In terms of modified instruction No. 1914 dated 21.03.1996 issued by CBDT, payment required to be made by the assessee as a precondition for stay of demand disputed before CIT(A) is 20%.
Many confuse this to be a precondition of absolute nature for obtaining stay under any circumstance, which is incorrect. Instruction simply talks about the powers of assessing officer to grant stay till disposal of first appeal before CIT(A). It could not have and it does not talk about on what conditions CIT(A) could grant stay. In practice, on various occasions it is seen that even CIT(A) refers to Office Memorandum / Instruction No. 1914 as modified lastly to prescribe deposit of 20% for grant of stay.
This clearly is misconceived. CIT(A) powers are granted under statute u/s.251 of Income Tax Act, 1961, which empower him to confirm, reduce, enhance or annual the assessment and also to pass such orders(including stay orders) in appeal as he thinks fit. CBDT administrative circular no way binds CIT(A) not to grant stay unless 20% amount is deposited.
In fact, in the Case of Flipkart(P) Ltd. v ACIT, Karnataka High Court has held that even assessing officer could grant stay with deposit of amount that is less than 15%(as it then was). There are similar decisions from other High Courts as well.
However, while power of AO are limited and factors that could be considered by AO are exactly as are prescribed in CBDT Circular i.e. whether addition on same issue has been deleted by appellate authorities or superior courts etc., powers of CIT(A) will not be restricted by any circulars and he could consider all factors that may be relevant for grant of stay e.g. strong and prima facie case, whether in law or in facts, irreparable injury, any special circumstances and any other relevant factors. Theoretically CIT(A) has powers to grant stay of demand even without deposit of even a single percent of disputed demand.
It is author's view that appeals before CIT(A) may be filed along with detailed stay applications putting forth relevant reasons for grant of stay and in case of pendency of stay applications without any delay from the side of appellant or in case of mechanical rejection of stay applications, remedy of filing a writ petition before jurisdictional high court could be availed. It will be beyond the scope of this article to discuss grounds of challenge of any order of CIT(A) rejecting stay applications but suffice it to say that there are many possibilities of having stay on demand by paying less than 20%.
* Readers should contact their attorney to obtain advice with respect to any particular legal matter. No reader or user should act or refrain from acting on the basis of information written above without first seeking legal advice from qualified law practitioner.
CAclubindia
