Outstanding Tax Demand: Is it Legally Valid After 15 Years?

We have received an intimation under Section 245 / 245(1) from the Income Tax Department.
It mentions an outstanding demand for F.Y. 2007-08 (A.Y. 2008-09).
No earlier notice or demand communication was ever received by us. We only came to know after checking the portal, where the outstanding demand amount is shown.

My questions are:
1) Is it legally valid for the Income Tax Department to raise or adjust a demand that is more than 15 years old under Section 245?
2) What is the limitation period for recovery or adjustment of such old demands?
3) What steps should be taken now — should we file a disagreement response through the “Outstanding Demand” option, or approach the AO / CPC for rectification?
4) Since we have no records or documents for that period, how should we draft our reply to safeguard the assessee’s interest?

Any reference to CBDT circulars, case laws, or practical experience in such old-demand Section 245 cases would be highly appreciated.

A 15-year-old demand is not automatically invalid, but its age alone does not establish that it can still be recovered or adjusted. Section 245 is a mechanism to set off a refund against a demand; it does not create or revive the demand. Under section 245, the assessee must be given an opportunity to respond before adjustment. The validity of the underlying demand, the date and manner of service, any appeal/stay, and the applicable recovery limitation must be checked separately.

Limitation: Section 245 does not prescribe a separate limitation period. Recovery under section 222 is subject to the Second Schedule to the Income-tax Act. In particular, Rule 68 generally bars a fresh recovery certificate after six years from the end of the financial year in which the demand became payable, but contains exceptions, including where recovery was stayed or where prescribed proceedings were initiated. Do not assume the six-year bar applies without checking the assessment, demand and recovery records; section 245 adjustment and recovery proceedings are not necessarily identical.
Respond promptly on the portal: Use the “Outstanding Demand” response to dispute the demand, selecting the appropriate reason (for example, demand already paid, incorrect demand, or appeal/stay, as applicable). State that the demand is disputed and that no prior demand notice/intimation has been received. Save the acknowledgement. A portal response is useful, but it may not by itself correct the underlying record or prevent adjustment.
Seek records and correction in parallel: Write to the jurisdictional AO and, where the demand is CPC-generated, raise a CPC grievance/request for the demand computation, assessment order, notice of demand under section 156, service details, and recovery history. If there is a clear mistake apparent from the record, consider a section 154 rectification request; if the assessment itself is disputed, the remedy and condonation position depend on the order and dates. Request that adjustment be kept in abeyance until the dispute is examined.
Drafting without old papers: Avoid admitting liability or asserting payment/appeal facts you cannot verify. Identify the AY and portal demand reference, record that the demand is disputed and documents are unavailable, request the basis and proof of service, and reserve the right to supplement the response after receiving records. Attach the current portal screenshot and retain all submission acknowledgements.

For authority, review the text of section 245 and Rule 68 of the Second Schedule, along with the relevant assessment and demand records; the applicable limitation analysis can turn on facts such as a stay or earlier recovery steps. The portal’s present response options and any current processing practice should be verified at the time of filing.

This response fits into the demand-reconciliation workflow: verify the assessment record, challenge an incorrect balance, and track any proposed refund adjustment. Manual practice work is difficult, and automation reduces repetitive checking and follow-ups while professional judgment remains in control. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. For support with streamlining compliance workflows, connect with us on WhatsApp https://wa.me/message/3HVOZ7HIY4ESC1.