My assessment is many times my returned income, the Assessing Officer has refused stay and attached my bank account. Can the Commissioner (Appeals) stay the demand while my appeal is pending?
Yes. The Rajasthan High Court held that the first appellate authority - the Commissioner (Appeals) or Deputy Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of a disputed demand while an appeal under section 246 or 246A is pending, even though the Act confers no express power. It followed ITO v. M.K. Mohammed Kunhi. It also held that section 220(6) is not a stay power at all but a discretion not to treat the assessee as in default, and that on a high-pitched assessment - in the spirit of CBDT Instruction No.95 of 1969, where the assessed income is twice the returned income or more - that discretion should ordinarily be exercised in the assessee's favour.
Decided by the High Court (High Court of Judicature for Rajasthan at Jodhpur - Dr. Vineet Kothari, J. (single bench, oral judgment, marked reportable)) on 2011-12-15, reported as S.B. Civil Writ Petition No.1264/2011 (Rajasthan High Court, Jodhpur Bench). It bears on section 220(6), section 246A, section 220(2), section 221 of the Income Tax Act 1961, in Demand, Recovery & Stay and Appeals matters.
This is the judgment to cite when the Assessing Officer refuses stay on a high-pitched assessment and the Commissioner (Appeals) says he has no power to help. It does two things nothing else does as squarely. It extends the Mohammed Kunhi principle of implied appellate power from the Tribunal down to the first appellate authority. And it reads section 220(6) properly: it is a negative discretion not to treat the assessee as in default, exercisable so as to save him from interest under section 220(2) and penalty under section 221, and the closing words as long as such appeal remains undisposed of show Parliament expected the Assessing Officer to await the appellate outcome. The Court also confirms that CBDT Instruction No.95 of 1969 survives Instruction No.1914 of 1993 on the high-pitched assessment point, following the Delhi High Court in Valvoline Cummins and Soul.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, a partnership firm dealing in oils, returned income of Rs.3,48,140 for assessment year 2008-09. A survey had been carried out at its premises under section 133A in March 2007 and the case was taken up in scrutiny. By assessment order of 20 December 2010 the income was assessed at Rs.1,44,42,320. The main addition of Rs.1,21,17,057 came from rejecting the books under section 145(3) and applying the 20.20% gross profit rate the firm had shown in assessment year 2006-07 on a turnover of Rs.58.37 lakh to assessment year 2008-09, where turnover had grown roughly tenfold to Rs.5.47 crore and the declared rate was 9.79%. The intervening year had shown 9.90%. After rectification the demand stood at Rs.58,48,697. The firm appealed under section 246A and applied to the Assessing Officer under sections 220(3) and 220(6) for stay. The application was rejected on 28 January 2011 on the ground that the business had closed and revenue had to be protected, and garnishee notices under section 226(3) went to the firm's bankers. The Commissioner later allowed part payment in instalments, but the firm defaulted, paying only Rs.5 lakh. The writ petition followed.
The Court held that the first appellate authority under section 246 or 246A - the Deputy Commissioner (Appeals) or Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of the disputed demand while the appeal is before it, even though no such power is expressly conferred, since the express grant of appellate power carries with it by necessary implication the power to make that appeal effective. It further held that section 220(6) is not a power to grant stay: it is a discretion in the Assessing Officer not to treat the assessee as in default, so long as the appeal remains undisposed of, thereby saving the assessee from interest under section 220(2) and penalty under section 221. Contrasting the permissive may in section 220(6) with the mandatory shall in section 220(7), the Court held the discretion in sub-section (6) should ordinarily be exercised in favour of the assessee, particularly where the assessment is high-pitched so that the demand is twice or more the declared liability, in the spirit of CBDT Instruction No.95 of 1969.
The Court reasoned from Mohammed Kunhi, where the Supreme Court read a power to stay into section 254 although the section said nothing about it, because an appellate power must carry with it whatever is needed to make it effective. If the Tribunal has that implied power, so must the first appellate authority; the absence of an express provision cannot mean Parliament intended appeals to be rendered nugatory by recovery. It drew support from the Full Bench of the Karnataka High Court in Bharat Heavy Electricals v. State of Karnataka, that in the absence of an express bar the grant of appellate or revisional power carries the implied power to stay, and from the Kerala decisions in Rajan Nair and Gajanand Agencies, which treat the section 220(6) power as quasi-judicial and directed at mitigating hardship, not as a tax gatherer's convenience. On section 220(6) itself the Court read the sub-section structurally: the closing words as long as such appeal remains undisposed of show the Assessing Officer is expected to await the appellate decision, and the contrast with the mandatory language of sub-section (7) does not turn the may of sub-section (6) into a licence to refuse. On the instructions, the Court adopted the Delhi High Court's analysis in Valvoline Cummins and in Soul, that although Instruction No.1914 of 1993 was expressed to supersede earlier instructions, its own paragraph 2(B)(iii) preserves interference where the assessment appears unreasonably high pitched or genuine hardship is likely, and Instruction No.95 of 1969 supplies the measure - assessment at twice the returned income or more. In Valvoline the multiple was eight, in Soul seventy-four; the Court noted the assessment before it was many times the returned income.
First appellate authority ... have inherent, implied and ancillary powers to grant stay against the recovery of disputed demand of tax while seized of the appeal filed before them in accordance with Section 246 or 246A of the Act.
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Handle my notice → Ask a CA on WhatsAppYes. The Rajasthan High Court held that the first appellate authority - the Commissioner (Appeals) or Deputy Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of a disputed demand while an appeal under section 246 or 246A is pending, even though the Act confers no express power. It followed ITO v. M.K. Mohammed Kunhi. It also held that section 220(6) is not a stay power at all but a discretion not to treat the assessee as in default, and that on a high-pitched assessment - in the spirit of CBDT Instruction No.95 of 1969, where the assessed income is twice the returned income or more - that discretion should ordinarily be exercised in the assessee's favour. This was decided by the High Court (High Court of Judicature for Rajasthan at Jodhpur - Dr. Vineet Kothari, J. (single bench, oral judgment, marked reportable)) and bears on section 220(6), section 246A, section 220(2), section 221 of the Income Tax Act 1961. It is reported as S.B. Civil Writ Petition No.1264/2011 (Rajasthan High Court, Jodhpur Bench). This is the judgment to cite when the Assessing Officer refuses stay on a high-pitched assessment and the Commissioner (Appeals) says he has no power to help. It does two things nothing else does as squarely. It extends the Mohammed Kunhi principle of implied appellate power from the Tribunal down to the first appellate authority. And it reads section 220(6) properly: it is a negative discretion not to treat the assessee as in default, exercisable so as to save him from interest under section 220(2) and penalty under section 221, and the closing words as long as such appeal remains undisposed of show Parliament expected the Assessing Officer to await the appellate outcome. The Court also confirms that CBDT Instruction No.95 of 1969 survives Instruction No.1914 of 1993 on the high-pitched assessment point, following the Delhi High Court in Valvoline Cummins and Soul. If it applies to you, the first step is this: Work out the multiple - assessed income against returned income - and lead with it; twice or more is the recognised marker of a high-pitched assessment.
The petitioner, a partnership firm dealing in oils, returned income of Rs.3,48,140 for assessment year 2008-09. A survey had been carried out at its premises under section 133A in March 2007 and the case was taken up in scrutiny. By assessment order of 20 December 2010 the income was assessed at Rs.1,44,42,320. The main addition of Rs.1,21,17,057 came from rejecting the books under section 145(3) and applying the 20.20% gross profit rate the firm had shown in assessment year 2006-07 on a turnover of Rs.58.37 lakh to assessment year 2008-09, where turnover had grown roughly tenfold to Rs.5.47 crore and the declared rate was 9.79%. The intervening year had shown 9.90%. After rectification the demand stood at Rs.58,48,697. The firm appealed under section 246A and applied to the Assessing Officer under sections 220(3) and 220(6) for stay. The application was rejected on 28 January 2011 on the ground that the business had closed and revenue had to be protected, and garnishee notices under section 226(3) went to the firm's bankers. The Commissioner later allowed part payment in instalments, but the firm defaulted, paying only Rs.5 lakh. The writ petition followed. The matter was decided on 2011-12-15 by the High Court (High Court of Judicature for Rajasthan at Jodhpur - Dr. Vineet Kothari, J. (single bench, oral judgment, marked reportable)). On those facts the High Court held as follows. The Court held that the first appellate authority under section 246 or 246A - the Deputy Commissioner (Appeals) or Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of the disputed demand while the appeal is before it, even though no such power is expressly conferred, since the express grant of appellate power carries with it by necessary implication the power to make that appeal effective. It further held that section 220(6) is not a power to grant stay: it is a discretion in the Assessing Officer not to treat the assessee as in default, so long as the appeal remains undisposed of, thereby saving the assessee from interest under section 220(2) and penalty under section 221. Contrasting the permissive may in section 220(6) with the mandatory shall in section 220(7), the Court held the discretion in sub-section (6) should ordinarily be exercised in favour of the assessee, particularly where the assessment is high-pitched so that the demand is twice or more the declared liability, in the spirit of CBDT Instruction No.95 of 1969.
The Court reasoned from Mohammed Kunhi, where the Supreme Court read a power to stay into section 254 although the section said nothing about it, because an appellate power must carry with it whatever is needed to make it effective. If the Tribunal has that implied power, so must the first appellate authority; the absence of an express provision cannot mean Parliament intended appeals to be rendered nugatory by recovery. It drew support from the Full Bench of the Karnataka High Court in Bharat Heavy Electricals v. State of Karnataka, that in the absence of an express bar the grant of appellate or revisional power carries the implied power to stay, and from the Kerala decisions in Rajan Nair and Gajanand Agencies, which treat the section 220(6) power as quasi-judicial and directed at mitigating hardship, not as a tax gatherer's convenience. On section 220(6) itself the Court read the sub-section structurally: the closing words as long as such appeal remains undisposed of show the Assessing Officer is expected to await the appellate decision, and the contrast with the mandatory language of sub-section (7) does not turn the may of sub-section (6) into a licence to refuse. On the instructions, the Court adopted the Delhi High Court's analysis in Valvoline Cummins and in Soul, that although Instruction No.1914 of 1993 was expressed to supersede earlier instructions, its own paragraph 2(B)(iii) preserves interference where the assessment appears unreasonably high pitched or genuine hardship is likely, and Instruction No.95 of 1969 supplies the measure - assessment at twice the returned income or more. In Valvoline the multiple was eight, in Soul seventy-four; the Court noted the assessment before it was many times the returned income. In the words reproduced by the source cited on this page: "First appellate authority ... have inherent, implied and ancillary powers to grant stay against the recovery of disputed demand of tax while seized of the appeal filed before them in accordance with Section 246 or 246A of the Act."
It was decided by the High Court on 2011-12-15 and is reported as S.B. Civil Writ Petition No.1264/2011 (Rajasthan High Court, Jodhpur Bench). 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 246A, section 220(2), section 221, 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 Court held that the first appellate authority under section 246 or 246A - the Deputy Commissioner (Appeals) or Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of the disputed demand while the appeal is before it, even though no such power is expressly conferred, since the express grant of appellate power carries with it by necessary implication the power to make that appeal effective. It further held that section 220(6) is not a power to grant stay: it is a discretion in the Assessing Officer not to treat the assessee as in default, so long as the appeal remains undisposed of, thereby saving the assessee from interest under section 220(2) and penalty under section 221. Contrasting the permissive may in section 220(6) with the mandatory shall in section 220(7), the Court held the discretion in sub-section (6) should ordinarily be exercised in favour of the assessee, particularly where the assessment is high-pitched so that the demand is twice or more the declared liability, in the spirit of CBDT Instruction No.95 of 1969. It arises in Demand, Recovery & Stay and Appeals matters, on section 220(6), section 246A, section 220(2), section 221 of the Income Tax Act 1961, and was decided by High Court of Judicature for Rajasthan at Jodhpur - Dr. Vineet Kothari, J. (single bench, oral judgment, marked reportable). 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. File the section 220(6) application before the Assessing Officer and a separate stay application before the Commissioner (Appeals), and press the latter to decide it rather than accept that he has no power. Ask for early hearing of the appeal itself; the stay reasoning here rests on the appeal being decided quickly. If a garnishee notice under section 226(3) has already gone to your bank, move at once - the writ jurisdiction was invoked here on exactly those facts. Cite Instruction No.95 of 1969 alongside Instruction No.1914 of 1993 and be ready to show that the earlier instruction still governs unreasonably high-pitched assessments.
Validity check could not be completed. The two propositions above are stated in the judgment in terms and are widely followed, but the harvested text stops before the operative order, so I have not read the Court's final directions or any qualification it may have added to them. I have also not checked whether the Revenue appealed. Separately, CBDT practice on stay has moved on since 2011 - Office Memorandum of 29 February 2016 as modified on 31 July 2017 sets a 20% deposit norm - and that is not addressed in this judgment. 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 harvested page is clipped in the middle and truncated at the end. Roughly the middle third of a 69-page judgment - the survey of authorities and the CBDT instructions between the arguments and paragraph 45 - is missing, and the text breaks off in paragraph 52 at page 65, so paragraphs 53 onwards, including the operative order and whatever relief or directions were given to this petitioner, have not been read. What the Court finally did about the Rs.58 lakh demand and the garnishee notices is therefore not stated above. The batch line dates the judgment 2012; the judgment itself is dated 15 December 2011 and that date is used. The batch line lists section 156, which the judgment does not decide; sections 220(2) and 221 are added because the Court's reading of section 220(6) turns on them. No reporter citations were supplied, so the writ petition number is used. 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 Court held that the first appellate authority under section 246 or 246A - the Deputy Commissioner (Appeals) or Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of the disputed demand while the appeal is before it, even though no such power is expressly conferred, since the express grant of appellate power carries with it by necessary implication the power to make that appeal effective. It further held that section 220(6) is not a power to grant stay: it is a discretion in the Assessing Officer not to treat the assessee as in default, so long as the appeal remains undisposed of, thereby saving the assessee from interest under section 220(2) and penalty under section 221. Contrasting the permissive may in section 220(6) with the mandatory shall in section 220(7), the Court held the discretion in sub-section (6) should ordinarily be exercised in favour of the assessee, particularly where the assessment is high-pitched so that the demand is twice or more the declared liability, in the spirit of CBDT Instruction No.95 of 1969.
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