Answer

1. F

   Facts

   A Sec 245 (now Sec 438) intimation says the department plans to use your current refund to clear a demand it shows for an earlier year. It is a proposal, not a final adjustment. You get a chance to agree or disagree before the money is set off.

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 143(1), Income-tax Act 1961 (now Sec 270(1), Income-tax Act 2025)Return is processed and an intimation shows tax, interest, refund or demand
   • Sec 536, Income-tax Act 2025 (repeal and savings)Proceedings for years before 1 April 2026 continue under the Income-tax Act 1961
3. A

   Analysis

   The law allows set-off only after written intimation, so the email is your window to check the old demand. Example: your AY 2026-27 refund is ₹35,000 and the portal shows ₹18,000 due for AY 2021-22. If you do nothing, CPC adjusts ₹18,000 and pays you ₹17,000. If the old demand is wrong and you prove it, the full ₹35,000 can be released. Because the old demand relates to a year before 1 April 2026, it stays under the 1961 Act.

4. C

   Conclusion

   1. 1Log in to the e-Filing portal and open Pending Actions > Response to Outstanding Demand
   2. 2Note the assessment year, section, demand amount and DIN of the old demand
   3. 3Pull the old order or intimation and your return for that year
   4. 4Decide whether the demand is correct, partly correct or wrong
   5. 5Respond within 30 days with reasons and proof

Ignoring the intimation is treated as agreement, and the refund is adjusted.

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.