Facts of the Case

  • The petitioner, NASSCOM, challenged recovery actions arising from tax demands for multiple assessment years.
  • The final assessment for AY 2018-19 resulted in demand, against which the petitioner filed:
    • Appeal before the CIT(A)
    • Rectification application under Section 154
    • Stay application under Section 220(6)
  • The authorities did not decide the stay application and proceeded with adjustment/recovery.
  • The Department insisted on a 20% pre-deposit as a condition for considering the stay request.
  • The petitioner approached the High Court seeking protection against coercive recovery and proper consideration of its stay application. 

Issues Involved

  1. Whether authorities can refuse to consider a stay application without a 20% pre-deposit.
  2. Whether CBDT instructions prescribing deposit create a mandatory condition.
  3. Scope of discretion under Section 220(6) of the Income-tax Act.
  4. Validity of recovery action pending disposal of stay application.

Petitioner’s Arguments

  • The petitioner argued that Section 220(6) confers discretionary power to grant stay without mandating any fixed pre-deposit.
  • CBDT instructions are administrative guidelines and cannot override statutory discretion.
  • Recovery action without deciding the stay application was arbitrary and unlawful.
  • The petitioner sought restraint on recovery and direction for proper consideration of its request.

Respondent’s Arguments

  • The Revenue contended that CBDT guidelines prescribe deposit (generally 20%) for granting stay.
  • It argued that the petitioner had not complied with these requirements.
  • Recovery actions were therefore justified in accordance with departmental instructions. 

Court Order / Findings

  • The requirement of 20% deposit is not an inflexible or mandatory rule.
  • Authorities exercising quasi-judicial powers must consider each case on its merits.
  • CBDT instructions cannot fetter statutory discretion under Section 220(6).
  • Refusal to even entertain a stay application without deposit is legally untenable.
  • Recovery should not proceed mechanically when a stay request is pending consideration.

Important Clarification by the Court

  • Administrative circulars prescribing “standard” deposit rates are only guidelines.
  • Authorities may grant stay on lesser deposit or even without deposit in appropriate cases.
  • Discretion must be exercised judicially, considering hardship and merits.
  • Mechanical application of deposit conditions is impermissible. 

Sections Involved

  • Section 220(6) — Stay of demand pending appeal
  • Section 154 — Rectification of mistakes
  • Section 156 — Notice of demand
  • Relevant provisions of the Income-tax Act, 1961

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/YVA01032024CW93102022_144310.pdf

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