What is the officer actually required to do when deciding your stay application?
Four things: set out your case briefly, give short prima facie reasons if directing a part deposit, indicate whether you are financially sound, and check whether the time to appeal has expired. Coercive measures should generally not be used during the appeal period.
Decided by the High Court (Bombay High Court — S.H. Kapadia J and V.C. Daga J) on 2001-03-29, reported as [2001] 119 Taxman 974 (Bom) / [2001] 251 ITR 158 (Bom) / [2001] 170 CTR 415 (Bom); Writ Petition No. 756 of 2001. It bears on section 226, section 226(3), section 156, section 143(3) of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
This is the checklist practitioners actually structure stay applications around, because it tells you what the officer is supposed to record. A stay order that records none of it is a non-speaking order, which is the ground for the next step.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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An assessment order was passed on 5 February 2001 under s.143(3) for assessment year 1998-99, and a notice of demand for Rs 12.93 crores including interest issued the same day under s.156. On 23 February 2001 the assessee filed a stay petition before the Assessing Officer so that it could take an appeal to the Commissioner. The Assessing Officer rejected it on 5 March 2001 without giving reasons. The assessee then approached the Commissioner on the administrative side on 13 March 2001; that application was dismissed by an order which recorded only that the Commissioner declined to interfere because the company would not agree to pay even 25 per cent of the demand. A garnishee notice under s.226(3) was issued to the Central Bank of India, J.B. Nagar Branch, Andheri (East), Mumbai, with the result that about 500 workers had not been paid their salary. The company petitioned under Article 226.
The writ petition was allowed. The impugned order was set aside and, in consequence, the garnishee notice under s.226(3) was set aside as well, with a direction to the Assessing Officer to dispose of the stay application in accordance with law (para 5) — the Court did not itself grant a stay. Because the order had been passed without any reasons, the Court laid down five parameters to be followed where a stay application is made pending appeal to the first appellate authority (para 3): the authority will at least briefly set out the assessee's case; where the assessed income far exceeds the returned income it will consider whether a case for unconditional stay is made out and, if not, whether part of the amount should be deposited, giving short prima facie reasons; where financial difficulty is pleaded it can briefly indicate whether the assessee is financially sound and viable to deposit; it will examine whether the time to prefer an appeal has expired, coercive measures generally not being adopted during that period unless the authority concludes the assessee is likely to defeat the demand, for which brief reasons may be indicated; and if the authority complies with these, the administrative authority above it need not give a second reasoned order. The Court added expressly that the parameters are not exhaustive and are only recommendatory in nature (para 4).
The Court opened by recording that in a large number of matters it was finding orders passed perfunctorily by the department only with the idea of effecting recovery before 31 March, when they could have been passed earlier in detail and after recording proper reasons, and that this was one of those cases (para 2). Neither the Assessing Officer nor the Commissioner had given any reason for refusing stay; the Commissioner's order rested on nothing more than the company's refusal to pay 25 per cent. The garnishee notice that followed had stopped the salaries of about 500 workers, and the Court identified that as the consequence of an order made without reasons (para 3). It was for that reason that it set out parameters for the disposal of stay applications, framed so that the assessee's case is recorded, the choice between unconditional stay and part deposit is reasoned, a plea of financial difficulty is addressed, and recovery is not pressed during the period allowed for an appeal unless the authority has a reason to think the demand will be defeated. The parameters were expressly said to be recommendatory and not exhaustive (para 4), and the Court granted no substantive relief on the demand beyond sending the stay application back for a proper decision (para 5).
Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order.
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Handle my notice → Ask a CA on WhatsAppFour things: set out your case briefly, give short prima facie reasons if directing a part deposit, indicate whether you are financially sound, and check whether the time to appeal has expired. Coercive measures should generally not be used during the appeal period. This was decided by the High Court (Bombay High Court — S.H. Kapadia J and V.C. Daga J) and bears on section 226, section 226(3), section 156, section 143(3) of the Income Tax Act 1961. It is reported as [2001] 119 Taxman 974 (Bom) / [2001] 251 ITR 158 (Bom) / [2001] 170 CTR 415 (Bom); Writ Petition No. 756 of 2001. This is the checklist practitioners actually structure stay applications around, because it tells you what the officer is supposed to record. A stay order that records none of it is a non-speaking order, which is the ground for the next step. If it applies to you, the first step is this: Structure the stay application to mirror the four parameters, so the officer has nothing left to fill in.
An assessment order was passed on 5 February 2001 under s.143(3) for assessment year 1998-99, and a notice of demand for Rs 12.93 crores including interest issued the same day under s.156. On 23 February 2001 the assessee filed a stay petition before the Assessing Officer so that it could take an appeal to the Commissioner. The Assessing Officer rejected it on 5 March 2001 without giving reasons. The assessee then approached the Commissioner on the administrative side on 13 March 2001; that application was dismissed by an order which recorded only that the Commissioner declined to interfere because the company would not agree to pay even 25 per cent of the demand. A garnishee notice under s.226(3) was issued to the Central Bank of India, J.B. Nagar Branch, Andheri (East), Mumbai, with the result that about 500 workers had not been paid their salary. The company petitioned under Article 226. The matter was decided on 2001-03-29 by the High Court (Bombay High Court — S.H. Kapadia J and V.C. Daga J). On those facts the High Court held as follows. The writ petition was allowed. The impugned order was set aside and, in consequence, the garnishee notice under s.226(3) was set aside as well, with a direction to the Assessing Officer to dispose of the stay application in accordance with law (para 5) — the Court did not itself grant a stay. Because the order had been passed without any reasons, the Court laid down five parameters to be followed where a stay application is made pending appeal to the first appellate authority (para 3): the authority will at least briefly set out the assessee's case; where the assessed income far exceeds the returned income it will consider whether a case for unconditional stay is made out and, if not, whether part of the amount should be deposited, giving short prima facie reasons; where financial difficulty is pleaded it can briefly indicate whether the assessee is financially sound and viable to deposit; it will examine whether the time to prefer an appeal has expired, coercive measures generally not being adopted during that period unless the authority concludes the assessee is likely to defeat the demand, for which brief reasons may be indicated; and if the authority complies with these, the administrative authority above it need not give a second reasoned order. The Court added expressly that the parameters are not exhaustive and are only recommendatory in nature (para 4).
The Court opened by recording that in a large number of matters it was finding orders passed perfunctorily by the department only with the idea of effecting recovery before 31 March, when they could have been passed earlier in detail and after recording proper reasons, and that this was one of those cases (para 2). Neither the Assessing Officer nor the Commissioner had given any reason for refusing stay; the Commissioner's order rested on nothing more than the company's refusal to pay 25 per cent. The garnishee notice that followed had stopped the salaries of about 500 workers, and the Court identified that as the consequence of an order made without reasons (para 3). It was for that reason that it set out parameters for the disposal of stay applications, framed so that the assessee's case is recorded, the choice between unconditional stay and part deposit is reasoned, a plea of financial difficulty is addressed, and recovery is not pressed during the period allowed for an appeal unless the authority has a reason to think the demand will be defeated. The parameters were expressly said to be recommendatory and not exhaustive (para 4), and the Court granted no substantive relief on the demand beyond sending the stay application back for a proper decision (para 5). In the words reproduced by the source cited on this page: "Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defeat the demand, it may take recourse to coercive action for which brief reasons may be indicated in the order."
It was decided by the High Court on 2001-03-29 and is reported as [2001] 119 Taxman 974 (Bom) / [2001] 251 ITR 158 (Bom) / [2001] 170 CTR 415 (Bom); Writ Petition No. 756 of 2001. 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 226, section 226(3), section 156, section 143(3), 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. The writ petition was allowed. The impugned order was set aside and, in consequence, the garnishee notice under s.226(3) was set aside as well, with a direction to the Assessing Officer to dispose of the stay application in accordance with law (para 5) — the Court did not itself grant a stay. Because the order had been passed without any reasons, the Court laid down five parameters to be followed where a stay application is made pending appeal to the first appellate authority (para 3): the authority will at least briefly set out the assessee's case; where the assessed income far exceeds the returned income it will consider whether a case for unconditional stay is made out and, if not, whether part of the amount should be deposited, giving short prima facie reasons; where financial difficulty is pleaded it can briefly indicate whether the assessee is financially sound and viable to deposit; it will examine whether the time to prefer an appeal has expired, coercive measures generally not being adopted during that period unless the authority concludes the assessee is likely to defeat the demand, for which brief reasons may be indicated; and if the authority complies with these, the administrative authority above it need not give a second reasoned order. The Court added expressly that the parameters are not exhaustive and are only recommendatory in nature (para 4). It arises in Demand, Recovery & Stay matters, on section 226, section 226(3), section 156, section 143(3) of the Income Tax Act 1961, and was decided by Bombay High Court — S.H. Kapadia J and V.C. Daga 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. Quantify how far the assessed income exceeds the returned income — that is parameter two. If the rejection records no reasons on hardship, say so; a non-speaking order is what gets set aside.
Still good law. Followed by the Bombay High Court in UTI Mutual Fund v. ITO [2012] 19 taxmann.com 250 / [2012] 206 Taxman 341 / [2012] 345 ITR 71 / [2012] 249 CTR 190 (Bom), decided 14 March 2012, whose CASES REVIEW records KEC International as followed; that Bench reproduced all five parameters in full, said the guidelines 'are now being breached by the Revenue', and added five further guidelines of its own, including that no recovery be made pending expiry of the appeal period or disposal of a stay application and for a reasonable period thereafter. An earlier Division Bench in Coca Cola India (P.) Ltd. v. Addl. CIT [2006] 285 ITR 419 / [2006] 150 Taxman 359 (Bom) had likewise deprecated the Revenue for ignoring the KEC parameters and for attaching bank accounts before communicating the order on the stay application. No decision doubting KEC International was found. 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.
Two things about this decision are routinely lost when it is cited. The parameters are described by the Court itself as not exhaustive and only recommendatory (para 4); and the relief given was to set aside the non-speaking refusal and the consequent garnishee notice and to send the stay application back to the Assessing Officer to be decided in accordance with law (para 5). Section 220(6) is nowhere mentioned in the judgment — the assessment was under s.143(3), the demand notice under s.156, and the attachment under s.226(3) — although the parameters are applied to s.220(6) applications in practice. The single earlier order in the same matter that the entry suspected does not exist: there is one judgment, dated 29 March 2001. 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 writ petition was allowed. The impugned order was set aside and, in consequence, the garnishee notice under s.226(3) was set aside as well, with a direction to the Assessing Officer to dispose of the stay application in accordance with law (para 5) — the Court did not itself grant a stay. Because the order had been passed without any reasons, the Court laid down five parameters to be followed where a stay application is made pending appeal to the first appellate authority (para 3): the authority will at least briefly set out the assessee's case; where the assessed income far exceeds the returned income it will consider whether a case for unconditional stay is made out and, if not, whether part of the amount should be deposited, giving short prima facie reasons; where financial difficulty is pleaded it can briefly indicate whether the assessee is financially sound and viable to deposit; it will examine whether the time to prefer an appeal has expired, coercive measures generally not being adopted during that period unless the authority concludes the assessee is likely to defeat the demand, for which brief reasons may be indicated; and if the authority complies with these, the administrative authority above it need not give a second reasoned order. The Court added expressly that the parameters are not exhaustive and are only recommendatory in nature (para 4).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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