Income Tax AO Can Grant Relief u/s 220(6) Even Below 20% Tax Deposit: Madras HC Remands Matter [Read Order]

The Madras High Court has clarified that an Assessing Officer ( AO ) is empowered to grant relief under Section 220(6) of the Income Tax Act, 1961, even when the assessee has deposited pre-deposit below 20% of the total amount.

The petitioner, VME Infrastructure Private Limited having filed an appeal against an assessment order before the Commissioner of Income Tax (Appeals), approached the AO seeking a stay of demand under Section 220(6) of the income tax act.

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However, the AO declined to grant relief, insisting on a mandatory deposit of 20% of the disputed amount, noting Central Board of Direct Taxes (CBDT) instructions. Challenging this rigid interpretation, the petitioner moved the High Court.

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Referring to the precedent set in M/s Queen Agencies v. The Assistant Commissioner of Income Tax, the Court emphasized that the AO, being a quasi-judicial authority, is not bound by administrative instructions and has the discretion to grant relief below the 20% threshold, depending on the facts and circumstances of each case.

In the Queen Agencies case, the High Court found the AO’s rejection to be a non-speaking order that failed to engage with the petitioner’s submissions or the appeal memorandum. It was observed in this ruling that “The order impugned in this writ petition is liable to be set aside as it is absolutely non – speaking. It is true that as pointed out by the learned standing counsel, the stay petition filed by the petitioner is equally bald and bereft of details. But as observed in Kannammal's case, the assessing officer ought to be pro-active. The statutory provision will come into play only if an appeal has been filed before the appellate authority. The case of the assessee would definitely be projected in the appeal memorandum. Therefore, in the light of the stand taken in the appeal memorandum, the Assessing Officer can pass order by applying the trinity principles.”

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Justice G R Swaminathan held that “Applying the aforesaid ratio, the order impugned in the present writ petition is set aside and the matter is remitted to the file of the respondent. The respondent will bear in mind the principles laid down in the aforesaid decision and pass appropriate orders after hearing the petitioner.”

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To Read the full text of the Order CLICK HERE

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