CBDT Circulars/Instructions on Stay of Income Tax demand

From time to time various instructions and circulars have been given by CBDT in respect of stay of demand. All such circulars and instructions are dealt below

S. No	Date	Particulars	Remarks No.
1.	21.08.1969	Instruction No. 96 [F. NO. 1/6/69-ITCC]	The CBDT had instructed the officers that “where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held  in abeyance till the decision on the appeals, provided there were no lapse on the part of the assessee”;
2.	14.09.1970	Board's Letter F. No. 404/132/70-ITCC	Source: PAC's 25th Report (Fifth Lok Sabha), Page 35
3.	06.03.1989	CBDT Circular No. 530	Circular No. 530, dated 06.03.1989 provides that stay on demand should be granted if the demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order in assessee's own case.
4.	16.01.1991	CBDT Circular No. 589	Vide CBDT Circular No. 589, dated 16.01.1991, paragraph 4 of Circular No. 530 was substituted
5.	02.12.1993	Instruction No. 1914 F. No. 404/72/93-ITCC	The CBDT has laid down guidelines for stay of demand
6.	21.03.1996	Revised guidelines issued by the CBDT partially modify Instruction No.1914	The Central Board of Direct Taxes (CBDT) had initially issued instruction No. 1914 dated 02.12.1993 which is clarified by instructions dated 21.03.1996. They contain the guidelines issued by the Board regarding the procedure to be followed for recovery of the outstanding demand including the procedure for grant of stay of demand.
7.	01.12.2009	Letter [F. No. 404/10/2009-ITCC],	CBDT’s clarification on instructions on Stay of Demand
8.	29.02.2016	Office Memorandum F. No. 404/72/93 – ITCC	Partial modification of Instruction No. 1914 CBDT has put in new rules for granting of stay: ·     With payment of 15% of the tax demand the Assessing Officer shall grant stay to the Assessee. •  Further in certain cases if he deems fit he may increase or decrease the payment of 15% he may refer to PCIT/CIT for approval •  In case where assessee is aggreived even by payment of 15% of demand, he may approach PCIT/CIT
9.	03.03.2016	Press Information Bureau	CBDT issues Revised Guidelines for stay of demand at the First Appeal Stage; Decision of the Board to provide significant relief to the taxpayers in matters relating to grant of stay and recovery of demand by reducing arbitrariness in the disposal of stay petitions where the tax demand is contested at the First Appellate stage.
10.	31.07.2017	Office Memorandum [F. No. 404/72/93-ITCC]	Partial modification of Instruction No. 1914 dated 21.03.1996 to provide for guidelines for stay of demand at the first appeal stage. The CBDT has issued Office Memorandum dated 31.07.2017 by which it has amended the conditions stipulated in the earlier OM dated 29.02.2016 pursuant to which the Assessing Officer is empowered to grant a stay of the outstanding demand till the disposal of the appeal by the CIT(A). CBDT hikes standard rate of disputed tax payment to 20% to get stay of demand from Assessing Officer

The CBDT has issued so far following circular or instructions with regard to stay of demand so far:

 [1]  CBDT Instruction No. 96, dated 21.08.1969

 The first instruction was given by the CBDT in the year 1969. The purpose of this instruction was to stay demand raised due to high pitched assessment. It was pointed out in the Instruction no 96 dated 21.08.1969 as to where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapse on the part of the assessee. The Board desired that the above observations may be brought to the notice of all the Income-Tax Officers and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/Commissioner of Income-Tax.

CBDT Instruction : No.  96 dated : 21.08.1969

Subject : Minutes of the 8th meeting of the Informal Consultative Committee held on 13.05.1969 -  Implementation of assurance given regarding stay of recovery in certain cases - Section 220(6) of the Income Tax Act, 1961

One of the points that came up for consideration in the 8th Meeting of the Informal Consultative Committee was that income-tax assessments were often arbitrarily pitched at higher figures and that the collection of disputed demand as a result thereof was also not stayed in spite of the specific provision in the matter in section 220(6) of the Income Tax Act, 1961.

2. The then Deputy Prime Minister had observed as under :

“Where the income determined on assessment was substantially higher than the returned income, say twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeal provided there were no lapses on the part of the assessees.”

3. The Board desire that the above observations may be brought to the notice of all the ITOs working under you and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/Commissioner of Income-tax.”.

Rajasthan High Court has taken a view that the CBDT Instruction No. 96 dated 21.08.1969 still holds good to the effect that if the income assessed is twice than the return, it is unreasonably high pitched

The following observations  were made by the Hon’ble Rajasthan High Court  in the case of Maheshwari Agro Industries v. Union of India :-

“The tendency of making high pitched assessments by the Assessing Officers is not unknown and it may result in serious prejudice to the assessee and miscarriage of justice & sometimes may even result into insolvency or closure of the business if such power was to be exercised only in a pro revenue manner. It may be like execution of death sentence, whereas the accused may get even acquittal from higher appellate forums or courts. Therefore, this Court is of the opinion that such powers under sub-Section (6) of Section 220 of the Act also have to be exercised in accordance with the letter and spirit of Instruction No. 96 dated 21.08.1969, which even now holds the field and its spirit survives in all subsequent CBDT Circulars quoted above, and undoubtedly the same is binding on all the assessing authorities created under the Act.” – [Maheshwari Agro Industries v. Union of India (2012) 346 ITR 375 (Raj)]

Instruction No. 96, dated 21.08.1969, issued by the CBDT had not been superseded by Instruction No.1914 of 1993, issued by the CBDT and accordingly, the same is still valid

Though Instruction No. 1914 dated 02.12.1993 supercedes Instruction No. 96 dated 21.08.1969, it clearly provides that demand should be stayed in “exceptional circumstances e.g., where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee”. A case where the assessed income is several times the returned income falls within the expression “unreasonably high pitched” and stay on recovery of demand must therefore be granted to the assessee. – [Soul v. DCIT (2010) 323 ITR 305 (Del)]

The fact of income being determined at a substantially higher than the returned income should be expressly brought out, and reliance must be placed on Instruction No. 96

It was held that instruction 96 is applicable and assessee would in the normal course would be entitled to absolute stay of demand. - [Valvoline Cummins LTd. v. DCIT & Ors. (2008) 307 ITR 103 (Del.)]

As against tax payable by the assessee at Rs. 3,47,829/-, Assessing Officer having raised a demand of Rs. 1,40,25,762 CBDT Instruction No. 96, dated 21.08.1969 was attracted and Assessing Officer could not reject stay Petition by merely observing that no valid reason was shown for stay, demand stayed till disposal of appeal subject to payment of Rs. 20 lakhs on or before 31st March, 2007. (Related Assessment year : 2004-05) – [M.G.M. Transport (Madras) (P) Ltd v. ITO (2007) 303 ITR 115 : 209 CTR 90 (Mad)]

In the case of MP Jain Cycle Spares and Co. v. CIT, instruction no. 96 was considered by the court. Property of the assessee was attached. CIT(A) was directed to here and decide the appeal expeditiously. Instruction no.96 should be brought to the notice of CIT(A). The shop should remain under attachment but the assessing officer was directed not to take any coercive action against the assessee. – [MP Jain Cycle Spares and Co. v. CIT (2004) 267 ITR 60 : 188 CTR 4 (MP)]

[2]   Board's Letter F. No. 404/132/70-ITCC, dated 14.09.1970.

Source : PAC's 25th Report (Fifth Lok Sabha), Page 35.

Board's Letter F. No. 404/132/70-ITCC, dated 14.09.1970

Subject : Undisputed tax-Recovery of - Instructions regarding

Under section 220 (6) of the Income-tax Act, 1961, when an assessee has presented an appeal before the Appellate Assistant Commissioner under section 246, the Income-tax Officer may, in his discretion treat the assessee as not being in default in respect of the amount in dispute in appeal during the period of the pendency of the appeal. The Board would like to emphasise that the discretionary powers given by section 220 (6) are to be exercised in respect of disputed taxes only. Similarly, the instructions contained in the Board's letter F. No. 1/6/69-ITCC dated 21st August, 1969 (Instruction No.96) also refer to disputed demand only.

2. The Board desire that all possible steps should be taken for the recovery of undisputed taxes by the Income-tax Officers and the assessee should not be allowed to withhold payment of the undisputed demand merely because they have filed appeals before the Appellate Assistant Commissioner of Income-tax. While reviewing the arrears of taxes, the Commissioners of Income-tax, Inspecting Assistant Commissioners should ensure that these instructions are being scrupulously followed by the Income-tax Officers.

[3]   CBDT Circular No. 530, dated 06.03.1989

Circular No. 530, dated 06.03.1989 provides that stay on demand should be granted if the demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order in assessee's own case.

CBDT Circular No. 530, dated 06.03.1989

Subject : Exercise of discretion under section 220(6) of the Income Tax Act, 1961 to treat the assessee as not being in default in respect of the amounts disputed in first appeal pending before Deputy Commissioner (Appeals)/Commissioner (Appeals)

CLARIFICATION 1

1. Under section 220(6) of the I.T. Act, 1961 where an assessee has presented an appeal under section 246 of the Act before the Deputy Commissioner (Appeals) or the Commissioner (Appeals), the Assessing Officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of.

2. Having regard to the proper and efficient management of the work of collection of revenue, the Board has considered it necessary and expedient to order that on an application being filed by the assessee in this behalf, the Assessing Officer will exercise his discretion under section 220(6) of the Act (subject to such conditions as he may think fit to impose) so as to treat the assessee as not being in default in respect of the amount in dispute in the appeal in the following situations :

   (i)  the demand in dispute has arisen because the Assessing Officer had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts or, the High Court of jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment, or

  (ii)  the demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order by an appellate authority or Court in assessees own case.

3. It is clarified that in the situations mentioned in para 2 above, the assessee will be treated as not in default only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or Court alters the situation referred to in para 2 about, the Assessing officer will no longer be bound by the instructions and will exercise his discretion independently.

4. In respect of other cases, not covered by para 2 above, the Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of a speaking order. While exercising discretion under the provision, the financial capacity of the assessee to pay demand will not be relevant.

5. The Chief Commissioners and Directors-General of Income-tax may please bring these guidelines to the notice of all officers in their regions. The guidelines will apply, mutatis mutandis, to the demands created under other Direct Tax Laws also.

This Circular No. 530, dated 06.03.1989 provides that the Assessing Officer may exercise his discretion under section 220(6) and treat the assessee as not being in default in regard to demand payable in the following circumstances: –

(a) The demand in dispute has arisen because the Assessing Officer has adopted an interpretation of law on which there are conflicting decisions from the High Courts or the jurisdictional High Court has adopted an interpretation, which has not been accepted by the Income Tax department.

(b) The demand in dispute relates to issues that have been decided in favour of the assessee in the past.
In respect of cases, which are not covered by (a) and (b), the Assessing Officer has been advised to take into account all the relevant factors and communicate his decision to the assessee by a speaking order. It was said in this circular that while exercising discretion under this provision, the financial capacity of the assessee to pay the demand would not be relevant.

The Circular No. 530, dated 06.03.1989 was explained in Madhu Silica (P) Ltd. v. CIT, as follows :

 8. From the aforesaid provision of the Act and Circular issued by the Board of Direct Taxes, it is apparent that in the case where the assessee has preferred an appeal under section 246, the Assessing Officer has been vested with the discretion to treat the assessee as not being in default in respect of the amount in dispute in appeal as long as the appeal remains undisposed of even though time for payment of demand under the assessment has expired. The power being discretionary, general guidelines laying down the circumstances in which the assessee may be treated not being in default, was issued by the Board in exercise of its power under section 119 of the Act which has been reproduced hereinabove. As per the instructions contained in clause 2 of the circular it is obvious that where the demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order by an appellate authority or court in the assessees own case, the assessee is not to be treated being in default in respect of that amount in dispute in appeal. While laying down that guidelines it has been further clarified that in that situation the assessee will be treated as not in default only in respect of the amount attributable to such disputed points, namely, which have been decided in favour of the assessee in earlier order by the appellate authority. We also notice that another Circular No. 589, dated 16.01.1991 had been issued by the Board wherein the Board clarified under clause (2) of its instruction contained in the circular that according to para 2 of the Circular No. 530, the Assessing Officer in two situations referred to in that para 2 was bound to treat the assessee not in default in respect of the amount in dispute in appeal.

9. It is not in dispute that the aforesaid circular being in the nature of laying down general guidelines for proper administration of the Act for those who are employed in the execution of the Act are bound to observe such instruction particularly ones which are beneficial to the assessee. (p. 523) – [Madhu Silica (P) Ltd. v. CIT 1996 Tax L.R. 521 (Guj.)]

In Gujarat State Fertilizers & Chemicals Ltd. v. DCIT, it was observed as follows :

As per Circular No. 530, dated 06.03.1989, on an application being filed by the assessee the Assessing Officer will exercise his discretion under section 220(6) subject to such conditions as he may think fit to impose, so as to treat the assessee as not being in default in respect of the amount in the appeal in the situations indicated in paragraph 2 of the circular. Accordingly, where the demand in dispute relates to issues that have been decided in favour of the assessee in an earlier order by an appellate authority or a court in the assessees own case, the assessee is to be treated as not being in default in respect of the amounts attributed to such disputed amounts. – [Gujarat State Fertilizers & Chemicals Ltd. v. DCIT (1997) 226 ITR 270 : 98 Taxman 100 (Guj.)]

[4]  CBDT Circular No. 589, dated 16.01.1991.

CLARIFICATION 2

1. Reference is invited to Boards Circular No. 530 [F. No. 404/82/88-ITCC], dated 03.06.1989 regarding the above-mentioned subject.

2. According to paragraph 2 of the said Circular, the Assessing Officer is, in the two situations referred to in that paragraph, bound to treat the assessee as not in default in respect of the amount in dispute in appeal. In respect of other cases, the Circular stated in paragraph 4

In respect of other cases, not covered by para 2 above, Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of a speaking order. While exercising discretion under this provision, the financial capacity of the assessee to pay the demand will not be relevant.

3. Representations have been received by the Board that the exclusion of financial capacity of the assessee to pay the demand, from the factors relevant for exercise of Assessing Officers discretion under section 220(6) of the Income-tax Act, is prejudicial to those assessees who are not financially sound.

4. The matter has been reconsidered by the Board. It has been decided to substitute paragraph 4 of Circular No. 530 by the following paragraph :

In respect of other cases not covered by paragraph 2 above, the Assessing Officer, while considering the situation for treating the assessees to be not in default, would consider all relevant factors having a bearing on the demand raised and communicate his decision to the assessee in the form of a speaking order.

[5] CBDT Instruction No. 1914 dated 02.12.1993 - Guidelines for Staying and Recovery of   Outstanding Income Tax Demands

Instruction No. 1914, dated 02.12.1993 provides that demand will be stayed only if there are valid reasons for doing so. Mere filing of an appeal against the assessment order will not be sufficient reason to stay the recovery of demand.

CBDT Instruction No. 1914 dated 02.12.1993

Subject : Recovery of outstanding tax demands-

The Board has felt the need for a comprehensive Instruction on the subject of recovery of tax demand in order to streamline recovery procedures. This Instruction is accordingly being issued in supersession of all earlier Instructions on the subject and reiterates the existing Circulars on the subject.

2. The Board is of the view that, as a matter of principle, every demand should be recovered as soon as it becomes due. Demand may be kept in abeyance for valid reasons only in accordance with the guidelines given below :-

A. RESPONSIBILITY

(i)       It shall be the responsibility of the Assessing Officers and the TRO to collect every demand that has been raised, except the following :

(a) Demand which has not fallen due;

(b) Demand which has been stayed by a Court or ITAT or Settlement Commission;

(c) Demand for which a proper proposal for write off has been submitted;

(d) Demand stayed in accordance with para B & C below.

(ii)     Where demand in respect of which a Recovery Certificate has been issued or a statement has been drawn, the primary responsibility for the collection of tax shall rest with the TRO.

(iii)   It would be the responsibility of the supervisory authorities to ensure that the Assessing Officers and the TROs take all such measures as are necessary to collect the demand. It must be understood that mere issue of a show cause notice with no follow up is not to be regarded as adequate effort to recover taxes.

B. STAY PETITIONS.

(i)       Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the tax payer. The assessee must be intimated of the decision without delay.

(ii)  Where stay petitions are made to the authorities higher than the Assessing Officer (DC/CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately.

(iii)  The decision in the matter of stay of demand should normally be taken by Assessing officer/TRO and his immediate superior. A higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances e.g. where the assessment order appears to be unreasonably highpitched or where genuine hardship is likely to be caused to the assessee. The higher authorities should discourage the assessee from filing review petitions before them as a matter of routine or in a frivolous manner to gain time for withholding payment of taxes.

C. GUIDELINES FOR STAYING DEMAND

(i)      A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are -

(a) If the demand in dispute relates to issues that have been decided in assessee's favour by an appellate authority or court earlier; or

(b) if the demand in dispute has arisen because the Assessing Officer had adopted an interpretation of law in respect of which there exist conflicting decisions of one or more High Courts (not of the High Court under whose jurisdiction the Assessing Officer is working); or

(c) if the High Court having jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgement.

It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not cooperated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive.

(ii)      In granting stay, the Assessing Officer may impose such conditions as he may think fit. Thus he may.

(a) require the assessee to offer suitable security to safeguard the interest of revenue;

(b) require the assessee to pay towards the disputed taxes a reasonable amount in lumpsum or in instalments;

(c) require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled;

(d) reserve the right to review the order passed after expiry of reasonable period, say upto 6 months, or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations;

(e)  reserve a right to adjust refunds arising, if any against the demand.

(iii)    Payment by instalments may be liberally allowed so as to collect the entire demand within a reasonable period not exceeding 18 months.

(iv)     Since the phrase 'stay of demand' does not occur in Section 220(6) of the Income-tax Act, the Assessing Officer should always use in any order passed under Section 220(6) [or under Section 220(3) or Section 220(7)], the expression that occurs in the section viz, that he agrees to treat the assessee as not being in default in respect of the amount specified, subject to such conditions as he deems fit to impose.

(v)      While considering an application under Section 220(6), the Assessing officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order.

D. MISCELLANEOUS.

(i)     Even where recovery of demand has been stayed, the Assessing Officer will continue to review the situation to ensure that the conditions imposed are fulfilled by the assessee failing which the stay order would need to be withdrawn.

(ii)     Where the assessee seeks stay of demand from the Tribunal, it should be strongly opposed. If the assessee presses his application, the CIT should direct the departmental representative to request that the appeal be posted within a month so that Tribunal's order on the appeal can be known within two months.

(iii)     Appeal effects will have to be given within 2 weeks from the receipt of the appellate order. Similarly, rectification application should be decided within 2 weeks of the receipt thereof, Instances where there is undue delay in giving effect to appellate orders, or in deciding rectification applications, should be dealt with very strictly by the CCITs/CITs.

4. The Board desires that appropriate action is taken in the matter of recovery in accordance with the above procedure. The Assessing Officer or the TRO, as the case may be, and his immediate superior officer shall be held responsible for ensuring compliance with these instructions.

5. The procedure would apply imutatis mutandis to demands created under other direct taxes enactments also.

The Board has provided the following illustrative situations where a stay of demand could be granted:

(i)     If the demand in dispute relates to issues that have been decided in assessee’s favour by an  appellate authority or court earlier;

(ii)      If the demand in dispute has arisen because the Assessing Officer had adopted an interpretation of law in respect of which there exist conflicting decisions of one or more High Courts;

(iii)    If the High Court having jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgement.

The instruction also specifically reiterates that the aforesaid illustrations are, of course, not exhaustive.

The said instruction also clarifies that the Assessing Officer should consider all relevant factors having bearing on the demand raised and communicates his decision in the form of a speaking order

Assessing Officer should grant stay in high pitch assessment considering old Instruction of CBDT

CBDT Instruction No. 96, dated 21.08.1969 has not been superseded by CBDT Instruction No. 1914, dated 02.12.1993; it even now holds field and, hence, powers under sections 220(3) & 220(6) have to be exercised in accordance with letter and spirit of CBDT Instruction No. 96 dated 21.08.1969, which is binding on all assessing authorities created under Act. – [N. Jegatheesan v. DCIT (2016) 388 ITR 410 : 287 CTR 292 : 237 TAXMAN 490 : 138 DTR 17 (Mad)]

High Court set aside order rejecting stay of demand in High pitched assessment

This writ petition is directed against the order dated 06.08.2014 passed by the Additional Commissioner of Income Tax with the approval of   the CIT, Delhi-I, New Delhi. By virtue of the said order dated 06.08.2014 the stay application filed by the petitioner has been rejected. We have gone through the impugned order dated 06.08.2014. The learned counsel for the petitioner has also taken us through the instruction No. 96 of 1969 as well as instruction No. 1914 of 1993. We   have also examined the decision of this court in the case of Soul v. DCIT: 323 ITR 305 (Delhi) and, in particular, paragraph 8 thereof where the above mentioned two instructions have been considered as also the earlier decision of this court in Valvoline Cummins v. DCIT: 307 ITR 103 (Delhi). Considering the same, we feel that it would be appropriate if the ACIT reconsiders the application of the petitioner for stay in the light of the observations contained in the said decision [Soul v.  DCIT (supra)]. This is so because according to the petitioner the assessment is a high pitched one inasmuch as it is approximately 17 times of the returned income. Consequently, we set aside the impugned order dated 06.08.2014 and remit the matter to the ACIT, Range - 3, New Delhi for a fresh consideration of the stay application filed by the petitioner after taking into account the above mentioned decision of this court.- [Charu Home Productts (P) Ltd v. CIT Date of Judgement : 13.08.2014 (Del)]

The Hon’ble Delhi High Court in the case of “Taneja Developers and Infrastracture Ltd. v. CIT and Ors, wherin the Hon’ble Delhi High Court, relying upon its earlier judgment in the case of “Valvoline Cummins Ltd. v. CIT and Ors. (2008) 307 ITR 103 : 217 CTR (Del) 292, had categorically held as under,

 “9.Having considered the arguments advanced by the learned counsel for the parties, we are of the view that although Instruction No.1914 of 1993 specifically states that it is in supersession of all earlier instructions, the position obtaining after the decision of this Court in Valvoline Cummins Ltd., (Supra) is not altered at all. This is so because paragraph No.2(A) which speaks of responsibility specifically indicates that it shall be the responsibility of the Assessing Officer and the TRO to collect every demand that has been raised except the following’, which includes: (d) demand stayed in accordance with the paras B and C below. Para B relates to stay petitions. As extracted above, Sub-clause (iii) of para B clearly indicates that a higher/superior authority could interfere with the decision of the Assessing Officer/TRO only in exceptional circumstances. The exceptional circumstances have been indicated as – “where the assessment order appears to be unreasonably high pitched or where genuine hardship is likely to be caused to the assessee…. The very question as to what would constitute the assessment order as being reasonably high pitched in consideration under the said Instruction No.96 and, there, it has been noted by way of illustration that assessment at twice the amount of the returned income would amount to being substantially higher or high pitched. In the case before this Court in Valvoline Cummins Ltd., (supra) that assessee’s income was about eight (8) times the returned income. This Court was of the view that was high pitched. In the present case, the assessed income is approximately 74 times the returned income and obviously, this would fall within the expression unreasonably high pitched. (Emphasis supplied)… (Related Assessment year : 2005-06) - [Taneja Developers and Infrastracture Ltd. v. CIT and Ors (2009) 222 CTR 521 (Del)]

A reading of the above dictum would show that if assessment order is unreasonably high pitched or genuine hardship is likely to be caused to the assessee, then the assessee is entitled to be treated as not being in default in respect of the amount in dispute in the appeal.”

[6]  Revised guidelines issued by the CBDT dated 21.03.1996 partially modify Instruction No. 1914

The Central Board of Direct Taxes (CBDT) had initially issued instruction No. 1914 dated 02.12.1993 which is clarified by instructions dated 21.03.1996. They contain the guidelines issued by the Board regarding the procedure to be followed for recovery of the outstanding demand including the procedure for grant of stay of demand.

With the objective of streamlining the process of grant of stay and standardising the quantum of demand, the instruction no. 1914 dated 02.12.1993 was revised. The revised instruction dated 21.03.1996 provides that where the demand is disputed before CIT(A), the AO shall grant the stay till the disposal of the appeal by CIT(A) on payment of 15% of disputed demand unless the AO is of the view that:

(a) the payment of lump sum amount higher than 15% is warranted, for instance: if an addition on the same issue has been confirmed by the ITAT in assessee’s own case or jurisdictional HCs or SCs decision is in the favour of revenue or addition is based upon evidence collected in a search or survey operation, etc.); or

(b) the payment of lump sum amount less than 15% is warranted: for e.g. if an addition on the same issue has been deleted by the ITAT or judgment has been passed by the jurisdictional High Court or Supreme Court is in the favour of the assessee etc.

In part ‘C’ of the Instruction, it has been prescribed that a demand will be stayed only if there are valid reasons for doing so and that mere filing of an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. It has been further prescribed that while granting stay, the field officers may require the assessee to offer a suitable security (bank guarantee, etc.) and/ or require the assessee to pay a reasonable amount in lump sum or in instalments.

Assessee deemed in default – Stay - Non speaking order - Directing to pay 20 percent of demand during pendency of appeal is set aside

Assessee’s application for interim stay of recovery of demand was disposed of with a conditional order to pay 20 per cent of tax demand made by Assessing Officer relying wholly on CBDT instruction no. 1914, dated 21.03.1996. PCIT also confirmed said order without even hearing assessee. Allowing the petition the Court held that, since no speaking order was passed by revenue authorities while directing assessee to deposit 20 per cent of demand amount and impugned order was passed relying wholly on CBDT instruction no. 1914, dated 21.03.1996, impugned order being mechanical and passed without application of mind was to b e set aside and matter was to be remanded back for disposal afresh. – [Shriram Finance. v. PCIT (2019) 262 Taxman 220 (Mad)]

Revenue authorities cannot pass an order mechanically referring the instruction no. 1914 dated 21.03.1996, directing the Assessee to pay 20 percent of amount during pendency of appeal before CIT (A) - Order of PCIT is set aside and remanded to the PCIT to reconsider the application of stay and decide in accordance with law

When the appeal is pending before the CIT(A), the assessee moved the application to stay the demand . The Assessing Officer directed the Assessee to deposit the 20% of tax in dispute. Application filed before the PCIT was also rejected. On writ the Court held that , Revenue authorities cannot pass an order mechanically  referring the instruction no 1914 dated 21.03.1996,directing the Assessee to pay 20 percent of amount during pendency of appeal before CIT (A). High Court set aside the order of PCIT and remanded to the PCIT  to reconsider the application of stay and decide  in accordance with law. (Related Assessment years : 2012-13, 2015-16) – [Charishma Hotels (P) Ltd v. ITO (2019) 410 ITR 96 : (2018) 305 CTR 621 : 255 Taxman 187 (Karn)]

[7]  CBDT’s clarification on instructions on Stay of Demand

       Letter [F. No. 404/10/2009-ITCC], dated 01.12.2009

Many queries have been received regarding the applicability of Instruction number 96 dated 21.08.1969 vis-à-vis Instruction number 1914 dated 02.12.1993. Many assesses are taking the plea that Instruction No. 1914 does not supercede Instruction No. 96 dated 21.08.1969.

2. Instruction No. 96 dated 22.08.1969 was an assurance given by the then Deputy Prime Minister during the 8th Meeting of the Informal Consultative Committee held on 13th May, 1969. The observations made by the Deputy Prime Minister were as under:-

“Where the income determined on assessment was substantially higher than the returned income, say twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeal provided there were no lapses on the part of the assesses.”

The above observations were circulated to the field officers by the Board as Instruction number 96 dated 21.8.1969.

2. The matter has been considered by the Board and the decision of the Board has been approved by the Finance Minister. It is hereby clarified that subsequent to Instruction No. 96 following Instructions/clarifications on the stay of demand were issued till 15th October 1980:-

(i) Clarification to Instruction number 95 was issued on 14.09.1970 stating that it relates to disputed demands only.

(ii) Instruction number 635 was issued on 12.11.1973 stating that stay should be granted only in those cases where demands are attributable to substantial points of dispute.

(iii)Clarification to Instruction number 95 dated 13.07.1976 held that the Instruction becomes operative only in cases where there are no lapses on the part of the assessee.

(iv)Instruction number 1067 dated 21.06.1977 held that the ITO can pass the necessary orders under section 220 (6) in all cases except cases under section 144A or 144B where the approval of IAC is required.

(v) Instruction number 1158 dated 27th March 1978 held that in suitable cases the assessee may be allowed to furnish security.

(vi) Instruction number 1282 dated 4th October 1979 held that requests should be made to CIT(A) and ITAT for early disposal of appeals and constant watch should be kept on progress of appeals.

(v) Instruction number 1362 was issued on 15.10.1980 in supersession of all the earlier Instructions. It was an Instruction covering the issue in detail and in para 4 of the same there was a clear reference to the proposition laid down in Instruction number 95 which is as follows:-

In exercising this discretion, the Income-tax Officer should take into account factors such as: whether the points in dispute relate to facts; whether they arise from different interpretations of law; whether the additions have been made as a result of detailed investigation; whether the additions are based on materials gathered through enquiry/survey/search and seizure operations; whether the disputed addition to income has been assessed elsewhere by way of protective assessment and the tax thereon has been paid by such person etc. The magnitude of addition to income returned cannot be the sole determinant in this regard. Each disputed addition will need to be considered to arrive at the quantum of tax that may need to be stayed.

3. It is clear that the substance of the assurance as laid down in Instruction number 96 dated 21.08.1969 was submerged in the Instruction number 1362 dated 15.10.1980 which was issued in supersession of all earlier Instructions on the subject. Instruction No. 1914 dated 02.12.1993 was issued subsequently in supersession of all the earlier Instructions on the subject and the said Instruction also covers unreasonably high pitched assessment order and genuine hardship cases.

4. It is therefore clarified that there is no separate existence of the Instruction number 96 dated 21.08.1969. Instruction number 96 and all subsequent Instructions on the issue ceased to exist from the date Instruction No. 1362 came into operation. In turn Instruction number 1362 and all subsequent Instructions on the issue also ceased to exist the day Instruction number 1914 came into operation i.e. 02.12.1993.The Instruction number 1914 holds the field currently and a copy of Instruction number 1914 is enclosed for reference.

 [8]  Office Memorandum, dated 29.02.2016 - Partial modification of Instruction No. 1914 - Office     memorandum dated 29.02.2016 issued by  the CBDT

CBDT Instruction 1914 was partially modified by Office Memorandum dated 29.02.2016 taking into account the fact that Assessing Officers insisted on payment of significant portions of the disputed demand prior to grant of stay resulting in extreme hardship for tax payers. Thus, in order to streamline the grant of stay and standardize the procedure, modified guidelines were issued which are as follows:

Office Memorandum, dated 29.02.2016

Subject : Partial modification of Instruction No. 1914 dated 21.03.1996 to provide for guidelines for stay of demand at the first appeal stage

Instruction No. 1914 dated 21.03.1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand.

2. In part ‘C’ of the Instruction, it has been prescribed that a demand will be stayed only if there are valid reasons for doing so and that mere filing of an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. It has been further prescribed that while granting stay, the field officers may require the assessee to offer a suitable security (bank guarantee, etc.) and/ or require the assessee to pay a reasonable amount in lump sum or in instalments.

3. It has been reported that the field authorities often insist on payment of a very high proportion of the disputed demand before granting stay of the balance demand. This often results in hardship for the taxpayers seeking stay of demand.

4. In order to streamline the process of grant of stay and standardize the quantum of lump sum payment required to be made by the assessee as a pre-condition for stay of demand disputed before CIT (A), the following modified guidelines are being issued in partial modification of Instruction No. 1914:

(A) In a case where the outstanding demand is disputed before CIT (A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in pars (B) hereunder.

(B) In a situation where,

(a) the assessing officer is of the view khat the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court /or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc.) or,

(b) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.), the assessing officer shall refer the matter to the administrative Pr. CIT/ CIT, who after considering all relevant facts shall decide the quantum/ proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.

(C) In a case where stay of demand is granted by the assessing officer on payment of 15% of the disputed demand and the assessee is still aggrieved, he may approach the jurisdictional administrative Pr. CIT/ CIT for a review of the decision of the assessing officer.

(D) The assessing officer shall dispose of a stay petition within 2 weeks of filing of the petition. If a reference has been made to Pr. CIT/ CIT under para 4 (B) above or a review petition has been filed by the assessee under para 4 (C) above, the same shall also be disposed of by the Pr. CIT/ CIT within 2 weeks of the assessing officer making such reference or the assessee filing such review, as the case may be.

(E) In granting stay, the Assessing Officer may impose such conditions as he may think fit. He may, inter alia,-

(i)   require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled;

(ii)  reserve the right to review the order passed after expiry of reasonable period (say 6 months) or

       if the assessee has not cooperated in the early disposal of appeal, or where a subsequent

       pronouncement by a higher appellate authority or court alters the above situations;
(iii) reserve the right to adjust refunds arising, if any, against the demand, to the extent of the

       amount required for granting stay and subject to the provisions of section 245.

5. These instructions/ guidelines may be immediately brought to the notice of all officers working in your jurisdiction for proper compliance.

Assessing Officer had to necessarily apply his/her mind to the application for stay of demand and pass appropriate orders having regard to the extant directions and circulars including the memorandum of 29.02.2016

The petitioner’s grievance is that its request for stay of demand made for Assessment Year 2011-12, has not been considered on merits at all and that the concerned Assessing Officer has required the deposit of 20% of the demand as a pre-condition, for consideration of the application for exemption/stay of demand.

It was held that this Court is of the opinion that the Assessing Officer had to necessarily apply his/her mind to the application for stay of demand and pass appropriate orders having regard to the extant directions and circulars including the memorandum of 29.02.2016. This in turn meant that Assessing Officer could not have imposed a precondition of the kind that has been done in the impugned order. Consequently, the impugned order is hereby set aside. The Assessing Officer shall consider the application for stay of demand made by the Assessing Officer in its letter dated 04.05.2018 and pass necessary and appropriate orders, and exercise his discretion having regard to the facts and circumstances of the case, within three weeks from today. (Related Assessment Year : 2011-12) – [Turner General Entertainment Networks (India) Pvt. Ltd v. ITO – Date of Judgement : 22.01.2019 (Del)]

Merely because no financial hardship would be caused to assessee would not itself justify the deposit of demand where a prima facie case was made out - Recovered 38% of disputed tax amount - No special circumstances pointed out to permit revenue to carry out full recoveries–Pending disposal of appeal further recovery proceedings were stayed.

In Vodafone India Ltd. v. CIT refusal of stay of disputed demand merely on the ground that assesse had funds was held not justified in the light of Board Circular F. No. 404/72/93 – ITCC dated 29.02.2016 requiring automatic stay where 15% of the disputed tax is paid. In this context of the fact, that it is not the case of revenue that assessee was delaying the appeal, the High Court directed that no coercive step for recovery of disputed amount of Rs. 43.79 crores should be taken pending in the first appeal before Commissioner.  (Appeals). Further, no special circumstances were pointed out to permit revenue to carry out full recoveries. Moreover, some appeals had already been decided by CIT(A) and also  by Tribunal, which were in favour of assesse Accordingly pending disposal of remaining appeals, revenue would not be permitted to carry out any further recoveries. - (Related Assessment years : 2000-01 to 2012-13) – [Vodafone India Ltd. v. CIT (TDS) (2018) 400 ITR 516 : 305 CTR 609 : 265 Taxman 98 (Bom)]

Allowing the petition the Court held that that the AO is not justified in insisting on payment of 20% of the demand based on CBDT’s instruction dated 29.02.2016 during pendency of appeal before the CIT(A). This approach may defeat & frustrate the right of the assessee to seek protection against collection and recovery pending appeal. Such can never be the mandate of law.  CIT(A) is directed to hear the appeal expeditiously - Pendency of appeal the stay is granted. (Related Assessment year : 2015-16) – [Bhupendra Murji Shah v. DCIT (2018) 305 CTR 88 : 259 Taxman 45 : 170 DTR 423 (Bom)]

Where assessee during pendency of appeal before CIT(A) also applied for grant of unconditional stay on demand, High Court in writ petition directed grant of stay, subject to adjustment of 15% of demand amount from the refund due for earlier years

Assessee filed return of loss. On scrutiny assessment a notice of demand was served upon assessee which was challenged by it before CIT(A). Meanwhile assessee also filed petitions before higher authorities for grant of unconditional stay on demand, to various authorities which was rejected. Ultimately, assessee filed a writ petition.

Bombay High Court has set aside CIT’s order refusing to grant stay of demand to assessee while the CIT(A) proceedings were pending. High Court observed that in view of O.M dated 29.02.2016, Assessing Officer is obliged to grant stay on payment of 15% of disputed amount where outstanding demand is disputed before the CIT(A). Further, High Court noted that Assessing Officer can adjust the refund to the extent of demand required for granting stay; Accordingly, High Court granted interim stay of demand pending appeal disposal by CIT(A) subject to a condition that 15% of disputed demand is adjusted against the refund due. 2012-13– [Andrew Telecommunications India (P) Ltd v. PCIT (2017) 295 CTR 557 (Bom)]

Assessee deemed in default –  When first appeal is pending the Assessing Officer cannot ask to pay more than 15% of disputed demand - If the Assessing Officer demands 15% to be paid, the assessee is entitled to approach the Pr. CIT for review of the Assessing Officer’s decision

Assessing Officer rejected application on ground that at time of submitting stay application, assessee had not deposited 15% of demand as pre-deposit and directed to pay 100% tax in dispute. On writ, allowing the petition the High Court held that the action of the Assessing Officer was absolutely based on misinterpretation and/or misreading of modified Instructions. High Court observed that Clause-4 provided that the Assessing Officer may/shall grant stay of demand till disposal of first appeal on payment of 15% of disputed demand. Further, it was held that the impugned decision of rejecting stay application and consequently directing assessee to deposit 100% of disputed demand on ground that assessee had not deposited 15% of disputed demand as a pre-deposit before his application for stay could not be sustained and same deserved to be quashed and set aside.

It was held that there was no requirement to pre-deposit 15 per cent of the demand before filing a stay application or before consideration of stay application by the Assessing Officer.  Allowing the petition, the Court held that CBDT’s instruction dated 29.02.2016 on stay of demand by the Assessing Officer does not require the assessee to make a pre-deposit of 15% of the disputed demand. As per the Instruction, if the Assessing Officer requires the assessee to pay less, or more, than 15% of the demand, the sanction of the Pr. CIT is required. If the Assessing Officer demands 15% to be paid, the assessee is entitled to approach the Pr CIT for review of the Assessing Officer’s decision. – [Jagdish Gandabhai Shah v. PCIT (2017) 247 Taxman 414 (Guj.)]

CBDT Circular dated 29.2.2016 does not supersede Instruction No.1914 but modifies it. Both have to be read together. The Assessing Officer and CIT cannot straightaway demand payment of 15% of the dues but have to grant complete stay if the assessment is “unreasonably high pitched” or the demand for depositing 15% of the disputed demand leads to "genuine hardship" to the assessee”

The Karnataka High Court in the case of Flipkart India (P) Ltd. v. ACIT, examined the approach followed by the income-tax authorities in respect of grant of stay of demand. The High Court observed that the income-tax authorities were required to examine whether the assessment was ‘unreasonably highpitched’ or whether the demand for depositing 15 per cent of the disputed demand amount ‘would lead to a genuine hardship being caused to the taxpayer or not’. The High Court also observed that the OM dated 29 February 2016 partially modified the Instruction No. 1914, dated 02.12.1993 and had not totally superseded it and hence, the income-tax authorities were required to apply two important factors mentioned in Instruction No. 1914 before rejecting an application for stay of tax demand filed by the taxpayer.  (Related Assessment year : 2014-15) – [Flipkart India (P) Ltd. v. ACIT (2017) 79 taxmann.com 159 (Karn)]

[9]  Press Information Bureau, dated 03.03.2016

Press Information Bureau
Government of India
Ministry of Finance
03-March-2016 17:41 IST

CBDT issues Revised Guidelines for stay of demand at the First Appeal Stage; Decision of the Board to provide significant relief to the taxpayers in matters relating to grant of stay and recovery of demand by reducing arbitrariness in the disposal of stay petitions where the tax demand is contested at the First Appellate stage.

With a view to streamline the process of grant of stay of demand when the case of the taxpayer is pending before Commissioner (Appeals) and to standardize the quantum of lump-sum payment required to be made by the assessee as a pre-condition for stay of demand disputed, the Central Board of Direct Taxes (CBDT) has issued fresh guidelines to the field authorities of the Income Tax Department.

Under the revised guidelines, where the outstanding demand is disputed before Commissioner (Appeals), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand. In case, any deviation from the standard pre-payment of 15% is proposed by the Assessing Officer, he shall refer the matter to the administrative Principal Commissioner or Commissioner, who after considering all relevant facts shall decide the quantum/ proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand. In a case, where stay of demand is granted by the Assessing Officer on payment of 15% of the disputed demand and the assessee is still aggrieved, he may approach the jurisdictional administrative Principal Commissioner or Commissioner for a review of the decision of the assessing officer.

This decision of the Board is expected to provide significant relief to the taxpayers in matters relating to grant of stay and recovery of demand by reducing arbitrariness in the disposal of stay petitions where the tax demand is contested at the First Appellate stage.

            The Office Memorandum dated 29.02.2016 issued in this regard is available on the website of the Department www.incometaxindia.gov.in.

[10]   Office Memorandum - Dated 31.07.2017

The CBDT has issued Office Memorandum dated 31.07.2017 by which it has amended the conditions stipulated in the earlier OM dated 29.02.2016 pursuant to which the Assessing Officer is empowered to grant a stay of the outstanding demand till the disposal of the appeal by the CIT(A). Revised guidelines for stay of demand at first appeal stage. Minimum deposit amount for grant of stay increased to 20% of the disputed amount from existing 15%.

   

     Office Memorandum dated 31.07.2017

     Subject: Partial modification of Instruction No. 1914 dated 21.03.1996 to provide for guidelines  

                    for stay of demand at the first appeal stage.

Reference: Board’s O.M. of even number dated 29.02.2016

Instruction No. 1914 dated 21.03.1996 contains guidelines issued by the Board regarding procedure to be followed for recovery of outstanding demand, including procedure for grant of stay of demand.

Vide O. M. No. 404/72/93-ITCC dated 29.02.2016 revised guidelines were issued in partial modification of instruction No 1914, wherein. inter alia, vide para 4(A) it had been laid down that in a case where the outstanding demand is disputed before CIT(A), the Assessing Officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand unless the case falls in the category discussed in para (B) thereunder. Similar references to the standard rate of 15% have also been made in succeeding paragraphs therein.

2. The matter has been reviewed by the Board in the light of feedback received from field authorities. In view of the Board’s efforts to contain over pitched assessments through several measures resulting in fairer and more reasonable assessment orders, the standard rate of 15% of the disputed demand is found to be on the lower side. Accordingly, it has been decided that the standard rate prescribed in O.M. dated 29.02.2016 be revised to 20% of the disputed demand, where the demand is contested before CIT(A). Thus all references to 15% of the disputed demand in the aforesaid O. M. dated 29.02.2016 hereby stand modified to 20% of the disputed demand. Other guidelines contained in the O.M. dated 29.02.2016 shall remain unchanged.

These modifications may be immediately brought to the notice of all officers working in your jurisdiction for proper compliance.

Tax authorities may allow deposit of less than 20 per cent of demand to grant stay of demand on the basis of facts of each case

It was held that  CBDT’s  Office Memorandum dated 29.02.2016 & 31.07.2017 by which Assessing Officers have been directed to grant stay of disputed demand on payment of 20%/ 15% does not fetter the power of the Assessing Officer & CIT to grant stay on payment of amounts lesser than 15%/ 20%. The taxpayer contended that the administrative circular will not operate as a fetter on the commissioner since it is a quasi-judicial authority. However, the Supreme Court clarified that in all cases like the present one, it will be open to the tax authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20 per cent, while appeal is pending. (Related Assessment year : 2007-08) – [PCIT v. LG Electronics India (P) Ltd – Date of Judgement : 20.07.2018 (SC)