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Stay of Demand 220 (6) Judiciary and Counsel Details

The High Court ruled in favor of the assessee regarding a stay application for a tax demand of Rs. 373,20,42,319, emphasizing that the assessing officer (AO) must consider four key parameters when deciding such applications. The court stated that the AO should separate their role from that of the assessment authority and may require a lower pre-deposit for granting stays. Additionally, the court clarified that applications under Section 220(6) should not be dismissed solely on the grounds of being against the interests of revenue if the tax demand is significantly higher than the declared liability.

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24 views2 pages

Stay of Demand 220 (6) Judiciary and Counsel Details

The High Court ruled in favor of the assessee regarding a stay application for a tax demand of Rs. 373,20,42,319, emphasizing that the assessing officer (AO) must consider four key parameters when deciding such applications. The court stated that the AO should separate their role from that of the assessment authority and may require a lower pre-deposit for granting stays. Additionally, the court clarified that applications under Section 220(6) should not be dismissed solely on the grounds of being against the interests of revenue if the tax demand is significantly higher than the declared liability.

Uploaded by

Krishnamoorthy Suresh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Judiciary and Counsel Details

 J.B. Pardiwala and Ms. Nisha M. Thakore, JJ.

 Abhishek M. Mehta for the Petitioner.

 M.R. Bhatt for the Respondent.

Facts of the Case


The Income-tax department conducted a search against the
assessee, and, consequently, assessment orders were passed. The
total demand raised of Rs. 373,20,42,319.
The assessee challenged the assessment orders passed by the
assessing officer (AO) by filing appeals before the CIT(A). The
assessee also preferred separate stay applications before the
assessing officer with a prayer to stay the demand as raised for the
assessment years under consideration. The assessee sought a stay of
demand on the ground of high-pitched assessment and pending
appeal before CIT(A). However, the assessing officer rejected the
stay application of assessee.

High Court Held


Being dissatisfied with the order of the assessing officer, the
assessee filed a writ petition before the High Court. The High Court
allowed the writ petition of the assessee and made the following
observations in its judgment:

(a) Application u/s 220(6) for a stay of demand is to be decided by


AO based on 4 basic parameters; (i) prima facie case, (ii) balance of
convenience, (iii) irreparable injury to the assessee, and (iv) whether
the assessee has come with clean hands.

(b) While deciding on stay of demand application u/s 220(6), AO


should divorce himself from his position as the authority who made
the assessment.

(c) AO may stipulate a pre-deposit of less than 20% of demand (even


5%/10%) while granting the stay of demand u/s 220(6).

(d) AO’s discretion of not treating the assessee in default, conferred


under section 220(6) should ordinarily be exercised in favor of the
assessee, unless the overriding and overwhelming reasons are there
to reject the application.

(e) The application under Section 220(6) of the Act cannot normally
be rejected merely by describing it as against the interest of
Revenue if recovery is not made if the tax demanded is twice or
more of the declared tax liability.

(f) Powers to grant stay can be implied as an inherent power of the


First Appellate Authority, i.e., CIT(A).

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only for general information of the user and shall not be construed as
legal advice. While the Taxmann has exercised reasonable efforts to
ensure the veracity of information/content published, Taxmann shall
be under no liability in any manner whatsoever for incorrect
information, if any.

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