Prior written intimation is mandatory before refund set-off against tax demand under section 245.

Section 245 of the Income-tax Act permits adjustment of a refund against an outstanding tax demand only after prior written intimation of the proposed set-off is given to the assessee. Where no such intimation is issued, the adjustment does not comply with the statutory mandate and is invalid. The text states that the refund was set off without prior notice, making the action contrary to section 245 and unsustainable.

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Issues: Whether a refund due to the assessee could be set off against outstanding tax demand under section 245 of the Income-tax Act, 1961 without giving prior intimation in writing of the proposed action.

Analysis: Section 245 permits set-off of refund against tax remaining payable, but only after giving an intimation in writing to the person concerned of the proposed action. The record showed that no prior intimation was issued before the refund was adjusted against the earlier demand. The statutory requirement of prior notice was therefore not complied with, and the set-off action was contrary to the mandate of section 245.

Conclusion: The set-off order was unsustainable and was quashed; the petition was allowed in favour of the assessee.

Ratio Decidendi: An adjustment of refund against outstanding tax demand under section 245 of the Income-tax Act, 1961 is invalid unless prior written intimation of the proposed set-off is given to the assessee.

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