CBDT Instruction r/w OM does not mandate 20% Pre-Deposit for Granting Stay in Recovery Proceedings: Delhi HC directs AO to Reconsider [Read Order]
The two Office Memo neither prescribe nor mandate 15% or 20% of the outstanding demand as the case may be, being deposited as a pre-condition for grant of stay
Delhi High Court – CBDT – Assessing Officer – NASSCOM – Recovery Proceedings – taxscan
Delhi High Court – CBDT – Assessing Officer – NASSCOM – Recovery Proceedings – taxscan
The Delhi High Court citing the decision in the case of NASSCOM, directed the Assessing Officer ( AO ) to reconsider the stay application for the recovery proceedings afresh. The court noted that the Instruction No 1914 read with Office Memo does not mandate 20% pre-deposit for granting stay for recovery proceedings.
The bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav court noted submission of the counsel for the respondents-Income Tax Department which conceded to the legal position as spelt out in NASSCOM case, and the admitted failure of the AO to bear in mind the relevant considerations for grant of stay of demand.
The writ petition challenged the order dated May 3, 2024, issued by the Assessing Officer, which disposed of an application for stay of demand filed by the petitioner during the pendency of its statutory appeal before the Commissioner of Income Tax (Appeals).
The order mandates the petitioner to deposit 20% of the outstanding demand as a precondition for protection. It cites CBDT's Instruction No. 1914 dated March 21, 1996, along with subsequent memoranda, which require an assessee to deposit at least 20% of the disputed demand to obtain a stay against the demand and file an appeal before the CIT(A).
The court stated that while the withdrawal of registration with retrospective effect is under challenge in WP(C) 11270/2023, the focus of this petition is solely on the AO's view during the examination of the application for stay of demand.
The High Court noted that the impugned order issued the AO does not address the prima facie merits of the challenge raised by the petitioner or the issue of undue hardship. Instead, it mechanically rejects the application for stay of demand due to the petitioner's failure to make the required pre-deposit of 20%.
Further, the court noted the case National Association of Software and Services Companies (NASSCOM) v. Deputy Commissioner of Income Tax (Exemption) Circle 2(1), New Delhi & Ors where it was held that “It must at the outset be noted that the two OMs’ noticed above neither prescribe nor mandate 15% or 20% of the outstanding demand as the case may be, being deposited as a pre-condition for grant of stay. The OM dated 29 February 2016 specifically spoke of a discretion vesting in the AO to grant stay subject to a deposit at a rate higher or lower than 15% dependent upon the facts of a particular case. The subsequent OM merely amended the rate to be 20%.”
In light of the legal principles that were propounded in NASSCOM, the court found itselves unable to sustain the order impugned. The appeal was allowed and the impugned order of the AO was set aside. The court remitted the matter back to the AO to examine application for stay of demand afresh and bearing in mind the legal principles as enunciated in NASSCOM.
To Read the full text of the Order CLICK HERE
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
