You can afford to pay. Does that mean the stay must be refused?
The stay was granted, but not on the ground the entry previously gave. The Court held that the power to stay recovery is a judicial power and that the authorities owe a duty of fairness. On the facts — a demand twice reduced on rectification, arguable submissions on each of the three additions still to be considered in appeal, and Rs 78 lakh of the demand already met by adjustment of a refund — the Commissioner ought to have considered more carefully whether a stay was warranted, and recovery of the balance of Rs 40.54 lakh was stayed pending the appeal.
Decided by the High Court (Bombay High Court — Dr. D.Y. Chandrachud and M.S. Sanklecha, JJ.) on 2012-03-15, reported as (2012) 345 ITR 545 / 250 CTR 412 / 209 Taxman 148 (Mag.) (Bom)(HC); Writ Petition No. 653 of 2012. It bears on section 220(6), section 245 of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
It is the decision to cite where a stay has been refused with little more than an observation that the assessee can afford to pay. The Court did not hold that hardship is irrelevant; it held that the stay power is a judicial power carrying a duty of fairness, and it looked at the strength of the pending appeal and at how much of the demand had already been met. The useful sequence for a practitioner is the one the Court followed: how far has the demand already been reduced or adjusted, and do the grounds in appeal require consideration.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 2009-10 a professional returned Rs 19.41 crore and was assessed at Rs 22.43 crore, creating a demand of Rs 2,00,48,630. A rectification application under s.154 of 5 January 2012 brought the demand down to about Rs 1.30 crore, and a second rectification application of 30 January 2012 brought it further down to about Rs 1.18 crore. A refund of about Rs 78 lakh was due for assessment year 2010-11. By order of 27 February 2012 the Commissioner directed that the refund be adjusted against the demand and called on the assessee to pay the balance of about Rs 41 lakh by 10 March 2012, observing that given his financial status and affairs such a payment was not likely to cause hardship; a separate order of the Assessing Officer the same day made the adjustment, leaving Rs 40.54 lakh payable. The assessee's appeal against the three additions — interest paid to a bank that had been allowed on scrutiny for seven earlier years, the annual letting value of house property where the addition would raise it by 3700 per cent on a municipal valuation certificate accepted in earlier years, and sales promotion expenses of Rs 1.20 crore — was pending before the Commissioner (Appeals).
The rule was made absolute by modifying the Commissioner's order of 27 February 2012, not by setting it aside. Recovery of the balance of Rs 40.54 lakh was stayed until the appeal is disposed of, and the Commissioner (Appeals) was directed to expedite the appeal and endeavour to dispose of it within three months. The Court expressly declined to issue any direction about the Rs 78 lakh already adjusted against the refund. No order as to costs.
The power under s.220(6), and equally the power of the Commissioner (Appeals) to grant a stay, is a judicial power. The Assessing Officer and the appellate authorities must have due regard to the fact that their function is not merely to act as tax gatherers but, equally, as quasi-judicial authorities they owe a duty of fairness to the assessee — something the Court said was lost sight of in the manner the authority acted here. The parameters for exercising the stay jurisdiction have been set out in several judgments of the Court, including KEC International. Applying that, the Court weighed three things: the assessee is a professional, the demand had already been scaled down twice on rectification, and his submissions on the three additions require to be considered in appeal. Having regard to those, the Commissioner ought to have devoted more careful consideration to whether a stay was warranted. Since Rs 78 lakh of the demand had already been adjusted against the refund and the balance was Rs 40.54 lakh, the ends of justice required a stay of recovery of that balance pending the appeal.
It is necessary for both the Assessing Officer as well as the Appellate Authorities constituted under the Income Tax Act, 1961, to have due regard to the fact that their function is not merely to act as tax gatherers, but equally as quasi judicial authorities, they owe a duty of fairness to the assessee.
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Handle my notice → Ask a CA on WhatsAppThe stay was granted, but not on the ground the entry previously gave. The Court held that the power to stay recovery is a judicial power and that the authorities owe a duty of fairness. On the facts — a demand twice reduced on rectification, arguable submissions on each of the three additions still to be considered in appeal, and Rs 78 lakh of the demand already met by adjustment of a refund — the Commissioner ought to have considered more carefully whether a stay was warranted, and recovery of the balance of Rs 40.54 lakh was stayed pending the appeal. This was decided by the High Court (Bombay High Court — Dr. D.Y. Chandrachud and M.S. Sanklecha, JJ.) and bears on section 220(6), section 245 of the Income Tax Act 1961. It is reported as (2012) 345 ITR 545 / 250 CTR 412 / 209 Taxman 148 (Mag.) (Bom)(HC); Writ Petition No. 653 of 2012. It is the decision to cite where a stay has been refused with little more than an observation that the assessee can afford to pay. The Court did not hold that hardship is irrelevant; it held that the stay power is a judicial power carrying a duty of fairness, and it looked at the strength of the pending appeal and at how much of the demand had already been met. The useful sequence for a practitioner is the one the Court followed: how far has the demand already been reduced or adjusted, and do the grounds in appeal require consideration. If it applies to you, the first step is this: Show what has already been paid or adjusted against the demand — Rs 78 lakh of this demand had gone by way of refund adjustment, and that framed the relief.
For assessment year 2009-10 a professional returned Rs 19.41 crore and was assessed at Rs 22.43 crore, creating a demand of Rs 2,00,48,630. A rectification application under s.154 of 5 January 2012 brought the demand down to about Rs 1.30 crore, and a second rectification application of 30 January 2012 brought it further down to about Rs 1.18 crore. A refund of about Rs 78 lakh was due for assessment year 2010-11. By order of 27 February 2012 the Commissioner directed that the refund be adjusted against the demand and called on the assessee to pay the balance of about Rs 41 lakh by 10 March 2012, observing that given his financial status and affairs such a payment was not likely to cause hardship; a separate order of the Assessing Officer the same day made the adjustment, leaving Rs 40.54 lakh payable. The assessee's appeal against the three additions — interest paid to a bank that had been allowed on scrutiny for seven earlier years, the annual letting value of house property where the addition would raise it by 3700 per cent on a municipal valuation certificate accepted in earlier years, and sales promotion expenses of Rs 1.20 crore — was pending before the Commissioner (Appeals). The matter was decided on 2012-03-15 by the High Court (Bombay High Court — Dr. D.Y. Chandrachud and M.S. Sanklecha, JJ.). On those facts the High Court held as follows. The rule was made absolute by modifying the Commissioner's order of 27 February 2012, not by setting it aside. Recovery of the balance of Rs 40.54 lakh was stayed until the appeal is disposed of, and the Commissioner (Appeals) was directed to expedite the appeal and endeavour to dispose of it within three months. The Court expressly declined to issue any direction about the Rs 78 lakh already adjusted against the refund. No order as to costs.
The power under s.220(6), and equally the power of the Commissioner (Appeals) to grant a stay, is a judicial power. The Assessing Officer and the appellate authorities must have due regard to the fact that their function is not merely to act as tax gatherers but, equally, as quasi-judicial authorities they owe a duty of fairness to the assessee — something the Court said was lost sight of in the manner the authority acted here. The parameters for exercising the stay jurisdiction have been set out in several judgments of the Court, including KEC International. Applying that, the Court weighed three things: the assessee is a professional, the demand had already been scaled down twice on rectification, and his submissions on the three additions require to be considered in appeal. Having regard to those, the Commissioner ought to have devoted more careful consideration to whether a stay was warranted. Since Rs 78 lakh of the demand had already been adjusted against the refund and the balance was Rs 40.54 lakh, the ends of justice required a stay of recovery of that balance pending the appeal. In the words reproduced by the source cited on this page: "It is necessary for both the Assessing Officer as well as the Appellate Authorities constituted under the Income Tax Act, 1961, to have due regard to the fact that their function is not merely to act as tax gatherers, but equally as quasi judicial authorities, they owe a duty of fairness to the assessee." The decision followed or applied KEC International Ltd. v. B.R. Balakrishnan (2001) 251 ITR 158 / 119 Taxman 974 (Bom) — cited and relied on in the reasoning as one of the decisions setting out the parameters for the stay jurisdiction (para 4).
It was decided by the High Court on 2012-03-15 and is reported as (2012) 345 ITR 545 / 250 CTR 412 / 209 Taxman 148 (Mag.) (Bom)(HC); Writ Petition No. 653 of 2012. 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 245, 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 rule was made absolute by modifying the Commissioner's order of 27 February 2012, not by setting it aside. Recovery of the balance of Rs 40.54 lakh was stayed until the appeal is disposed of, and the Commissioner (Appeals) was directed to expedite the appeal and endeavour to dispose of it within three months. The Court expressly declined to issue any direction about the Rs 78 lakh already adjusted against the refund. No order as to costs. It arises in Demand, Recovery & Stay matters, on section 220(6), section 245 of the Income Tax Act 1961, and was decided by Bombay High Court — Dr. D.Y. Chandrachud and M.S. Sanklecha, JJ.. 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. Show any reduction already made on rectification; the demand here had been cut twice under s.154 before the stay application was decided. Set out the specific grounds in appeal and why each requires consideration, since that is what the Court weighed. Ask for a direction expediting the appeal alongside the stay — the Court gave both, with a three-month endeavour. Cite it with KEC International, which para 4 names as one of the decisions setting out the parameters.
Validity check could not be completed. The judgment has now been read in full and the entry is far better grounded than it was, but the status does not move. There is no later-treatment banner and no case-review entry, and no later decision applying, following or affirming this order was found. The one candidate for later history was chased and read: the same assessee's later Bombay decision, Nishith Madanlal Desai v. CIT-11, Mumbai (2014) 368 ITR 649 (Bom), Writ Petition No. 878 of 2013, decided 1 July 2014 in favour of the revenue. It is not the subsequent history of this order — it is a separate writ challenging a s.148 notice reopening assessment year 2005-06, dismissed on the ground that fresh material came to light during the assessment for 2009-10, and it neither reviews, doubts nor applies the 2012 stay order. So there is no adverse later history either. Absence of contrary authority is not positive authority. On the refund-adjustment limb the statutory position has moved: the Finance Act 2023 recast s.245 with effect from 1 April 2023, integrating into it the withholding power that formerly stood in s.241A — set-off now sits in s.245(1) and withholding in s.245(2), the latter requiring written reasons and the prior approval of the Principal Commissioner or Commissioner, with interest under s.244A(1A) not running for the withholding period — and s.241A became inapplicable from the same date; Instruction No. 02/2023 of 10 November 2023 confines s.245(2) to refunds of Rs 10 lakh or more. The s.220(6) fairness reasoning is untouched by that change. That finding was checked against a published source, which is linked on this page, on 2026-08-24. 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 assessee's name is Nishith Madanlal Desai — Nishith with an h. The spelling carried here previously does not find the judgment on a name search, and the slug still carries it. The decision is reported: (2012) 345 ITR 545 / 250 CTR 412 / 209 Taxman 148 (Mag.) (Bom). Coram, date, petition number and assessment year are all confirmed. Two things to keep straight when citing it. The Court modified the Commissioner's order; it did not set it aside, and it made no direction about the Rs 78 lakh already adjusted, so the relief is the stay of Rs 40.54 lakh plus a direction to expedite the appeal. And the Court did not rule on the Commissioner's observation about financial hardship: it reasoned from the twice-reduced demand and the arguable merits of the three additions. The order does not decide the merits of the three additions, and it does not lay down when a stay must be granted — it turns on a demand twice reduced on rectification and submissions that required consideration in appeal. It does not record what became of the appeal. 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 rule was made absolute by modifying the Commissioner's order of 27 February 2012, not by setting it aside. Recovery of the balance of Rs 40.54 lakh was stayed until the appeal is disposed of, and the Commissioner (Appeals) was directed to expedite the appeal and endeavour to dispose of it within three months. The Court expressly declined to issue any direction about the Rs 78 lakh already adjusted against the refund. No order as to costs.
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