Refund adjusted against an old wrong demand

The department can set off a refund against an outstanding demand after giving you notice. If the old demand is wrong or already paid, you need that demand corrected, usually by rectification of the old year, and then the adjusted amount comes back.

Ideally you respond when the Sec 245 intimation arrives and say the demand is paid or wrong. If the set off has already happened, find the old year's demand, show the challan or the reason it is wrong, and file rectification for that year with CPC or the AO. Once the old demand is reduced, the ₹22,000 should be refunded with interest under Sec 244A as applicable. Old demands migrated from legacy systems often need the Jurisdictional AO.