JUDGMENT Ashok Bhan, J. 1. THE appellant being aggrieved by the order passed by the single judge dismissing the writ petitions thereby upholding the order passed by the Commissioner of Income-tax, Karnataka III (hereinafter referred to as "respondent No. 1"), dismissing the applications filed by the appellant under the Kar Vivad Samadhan Scheme (for short the "Scheme"), has filed these appeals. 2. SHORTLY stated the facts are : For the assessment year 1995-96, there was outstanding assessed tax due from the appellant to the tune of Rs. 18,59,056 which was later on reduced in appeal to Rs. 14,75,005. For the assessment year 1996-97, the assessee was assessed to tax and a demand of Rs. 40,22,586 was raised. It was later on rectified on August 31, 1998, resulting in an order of refund of Rs. 22,87,134. Out of this amount, a sum of Rs. 3,96,505 was adjusted towards the demand for the assessment year 1995-96. For the assessment year 1997-98, the appellant was due a refund of Rs. 10,78,700. The appellant received a communication annexure 8 stating that the said amount has been adjusted towards demand for the assessment year 1995-96. Thus, the total adjustment made towards the tax due for the assessment year 1995-96 was Rs. 14,75,205 (3,96,505+10,78,700) which wiped out the reduced demand for that year. The Union of India introduced a scheme known as the Kar Vivad Samadhan Scheme. The appellant filed a declaration under the scheme on December 29, 1998, for the assessment year 1995-96. This was rejected by respondent No. 1 vide communication dated February 23, 1999, stating therein that as there was no outstanding demand against the appellant he was not covered under the scheme for the assessment year 1995-96. 3. THE appellant filed the writ petition challenging the order dated February 23, 1999, passed by respondent No. 1, rejecting his application under the scheme for the assessment year 1995-96 on the ground that as on March 31. 1998, there was an outstanding tax liability. That the demand of refund amount due to the assessee could not be adjusted against the outstanding demand for any other year without giving an intimation in writing of the action proposed to the assessee. 1998, there was an outstanding tax liability. That the demand of refund amount due to the assessee could not be adjusted against the outstanding demand for any other year without giving an intimation in writing of the action proposed to the assessee. That the Department could not set off the refund due to the appellant towards the outstanding demand for the assessment year 1995-96 without intimation to the appellant in violation of the mandatory provisions of Section 245 of the Income-tax Act (for short "the Act"). THE two amounts referred to were the sums of Rs. 3,96,505 and Rs. 10,78,700. 4. THE learned single judge accepted the contention of the assessee in so far as the sum of Rs. 3,96,505 was concerned but rejected his claim regarding the sum of Rs. 10,78,700. Regarding the adjustment of Rs. 3,96,505, the respondent was directed to pass an order treating the sum of Rs. 3,96,505 as outstanding dues under the scheme. Regarding the amount of Rs. 10,78,700, it was held that the assessee was intimated by a letter dated March 28, 1998, informing him that the demand to the extent of Rs. 10,78,700 had been adjusted/set off for the amount of tax due for the assessment year 1995-96. The appellant aggrieved by the order passed by the single judge rejecting the relief regarding the sum of Rs. 10,78,700 has come up in appeal. 5. SECTION 245 of the Act reads as under : "Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section." 6. A reading of the section would indicate that for the purpose of any adjustment of the amount due to the assessee by way of refund against an outstanding demand due from the assessee to the Revenue an intimation in writing is required to be given to the concerned person of the action proposed. A reading of the section would indicate that for the purpose of any adjustment of the amount due to the assessee by way of refund against an outstanding demand due from the assessee to the Revenue an intimation in writing is required to be given to the concerned person of the action proposed. Proposed action would mean a notice before making the adjustments and not an intimation of making the adjustment. It is not in the nature of information, It has to be an intimation that the Revenue proposes to adjust the amount of refund due to the assessee towards the amount of tax due from the assessee. An order passed purporting to set off an amount of refund due to the assessee without a prior intimation would be against the express provisions of law and therefore bad in law. The provisions of Section 245 are mandatory in nature. In the present case there was no prior intimation of the proposed action of adjusting the amount of refund due to the assessee towards any other amount due from the assessee. It was an intimation informing the appellant that the amount of refund due for the assessment year 1997-98 stood adjusted against the outstanding demand for the assessment year 1995-96. It would not be same thing as a prior intimation of the proposed action. As the adjustment of the refund amount was made without following the provisions of Section 245 and without giving a proper intimation the same was bad in law. The provisions of Section 245 being mandatory in nature, any action taken contrary to such provision would he bad in law. This is the consistent view of other High Courts as well. A reference may be made to the following judgments. 7. THE Delhi High Court in Vijay Kumar Bhati v. CIT, while interpreting Section 245 held (headnote) : "For the purpose of any set off under Section 245 of the Income-tax Act, 1961, of any refund due to the assessee an intimation in writing has to be given to the assessee of the action proposed to be taken under Section 245. Any order of set off purporting to be made without any such intimation is neither fair, nor just, nor reasonable and has to be ignored." 8. Any order of set off purporting to be made without any such intimation is neither fair, nor just, nor reasonable and has to be ignored." 8. SIMILARLY, the High Court of Calcutta in J. K. Industries Ltd. v. CIT, has taken the same view and held (headnote) : "The wording of Section 245 of the Income-tax Act, 1961, leaves no manner of doubt that the proposed adjustment is to be intimated to the assessee. Since the adjustment at the time of intimation is only a proposed one, the intimation has to go before the adjustment has been made. The Revenue has no jurisdiction to make an adjustment of a refund without following Section 245 and without giving a prior intimation to the assessee as required by that section." Similar is the view expressed by the Allahabad High Court in Hira Lal and Sons v. ITO. 9. FOR the reasons stated above, we set aside the order of the single judge as well as respondent No. 1, dated February 23, 1999. The Commissioner of Income-tax is directed to pass a fresh order on the application filed by the appellant under the scheme in accordance with law treating the sum of Rs. 10,78,700 as outstanding dues.