20% Pre-Deposit Not Mandatory for Grant of Stay u/s 220(6) of Income Tax Act: Delhi HC [Read Order]
The Delhi High Court held that payment of 20% of the disputed tax demand is not a mandatory condition for grant of stay under Section 220(6) of the Income Tax Act.
![20% Pre-Deposit Not Mandatory for Grant of Stay u/s 220(6) of Income Tax Act: Delhi HC [Read Order]](https://images.taxscan.in/h-upload/2025/12/31/2116214-delhi-hc-stay-of-tax-demand-taxscan.webp "20% Pre-Deposit Not Mandatory for Grant of Stay u/s 220(6) of Income Tax Act: Delhi HC [Read Order]")
In a recent decision, the Delhi High Court said that a taxpayer cannot be refused a stay on recovery of disputed tax just because they did not pay 20% of the demand upfront. This pre-payment is not compulsory under Section 220(6) of the Income Tax Act, 1961. Clearmedi Healthcare Private Limited, the company that filed the case, challenged an order from the Assessing Officer who...
In a recent decision, the Delhi High Court said that a taxpayer cannot be refused a stay on recovery of disputed tax just because they did not pay 20% of the demand upfront. This pre-payment is not compulsory under Section 220(6) of the Income Tax Act, 1961.
Clearmedi Healthcare Private Limited, the company that filed the case, challenged an order from the Assessing Officer who refused to stop the tax recovery while their appeal was still pending before the Commissioner of Income Tax (Appeals) ( CIT(A) ). The company had filed its income tax return for the year 2023-24 showing a loss of Rs. 58,35,700. The return was picked for checking, and an assessment order was passed creating a tax demand against them.
Unhappy with this, the company appealed to the Commissioner of Income Tax (Appeals), and that appeal was still under review. While the appeal was pending, the company asked under Section 220(6) of the Income Tax Act not to be treated as a defaulter and to pause the recovery of the disputed amount.
But the Assessing Officer rejected this request in a short order, saying the company had not deposited 20% of the demand, based on office memos from the Central Board of Direct Taxes (CBDT) from 29 February 2016 and 31 July 2017.
The company's advocate argued that the order was not detailed and was automatic, as the officer did not check if the company had a strong initial case. The advocate said those office memos do not make 20% payment mandatory, and as per established law, the officer must use their judgment under Section 220(6).
The revenue counsel defended the impugned order and argued that the Assessing Officer acted in line with the CBDT instructions prescribing 20% deposit as the standard rate. The revenue could not dispute the legal position laid down in earlier decisions of the Delhi High Court and the Supreme Court on the nature of discretion under Section 220(6) of the Income Tax Act.
The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar observed that the power under Section 220(6) is a quasi-judicial discretion which cannot be curtailed by administrative circulars. The court explained that the Office Memorandums do not mandate a fixed pre-deposit of 20% in all cases and that the Assessing Officer is required to consider the individual facts, including prima facie merits, hardship to the assessee, and protection of revenue interest.
The court observed that the impugned order showed complete non-application of mind, as the Assessing Officer proceeded on the incorrect assumption that the stay application could not even be considered without a 20% deposit. Such an approach was contrary to settled law and legally unsustainable.
In view of these findings, the Delhi High Court set aside the impugned order dated 13 November 2025 and remanded the matter to the Assessing Officer for fresh consideration of the stay application in accordance with law and the principles laid down in earlier judgments. The writ petition was disposed of in these terms.
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