My appeal is filed and part-heard, but the Assessing Officer says pay 20% or recovery continues, and my bank account is attached. What can the High Court do?
The Bombay High Court directed that during the pendency of the appeals the assessee not be called upon to pay any sum, much less 20%, and that any attachment on his bank account be raised forthwith. The reasoning is that a statutory right of appeal must not be rendered illusory and nugatory by recovery that would make the appeal infructuous before it is heard. But read the order to the end: the Court itself said it cannot be treated as a precedent for all cases of this nature.
Decided by the High Court (S.C. Dharmadhikari J and B.P. Colabawalla J) on 2018-09-11, reported as Writ Petition Nos. 2157 and 2160 of 2018 (High Court of Judicature at Bombay); Revenue's SLP (C) Diary No. 15500/2019 dismissed by the Supreme Court on 03.07.2019 with the question of law kept open. It bears on section 220(6), section 226(3), section 246, section 246A, section 156 of the Income Tax Act 1961, in Demand, Recovery & Stay and Appeals matters.
This is the most quoted formulation of why coercive recovery pending appeal is objectionable, and it is worth carrying precisely because of its limits - both of which the profession tends to leave out. First, the Court expressly declined to deal with the CBDT circular or with the officer's recovery powers; it decided on the narrow footing that the appeal was already part-heard before the Commissioner (Appeals). Second, para 7 records that in ordinary circumstances the assessee would have been relegated to a stay application before the Commissioner (Appeals), and that this order is not a precedent. The Revenue's SLP against it was dismissed by the Supreme Court on 3 July 2019, but with the express reason that the question of law is kept open - so the point is not settled by that dismissal either. Use it for the principle and for the shape of the relief, not as a rule that no deposit can ever be required.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner challenged a demand of Rs.11,15,99,897 for AY 2015-16 raised by an assessment order dated 30.12.2017, and a similar demand in the connected petition. Appeals under s.246A were filed and pending before the Commissioner (Appeals), and counsel informed the Court that the appeal had been scheduled for hearing and had in fact been heard in part. The petitioner had written to the Deputy Commissioner asking that the demand be kept in abeyance till disposal of the appeal, being concerned that he would otherwise be treated as an assessee in default and the amount recovered by coercive means. The Deputy Commissioner replied dismissing the application for stay and directing payment of 20% of the outstanding amount as prescribed in the circulars, particularly that dated 29.02.2016, with production of the challan, failing which collection and recovery would continue. A bank account of the petitioner had been attached.
Both petitions were disposed of with directions that the appellate authority conclude the hearing of the appeals as expeditiously as possible and that during their pendency the petitioner not be called upon to make payment of any sum, much less to the extent of 20% (para 6), and that any attachment levied on the petitioner's bank account stand raised forthwith, without prejudice to the department's power to collect and recover taxes due and payable (para 8). The Court recorded that where a demand is under dispute and subject to appellate proceedings, the statutory right of appeal should not be rendered illusory and nugatory (para 5). It clarified that it expressed no opinion on the merits, that the order was passed in the peculiar facts because the appeal was already being heard, and that it cannot be treated as a precedent for all cases of this nature (para 7). An undertaking was recorded that pending the appeals the petitioner would not dispose of or create third-party rights in his movable assets, without preventing their use in the ordinary course of business (para 8).
The Court read the letter the assessee had written and characterised it not as a formal stay application but as a request that the demand be kept in abeyance pending an appeal that had been filed and was pending (para 3). Once the assessment order is appealable and an appeal has been filed and is pending, the assessee should either have been given an opportunity to seek a stay during its pendency or the demand should have been held in abeyance; instead the officer dismissed the application and directed payment of 20% failing which recovery would continue (para 4). The Court expressly declined to enter on the CBDT circular or on the officer's powers of coercive recovery, and confined itself to the consequence: if the amount is not brought in, the assessee may lose the opportunity to argue the appeal on merits or the appeal may become infructuous if the demand is enforced during its pendency, and the right to seek protection by a stay application would itself be defeated - which can never be the mandate of law (para 5). Because the appeal was already part-heard, the Court gave relief rather than relegating the assessee to a stay application before the Commissioner (Appeals) (para 7).
If that demand is under dispute and is subject to the appellate proceedings, then, the right of appeal vested in the petitioner/assessee by virtue of the Statute should not be rendered illusory and nugatory.
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Handle my notice → Ask a CA on WhatsAppThe Bombay High Court directed that during the pendency of the appeals the assessee not be called upon to pay any sum, much less 20%, and that any attachment on his bank account be raised forthwith. The reasoning is that a statutory right of appeal must not be rendered illusory and nugatory by recovery that would make the appeal infructuous before it is heard. But read the order to the end: the Court itself said it cannot be treated as a precedent for all cases of this nature. This was decided by the High Court (S.C. Dharmadhikari J and B.P. Colabawalla J) and bears on section 220(6), section 226(3), section 246, section 246A, section 156 of the Income Tax Act 1961. It is reported as Writ Petition Nos. 2157 and 2160 of 2018 (High Court of Judicature at Bombay); Revenue's SLP (C) Diary No. 15500/2019 dismissed by the Supreme Court on 03.07.2019 with the question of law kept open. This is the most quoted formulation of why coercive recovery pending appeal is objectionable, and it is worth carrying precisely because of its limits - both of which the profession tends to leave out. First, the Court expressly declined to deal with the CBDT circular or with the officer's recovery powers; it decided on the narrow footing that the appeal was already part-heard before the Commissioner (Appeals). Second, para 7 records that in ordinary circumstances the assessee would have been relegated to a stay application before the Commissioner (Appeals), and that this order is not a precedent. The Revenue's SLP against it was dismissed by the Supreme Court on 3 July 2019, but with the express reason that the question of law is kept open - so the point is not settled by that dismissal either. Use it for the principle and for the shape of the relief, not as a rule that no deposit can ever be required. If it applies to you, the first step is this: Show the Court that the appeal is filed and, if you can, that it is listed or part-heard. That fact carried this case.
The petitioner challenged a demand of Rs.11,15,99,897 for AY 2015-16 raised by an assessment order dated 30.12.2017, and a similar demand in the connected petition. Appeals under s.246A were filed and pending before the Commissioner (Appeals), and counsel informed the Court that the appeal had been scheduled for hearing and had in fact been heard in part. The petitioner had written to the Deputy Commissioner asking that the demand be kept in abeyance till disposal of the appeal, being concerned that he would otherwise be treated as an assessee in default and the amount recovered by coercive means. The Deputy Commissioner replied dismissing the application for stay and directing payment of 20% of the outstanding amount as prescribed in the circulars, particularly that dated 29.02.2016, with production of the challan, failing which collection and recovery would continue. A bank account of the petitioner had been attached. The matter was decided on 2018-09-11 by the High Court (S.C. Dharmadhikari J and B.P. Colabawalla J). On those facts the High Court held as follows. Both petitions were disposed of with directions that the appellate authority conclude the hearing of the appeals as expeditiously as possible and that during their pendency the petitioner not be called upon to make payment of any sum, much less to the extent of 20% (para 6), and that any attachment levied on the petitioner's bank account stand raised forthwith, without prejudice to the department's power to collect and recover taxes due and payable (para 8). The Court recorded that where a demand is under dispute and subject to appellate proceedings, the statutory right of appeal should not be rendered illusory and nugatory (para 5). It clarified that it expressed no opinion on the merits, that the order was passed in the peculiar facts because the appeal was already being heard, and that it cannot be treated as a precedent for all cases of this nature (para 7). An undertaking was recorded that pending the appeals the petitioner would not dispose of or create third-party rights in his movable assets, without preventing their use in the ordinary course of business (para 8).
The Court read the letter the assessee had written and characterised it not as a formal stay application but as a request that the demand be kept in abeyance pending an appeal that had been filed and was pending (para 3). Once the assessment order is appealable and an appeal has been filed and is pending, the assessee should either have been given an opportunity to seek a stay during its pendency or the demand should have been held in abeyance; instead the officer dismissed the application and directed payment of 20% failing which recovery would continue (para 4). The Court expressly declined to enter on the CBDT circular or on the officer's powers of coercive recovery, and confined itself to the consequence: if the amount is not brought in, the assessee may lose the opportunity to argue the appeal on merits or the appeal may become infructuous if the demand is enforced during its pendency, and the right to seek protection by a stay application would itself be defeated - which can never be the mandate of law (para 5). Because the appeal was already part-heard, the Court gave relief rather than relegating the assessee to a stay application before the Commissioner (Appeals) (para 7). In the words reproduced by the source cited on this page: "If that demand is under dispute and is subject to the appellate proceedings, then, the right of appeal vested in the petitioner/assessee by virtue of the Statute should not be rendered illusory and nugatory."
It was decided by the High Court on 2018-09-11 and is reported as Writ Petition Nos. 2157 and 2160 of 2018 (High Court of Judicature at Bombay); Revenue's SLP (C) Diary No. 15500/2019 dismissed by the Supreme Court on 03.07.2019 with the question of law kept open. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 220(6), section 226(3), section 246, section 246A, section 156, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Both petitions were disposed of with directions that the appellate authority conclude the hearing of the appeals as expeditiously as possible and that during their pendency the petitioner not be called upon to make payment of any sum, much less to the extent of 20% (para 6), and that any attachment levied on the petitioner's bank account stand raised forthwith, without prejudice to the department's power to collect and recover taxes due and payable (para 8). The Court recorded that where a demand is under dispute and subject to appellate proceedings, the statutory right of appeal should not be rendered illusory and nugatory (para 5). It clarified that it expressed no opinion on the merits, that the order was passed in the peculiar facts because the appeal was already being heard, and that it cannot be treated as a precedent for all cases of this nature (para 7). An undertaking was recorded that pending the appeals the petitioner would not dispose of or create third-party rights in his movable assets, without preventing their use in the ordinary course of business (para 8). It arises in Demand, Recovery & Stay and Appeals matters, on section 220(6), section 226(3), section 246, section 246A, section 156 of the Income Tax Act 1961, and was decided by S.C. Dharmadhikari J and B.P. Colabawalla J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Frame the grievance as the right of appeal being rendered illusory, not as a challenge to the circular - the Court expressly said it was not concerned with the circular or with the recovery power. Ask separately and expressly for the bank attachment to be raised; that was a distinct direction at para 8. Be ready to offer the undertaking the Court accepted - not to dispose of or create third-party rights in movable assets, while remaining free to use them in the ordinary course of business. Quote the order fairly. If you rely on it, expect the Revenue to point to para 7 and to the Supreme Court keeping the question of law open.
Still good law. Five citator hits, and the judgment has travelled outside Bombay. The Gujarat High Court relied on it twice in its own reasoning - in Niko Resources Ltd v State of Gujarat (26 February 2020) and again in Micro Media System v State of Gujarat (9 February 2022) - each time reproducing the order and adopting its direction that an appellant should not be called upon to pay 20 per cent while the first appeal is pending, because that would frustrate the right of appeal. The Karnataka High Court cited it in Xonique Ventures Pvt Ltd v PCIT (14 November 2025), and the Gujarat High Court noted counsel's reliance on it in Dalpatsinh Ukabhai Vasava v PCIT (24 June 2019). Nothing overruling or doubting it was found and no Supreme Court challenge appears in the citator. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order runs to 8 numbered paragraphs. Paragraph 7 contains the Court's own express limitation - 'This order cannot be treated as a precedent for all cases of this nature' - and any use of the case that omits it is misleading. The Revenue's special leave petition, SLP (C) Diary No. 15500/2019, was dismissed by the Supreme Court (S.A. Bobde and B.R. Gavai JJ) on 3 July 2019 in a two-line record of proceedings reading 'We see no reason to entertain these petitions' with the reason recorded as 'The question of law is kept open'; that record was read separately and is the source for the statement here. Indiankanoon carries several documents under this case name for 2018; the one read is the order of 11 September 2018 in Writ Petition Nos. 2157 and 2160 of 2018. The judgment does not say what conditions would ordinarily justify a stay; it turns on the appeal being part-heard and listed shortly, and the Court records it would otherwise have relegated the assessee to the Commissioner (Appeals). It does not say what became of the appeals or whether the demand was ultimately recovered. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both petitions were disposed of with directions that the appellate authority conclude the hearing of the appeals as expeditiously as possible and that during their pendency the petitioner not be called upon to make payment of any sum, much less to the extent of 20% (para 6), and that any attachment levied on the petitioner's bank account stand raised forthwith, without prejudice to the department's power to collect and recover taxes due and payable (para 8). The Court recorded that where a demand is under dispute and subject to appellate proceedings, the statutory right of appeal should not be rendered illusory and nugatory (para 5). It clarified that it expressed no opinion on the merits, that the order was passed in the peculiar facts because the appeal was already being heard, and that it cannot be treated as a precedent for all cases of this nature (para 7). An undertaking was recorded that pending the appeals the petitioner would not dispose of or create third-party rights in his movable assets, without preventing their use in the ordinary course of business (para 8).
TaxSphere, “Bhupendra Murji Shah v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/bhupendra-murji-shah-v-dcit/ (validity last checked 2026-09-08)
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The AO rejected my stay application and issued a garnishee notice to my bank the same day. Is that permissible?
The Assessing Officer has rejected my stay application in two lines saying pay 20%. Is that order sustainable, and can he order less than 20% without going to the Principal Commissioner?
Your bank account was attached while the stay application was still pending. Was that lawful?
The department has attached my bank account under s.226(3) because I did not pay the 20%. I say I have already paid more than that. Will the High Court interfere?
