Every issue in my Tribunal appeal is covered in my favour. Can the Tribunal grant an unconditional stay without my paying 20%?
Not an unconditional one. After the Finance Act 2020 amended the first proviso to s.254(2A), the Tribunal may grant stay only on the condition that the assessee deposits not less than twenty per cent of the tax, interest, fee, penalty or other sum payable, or furnishes security of equal amount. But the deposit is not a condition precedent: the assessee may instead furnish security, and what constitutes reasonable security is for the Tribunal to decide. Stay was granted on security of Rs.35 crores against a demand of about Rs.172.48 crores.
Decided by the ITAT (Pramod Kumar, Vice President, and Kavitha Rajagopal, Judicial Member) on 2022-09-26, reported as SA No. 116/Mum/2022 in ITA No. 2125/Mum/2022 (Income Tax Appellate Tribunal, Mumbai 'K' Bench). It bears on section 254(2A), section 254(1), section 220(6), section 143(3), section 144C(13) of the Income Tax Act 1961, in Demand, Recovery & Stay and Appeals matters.
This is the twenty per cent that IS statutory - and it is not the one in the CBDT Office Memorandum. Under s.220(6) before the CIT(A) the 20% is administrative and the Assessing Officer can go below it; under the first proviso to s.254(2A) before the Tribunal it is in the statute, and the Tribunal - a creature of the Act - holds that it cannot grant a blanket stay in violation of it, however strong the covered-issue argument. The escape valve is the words 'or furnishes security of equal amount', and this order is the authority for using them: security rather than cash, in a form the Tribunal can approve, with a safeguard requiring the Assessing Officer to pass a speaking order and give two weeks' notice before coercive recovery if he is not satisfied with it. Keep it distinct from Pepsi Foods, which struck down words in the third proviso about the outer limit; this decision is about the first proviso and the condition for granting stay at all.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The taxpayer sought a stay on collection and recovery of tax and interest demands aggregating Rs.172,47,58,360 raised in an assessment under s.143(3) read with s.144C(13) for AY 2018-19, then in appeal before the Tribunal. Not even a part of the demand had been paid, and counsel stated that the assessee did not intend to pay any part of it, seeking a blanket stay on the footing that most issues were covered in its favour by binding precedents in its own case or in its sister concerns' cases, and relying on CBDT instructions directing that demands on covered issues not be collected. The Departmental Representative opposed the application, pointing to the amendment to the first proviso to s.254(2A) and to the fact that nothing had been paid. At the close of argument counsel asked in the alternative for a conditional stay on furnishing security equivalent to 20% of the disputed demand, on the lines of the order in Grasim India Ltd.
The stay application was partly allowed (para 11). The Tribunal has no power to grant a blanket stay in violation of the first proviso to s.254(2A) as it stands after the Finance Act 2020: once the statute provides that stay may be granted only subject to a deposit of not less than 20% of the disputed demand or the furnishing of security thereof, it is not open to the Tribunal to grant a stay in violation of that provision (paras 6 and 8). At the same time the law itself visualises that payment of 20% is not a condition precedent, because the applicant may instead furnish security of equal amount, and what constitutes reasonable security may vary from case to case and can be judicially examined or decided by the Tribunal itself (para 8). Stay was granted on the conditions that the assessee provide reasonable security for Rs.35 crores or more within two weeks, that if the Assessing Officer is not satisfied with the security he pass a detailed speaking order and give two weeks' notice before initiating coercive recovery, that the assessee cooperate in expeditious disposal on pain of the stay being vacated, and that the stay operate for 180 days or until the appeal is decided, whichever is earlier (para 9).
The Tribunal accepted that under s.254(1), as held in M.K. Mohammed Kunhi, it has powers of stay incidental and ancillary to its appellate jurisdiction, but noted that the Supreme Court had also warned that the power is not to be exercised routinely, and that at that time the statute conferred no express power of stay (para 6). As the law stands, the first proviso to s.254(2A) expressly conditions the power, and to read s.254(1) in disjunction with that proviso would render the proviso otiose; applying the rule against constructions that make a provision redundant, as in Hindustan Bulk Carriers and Papillon Investments, and the principle of harmonious construction, the Tribunal held that its powers under s.254(1) cannot be read so as to defeat the proviso (paras 6 to 8). Being a creature of the statute, it cannot sit in judgment over the reasonableness of the provision; that is for the constitutional Courts (paras 6 and 8). The precedents cited on stay during the first appeal, and the CBDT instructions issued in that context, do not apply, the Supreme Court in Mohammed Kunhi itself having distinguished administrative relief from the statutory power in s.220(6) confined to the stage of the first appeal (para 8). On the alternative prayer, having satisfied itself that the issues were by and large covered, the Tribunal followed the course taken in Grasim India Ltd and granted stay against security (para 9).
In our considered view, once a statutory provision specifically provides that the Tribunal can only grant a stay subject to a deposit of not less than 20% of the disputed demand, or furnishing of security thereof, it cannot be open to us to grant a stay in violation of these basic statutory provisions.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNot an unconditional one. After the Finance Act 2020 amended the first proviso to s.254(2A), the Tribunal may grant stay only on the condition that the assessee deposits not less than twenty per cent of the tax, interest, fee, penalty or other sum payable, or furnishes security of equal amount. But the deposit is not a condition precedent: the assessee may instead furnish security, and what constitutes reasonable security is for the Tribunal to decide. Stay was granted on security of Rs.35 crores against a demand of about Rs.172.48 crores. This was decided by the ITAT (Pramod Kumar, Vice President, and Kavitha Rajagopal, Judicial Member) and bears on section 254(2A), section 254(1), section 220(6), section 143(3), section 144C(13) of the Income Tax Act 1961. It is reported as SA No. 116/Mum/2022 in ITA No. 2125/Mum/2022 (Income Tax Appellate Tribunal, Mumbai 'K' Bench). This is the twenty per cent that IS statutory - and it is not the one in the CBDT Office Memorandum. Under s.220(6) before the CIT(A) the 20% is administrative and the Assessing Officer can go below it; under the first proviso to s.254(2A) before the Tribunal it is in the statute, and the Tribunal - a creature of the Act - holds that it cannot grant a blanket stay in violation of it, however strong the covered-issue argument. The escape valve is the words 'or furnishes security of equal amount', and this order is the authority for using them: security rather than cash, in a form the Tribunal can approve, with a safeguard requiring the Assessing Officer to pass a speaking order and give two weeks' notice before coercive recovery if he is not satisfied with it. Keep it distinct from Pepsi Foods, which struck down words in the third proviso about the outer limit; this decision is about the first proviso and the condition for granting stay at all. If it applies to you, the first step is this: Do not ask the Tribunal for a blanket stay on the strength of covered issues alone; on this order it has no power to grant one.
The taxpayer sought a stay on collection and recovery of tax and interest demands aggregating Rs.172,47,58,360 raised in an assessment under s.143(3) read with s.144C(13) for AY 2018-19, then in appeal before the Tribunal. Not even a part of the demand had been paid, and counsel stated that the assessee did not intend to pay any part of it, seeking a blanket stay on the footing that most issues were covered in its favour by binding precedents in its own case or in its sister concerns' cases, and relying on CBDT instructions directing that demands on covered issues not be collected. The Departmental Representative opposed the application, pointing to the amendment to the first proviso to s.254(2A) and to the fact that nothing had been paid. At the close of argument counsel asked in the alternative for a conditional stay on furnishing security equivalent to 20% of the disputed demand, on the lines of the order in Grasim India Ltd. The matter was decided on 2022-09-26 by the ITAT (Pramod Kumar, Vice President, and Kavitha Rajagopal, Judicial Member). On those facts the ITAT held as follows. The stay application was partly allowed (para 11). The Tribunal has no power to grant a blanket stay in violation of the first proviso to s.254(2A) as it stands after the Finance Act 2020: once the statute provides that stay may be granted only subject to a deposit of not less than 20% of the disputed demand or the furnishing of security thereof, it is not open to the Tribunal to grant a stay in violation of that provision (paras 6 and 8). At the same time the law itself visualises that payment of 20% is not a condition precedent, because the applicant may instead furnish security of equal amount, and what constitutes reasonable security may vary from case to case and can be judicially examined or decided by the Tribunal itself (para 8). Stay was granted on the conditions that the assessee provide reasonable security for Rs.35 crores or more within two weeks, that if the Assessing Officer is not satisfied with the security he pass a detailed speaking order and give two weeks' notice before initiating coercive recovery, that the assessee cooperate in expeditious disposal on pain of the stay being vacated, and that the stay operate for 180 days or until the appeal is decided, whichever is earlier (para 9).
The Tribunal accepted that under s.254(1), as held in M.K. Mohammed Kunhi, it has powers of stay incidental and ancillary to its appellate jurisdiction, but noted that the Supreme Court had also warned that the power is not to be exercised routinely, and that at that time the statute conferred no express power of stay (para 6). As the law stands, the first proviso to s.254(2A) expressly conditions the power, and to read s.254(1) in disjunction with that proviso would render the proviso otiose; applying the rule against constructions that make a provision redundant, as in Hindustan Bulk Carriers and Papillon Investments, and the principle of harmonious construction, the Tribunal held that its powers under s.254(1) cannot be read so as to defeat the proviso (paras 6 to 8). Being a creature of the statute, it cannot sit in judgment over the reasonableness of the provision; that is for the constitutional Courts (paras 6 and 8). The precedents cited on stay during the first appeal, and the CBDT instructions issued in that context, do not apply, the Supreme Court in Mohammed Kunhi itself having distinguished administrative relief from the statutory power in s.220(6) confined to the stage of the first appeal (para 8). On the alternative prayer, having satisfied itself that the issues were by and large covered, the Tribunal followed the course taken in Grasim India Ltd and granted stay against security (para 9). In the words reproduced by the source cited on this page: "In our considered view, once a statutory provision specifically provides that the Tribunal can only grant a stay subject to a deposit of not less than 20% of the disputed demand, or furnishing of security thereof, it cannot be open to us to grant a stay in violation of these basic statutory provisions." The decision followed or applied ITO v. M.K. Mohammed Kunhi (1969) 71 ITR 815 (SC) - considered and read down in the light of the subsequent statutory amendment; CIT v. Hindustan Bulk Carriers (2003) 259 ITR 449 (SC) - applied on ut res magis valeat quam pereat; ACIT v. Papillon Investments Pvt Ltd (2005) 4 SOT 234 (Mum), affirmed in CIT v. Papillon Investments Pvt Ltd (2012) 20 taxmann.com 201 (Bom) - applied; Grasim India Ltd v. DCIT (2021) 126 taxmann.com 106 - followed on the form of conditional stay.
It was decided by the ITAT on 2022-09-26 and is reported as SA No. 116/Mum/2022 in ITA No. 2125/Mum/2022 (Income Tax Appellate Tribunal, Mumbai 'K' Bench). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 254(2A), section 254(1), section 220(6), section 143(3), section 144C(13), 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 cuts both ways and is cited by both sides. The stay application was partly allowed (para 11). The Tribunal has no power to grant a blanket stay in violation of the first proviso to s.254(2A) as it stands after the Finance Act 2020: once the statute provides that stay may be granted only subject to a deposit of not less than 20% of the disputed demand or the furnishing of security thereof, it is not open to the Tribunal to grant a stay in violation of that provision (paras 6 and 8). At the same time the law itself visualises that payment of 20% is not a condition precedent, because the applicant may instead furnish security of equal amount, and what constitutes reasonable security may vary from case to case and can be judicially examined or decided by the Tribunal itself (para 8). Stay was granted on the conditions that the assessee provide reasonable security for Rs.35 crores or more within two weeks, that if the Assessing Officer is not satisfied with the security he pass a detailed speaking order and give two weeks' notice before initiating coercive recovery, that the assessee cooperate in expeditious disposal on pain of the stay being vacated, and that the stay operate for 180 days or until the appeal is decided, whichever is earlier (para 9). It arises in Demand, Recovery & Stay and Appeals matters, on section 254(2A), section 254(1), section 220(6), section 143(3), section 144C(13) of the Income Tax Act 1961, and was decided by Pramod Kumar, Vice President, and Kavitha Rajagopal, Judicial Member. 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. Offer security instead of cash where liquidity is the problem, and put a concrete proposal in the application - the alternatives canvassed included a bank guarantee, mortgage, lien, charge, pledge, bond or an undertaking not to dispose of identified assets. Quantify the security at not less than 20% of the tax, interest, fee, penalty or other sum payable, and say how the Assessing Officer can perfect it. Ask for the protective direction granted here: if the Assessing Officer is not satisfied with the security, he must pass a detailed speaking order and give two weeks' notice before any coercive recovery. Offer full cooperation in early disposal and accept a vacation clause for dilatory tactics; the stay was granted for 180 days on those terms. Do not carry the s.220(6) case law across to the Tribunal - the order expressly holds that decisions on stay during the first appeal do not apply to the Tribunal's power under the first proviso to s.254(2A).
Validity check could not be completed. Later treatment was not checked. This is a stay order of a Division Bench of the Tribunal, not a decision on appeal, and other benches have taken different views on whether the amended first proviso is mandatory - the question was referred for a larger bench in Tata Education and Development Trust on 17.06.2020 and no larger-bench decision was traced on this pass. The library's existing entry on DCIT v. Pepsi Foods Ltd concerns the third proviso and the outer time limit, which is a different question from the condition for granting stay dealt with here. 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 11 numbered paragraphs. Para 8 refers to 'the grant of stay under section 220(2)' where the context is plainly s.220(6). Paras 6 and 7 reproduce the Supreme Court in M.K. Mohammed Kunhi, the Supreme Court in Hindustan Bulk Carriers, a passage from a coordinate bench in Papillon Investments and an extract from Justice G.P. Singh's Principles of Statutory Interpretation - the words inside those blocks are not the Tribunal's own. The first proviso to s.254(2A) is reproduced verbatim at para 6 and that reproduction is the source used here for the statutory text; no live departmental page for s.254 was checked on this pass. An earlier Mumbai bench in Tata Education and Development Trust (SA Nos. 147 and 148/Mum/2020, order dated 17.06.2020) referred the same question - whether the amended first proviso is directory or mandatory, whether it applies to appeals filed before it came into force, and what constitutes security - to the President for constitution of a larger bench under s.255(3); that order was read, and no decision of any larger bench on the reference was traced on this pass. 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.
The stay application was partly allowed (para 11). The Tribunal has no power to grant a blanket stay in violation of the first proviso to s.254(2A) as it stands after the Finance Act 2020: once the statute provides that stay may be granted only subject to a deposit of not less than 20% of the disputed demand or the furnishing of security thereof, it is not open to the Tribunal to grant a stay in violation of that provision (paras 6 and 8). At the same time the law itself visualises that payment of 20% is not a condition precedent, because the applicant may instead furnish security of equal amount, and what constitutes reasonable security may vary from case to case and can be judicially examined or decided by the Tribunal itself (para 8). Stay was granted on the conditions that the assessee provide reasonable security for Rs.35 crores or more within two weeks, that if the Assessing Officer is not satisfied with the security he pass a detailed speaking order and give two weeks' notice before initiating coercive recovery, that the assessee cooperate in expeditious disposal on pain of the stay being vacated, and that the stay operate for 180 days or until the appeal is decided, whichever is earlier (para 9).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
My return was only processed under 143(1). Does that stop the department reopening it later?
No s.143(2) notice was issued at all. Does s.292BB save the assessment?
Your Tribunal stay lapsed at 365 days through no fault of yours. Is that constitutional?