Mr.Amit Rastogi
I am herewith attaching relvant circulars issued by CBDT regarding stay of demand by the Assessing Officers which may help you.
Best Wishes
Sathikonda
p.s. Mr. Rastogi there is a problem in uploading the file. Hence I am hereunder furnishing the copy of the circualrs.
1224. Whether Assessing Officer can exercise discretion under section 220(6) to treat assessee as not being in default in respect of 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 u/s 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 u/s 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 assessee’s 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 excercise his disertion 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.
Circular : No. 530, dated 6-3-1989.
Judicial analysis
Explained in - The above circular was explained in Madhu Silica (P.) Ltd. v. CIT 1996 Tax L.R. 521 (Guj.), 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 assessee’s 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 16-1-1991 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)
Explained in - Gujarat State Fertilizers & Chemicals Ltd. v. Dy. CIT [1997] 226 ITR 270/98 Taxman 100 (Guj.) it was observed as follows :
“As per Circular No. 530, dated March 6, 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 assessee’s own case, the assessee is to be treated as not being in default in respect of the amounts attributed to such disputed amounts.”
Clarification 2
1. Reference is invited to Board’s Circular No. 530 [F. No. 404/82/88-ITCC], dated March 6, 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 Officer’s 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.”
Circular : No. 589, dated 16-1-1991.
1225. Stay in case of harsh assessment
It seems that the Government has agreed, and has sent instructions to the Commissioners that, in cases of harsh assessments, the Income-tax Officer should, normally, grant stay on application made under section 220(6). That is clear from the proceedings of the Lok Sabha dated 11th December, 1970, when in reply to unstarred question No. 4289, the Minister for Revenue and Expenditure assured :
“(a) and (b), suitable instructions (to the effect 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 of the appeals, provided there were no lapse on the part of the assessee) have been issued by the Central Board of Direct Taxes to all Commissioners of Income-tax in view of the recommendation made by the informal Consultative Committee of the Ministry.” (pp. 420-421)
Extract from : Vikarambhai Punjabhai Palkhiwala v. S.M. Alpbang, Recovery Officer [1990] 182 ITR 413 (Guj.).
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