The main legal point established in the judgment is the mandatory requirement of prior intimation under Section 245 of the Income Tax Act, 1961 for the set off of refunds against tax remaining payable, and the effect of depositing 20% of the demanded amount on the stay of demand.

JUDGMENT

K.R. Shriram, J. - Rule. Rule made returnable forthwith.

Respondents waive service.

Taken up for final disposal.

2. Petitioner is seeking issuance of writ of certiorari or a writ in the nature of certiorari or any other appropriate writ or order or direction under Article 226 and 227 of the Constitution of India, calling for records of petitioner's case so far as related to the adjustment of refund against outstanding demand for A.Y. 2019-20. Petitioner says respondent is yet to refund a sum of Rs.37,63,57,620/- for A.Y. 2019-20 alongwith applicable statutory interest under Section 244 (A) of the Income Tax Act, 1961 (the Act).

3. According to petitioner, for the assessment year 2019-20, respondent had to refund a sum of Rs.44,24,54,040/- as per the intimation dated 17th March, 2020 under Section 143 (1) of the Act. Thereafter, petitioner received a communication dated 13th May, 2020 being intimation under Section 245 of the Act from the Centralized Processing Center, Income Tax Department, whereby petitioner was informed that their return for the assessment year 2019- 20 has been processed at CPC and the refund will be adjusted against the outstanding demand as shown in "Outstanding Demand table" annexed to the said communication. The Outstanding Demand table reads as under :

Petitioner had 30 days to respond or take action.

Petitioner, by its letter dated 21st May, 2020 responded to this communication and informed respondent that no amount was adjustable and no recovery should be made with respect to outstanding demands reflected in the table, as demands have been stayed for recovery in appeals which were pending or erroneous (pending rectification).

Mr. Pardiwalla states that the amount of outstanding demand of Rs.64,37,110/- for A.Y. 2018-19 has already been rectified and the dispute is now restricted to amount of outstanding demand of Rs.1,48,02,770/- for A.Y. 2015-16 and Rs.31,31,82,800/- for A.Y. 2016-17.

4. Mr. Pardiwalla states that alongwith appeal challenging the demand for A.Y. 2015-16 and 2016-17, Stay Applications were also filed and orders have been stayed upon petitioner depositing 20% of the demand amounts. The fact of petitioner depositing 20% has not been disputed though Mr. Walve states that extension to deposit 20% for A.Y. 2016-17 was not granted but petitioner still went ahead and deposited it. In our view that should not really matter because 20% has been deposited and respondents have accepted the same. The stay for both A.Y. 2015-16 and 2016-17 have to be in force.

5. Mr. Pardiwalla submitted that before any adjustment is made, it is mandatory to give intimation under Section 245 of the Act to the person to whom the refund is due of the proposed action. In this case, admittedly, and we say admittedly because the affidavit in reply/additional affidavit filed by respondent confirms that the intimation under Section 245 of the Act was given only on 13th May, 2020. At this point, if one refers to Form 26 AS which is the annaul tax statement under Section 203 (AA) of the Act for the A.Y. 2015-16 and for A.Y. 2016-17, adjustment against the refund due has been made on 5th May, 2020, whereas the mandatory notice under Section 245 of the Act has been given only on 13th May, 2020. Mr.Pardiwalla submits that it is settled law that failure to comply with this mandatory requirement of prior