Facts of the Case

Harakh Chand Glass Pvt. Ltd., Allahabad, filed an appeal before the Income Tax Appellate Tribunal challenging additions made by the Assessing Officer which resulted in a substantial tax demand. Pending disposal of the appeal, the assessee filed a stay application seeking suspension of recovery proceedings initiated by the department.

The assessee contended that immediate recovery would cause undue hardship and that the appeal had strong merits.

Issues Involved

Whether the assessee was entitled to stay of recovery of the disputed tax demand during the pendency of the appeal before the Tribunal.

Petitioner’s (Assessee’s) Arguments

  • The appeal raised substantial legal and factual issues and had a strong prima facie case
  • Recovery of the demand would cause serious financial hardship
  • The balance of convenience favored grant of stay
  • The assessee was willing to comply with reasonable conditions imposed by the Tribunal

Respondent’s (Revenue’s) Arguments

The Revenue opposed the stay application, arguing that tax demands raised through due process should not ordinarily be withheld. It contended that the assessee had not demonstrated sufficient grounds for complete suspension of recovery and that the department was entitled to proceed with collection of lawful dues.

Court Order / Findings (ITAT)

The Tribunal examined the facts, the nature of additions under challenge, and the financial position of the assessee. It reiterated that grant of stay of demand is discretionary and must be guided by established principles, namely:

  1. Existence of a prima facie case in favor of the assessee
  2. Likelihood of irreparable financial hardship if recovery proceeds
  3. Balance of convenience between the parties

Important Clarification

The ruling emphasizes that stay of tax demand is not automatic upon filing an appeal. The assessee must demonstrate genuine hardship and arguable merits. Tribunals typically impose conditions such as partial payment or security to safeguard revenue interests while protecting taxpayers from coercive recovery.

Link to download the order –https://itat.gov.in/public/files/upload/1582539755-HARAKH-60&SA-01.pdf

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