Answer

1. F

   Facts

   A demand properly stayed under appeal should not be recovered by adjusting your refund. You need to tell CPC that an appeal is pending and that a stay is granted or that 20% has been paid.

2. P

   Provisions and law

   • Sec 245, Income-tax Act 1961 (now Sec 438, Income-tax Act 2025)Refund can be set off against an earlier demand only after a written intimation to the taxpayer
   • Sec 246A, Income-tax Act 1961 (now Sec 357, Income-tax Act 2025)Appeal to the Commissioner (Appeals) against an order or intimation, in Form 35 (now Form 99)
   • CBDT Office Memorandum dated 31 July 2017 (stay of demand on 20% payment)A demand under first appeal is normally stayed on payment of 20% of the disputed demand, unless the case is exceptional
3. A

   Analysis

   In the response, pick Disagree and select the reason that an appeal is filed with stay granted, or appeal filed with stay petition. Give the appeal number, date and stay details. Example: demand ₹2,00,000, you paid ₹40,000 under the 20% rule and asked for a stay. Adjusting your ₹50,000 refund against the balance would defeat the stay, so the response should ask that the refund be released. The officer confirms the status before CPC acts.

4. C

   Conclusion

   1. 1Keep the Form 35 (now Form 99) acknowledgement and appeal number ready
   2. 2Get the stay order, or proof of the 20% payment and stay request
   3. 3Respond: Disagree, reason appeal pending with stay
   4. 4Write to the jurisdictional officer if the stay is not yet recorded
   5. 5Check the demand status after a few weeks

Without a stay application, a pending appeal alone may not stop the adjustment.

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