Kerala HC Stays Income Tax Recovery Proceedings Pending Disposal of Stay Petition, Directs Commissioner to Decide Within 2 Months [Read Order]
Further held that “Until such a decision is taken, the recovery proceedings pursuant to assessment shall be kept in abeyance.
Kerala HC - Income Tax Recovery Proceedings - Taxscan
Kerala HC - Income Tax Recovery Proceedings - Taxscan
The Kerala High Court, in a recent case, stayed the Income tax recovery proceedings pending disposal of the stay petition and directed the commissioner to decide within 2 months.
Shibu Mathew, the petitioner, who is an assessee under the Income Tax Act, has filed an income tax appeal, being aggrieved by income tax assessment order pertaining to the assessment year 2022-2023. Along with appeal, a stay petition was also submitted.
Grievance of the petitioner is with regard to the recovery that is being pursued by the respondents, pending consideration of the appeal and the stay petition. This writ petition is submitted in such circumstances.
The single bench of Justice Ziyad Rahman A.A disposed of the writ petition. Accordingly, it is ordered that the 2nd respondent shall take up stay petition and pass appropriate orders thereon within a period of two months from the date of receipt of this judgment. Further held that “Until such a decision is taken, the recovery proceedings pursuant to assessment shall be kept in abeyance”.
In CIT vs. M/S. Kalki Investment & Holdings Pvt. Ltd., the Kerala High Court set a precedent regarding income tax recovery proceedings and stay petitions. The Department cannot proceed with coercive recovery measures while the assessee's stay petition (filed under Section 220(6)) is pending adjudication by the appropriate authority (typically the Commissioner of Income Tax (Appeals) or the Assessing Officer, depending on the stage).
The mere filing of a valid stay petition under Section 220(6) operates as an automatic stay on recovery proceedings until that stay petition is decided by the designated authority. The Department cannot bypass this by rejecting the stay petition and immediately starting recovery.
If the Department rejects the stay petition, it does not automatically grant them the right to immediately recover. The assessee retains the right to challenge that rejection (e.g., via Writ Petition under Article 226), and recovery should generally await the outcome of that challenge, especially if the rejection is patently illegal or arbitrary.
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