In terms of modified instruction No. 1914 dated 21.03.1996 issued by CBDT, payment required to be made by the assessee as a precondition for a stay of demand disputed before CIT(A) is 20%.
Many confuse this to be a precondition of absolute nature for obtaining stay under any circumstance, which is incorrect. Instruction simply talks about the powers of assessing officers to grant stay till the disposal of the first appeal before CIT(A). It could not have and it does not talk about what conditions CIT(A) could grant the stay. In practice, on various occasions, it is seen that even CIT(A) refers to Office Memorandum / Instruction No. 1914 as modified lastly to prescribe a deposit of 20% for grant of stay.
This clearly is misconceived. CIT(A) powers are granted under statute u/s.251 of Income Tax Act, 1961, which empowers him to confirm, reduce, enhance or annul the assessment and also to pass such orders(including stay orders) in appeal as he thinks fit. CBDT administrative circular no way binds CIT(A) not to grant a stay unless a 20% amount is deposited.
In fact, in the Case of Flipkart(P) Ltd. v ACIT, Karnataka High Court has held that even an assessing officer could grant a stay with a deposit of amount that is less than 15%(as it then was). There are similar decisions from other High Courts as well.
However, while the power of AO are limited and factors that could be considered by AO are exactly as are prescribed in CBDT Circular i.e. whether addition on the same issue has been deleted by appellate authorities or superior courts etc., powers of CIT(A) will not be restricted by any circulars and he could consider all factors that may be relevant for grant of stay e.g. strong and prima facie case, whether in law or in facts, irreparable injury, any special circumstances, and any other relevant factors. Theoretically, CIT(A) has powers to grant a stay of demand even without a deposit or even a single percent of disputed demand.
It is the author’s suggestion that appeals before CIT(A) may be filed along with detailed stay applications putting forth relevant reasons for grant of stay and in case of pendency of stay applications without any delay from the side of the appellant or in case of mechanical rejection of stay applications, the remedy of filing a writ petition before the jurisdictional high court could be availed. It will be beyond the scope of this article to discuss grounds of the challenge of any order of CIT(A) rejecting stay applications but suffice it to say that there are many possibilities of having stay on demand by paying less than 20%.
# Income Tax # Stay of disputed demand # Pre- deposit of demand
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