Is 20% of the disputed demand a fixed price for a stay, or can the officer take less?
Less is possible. The CBDT Office Memoranda of 29 February 2016 and 31 July 2017 do not fetter the quasi-judicial discretion of the officer or the Commissioner, who may on the facts grant stay on a deposit of under 20%.
Decided by the Supreme Court (Rohinton Fali Nariman J and Indu Malhotra J) on 2018-07-20, reported as Civil Appeal No. 6850 of 2018; [2018] 96 taxmann.com 656 (SC); [2018] 18 SCC 447. It bears on section 220(6), section 271(1)(c) of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
Almost every stay application is met with '20% and no discussion'. This is the one-line Supreme Court answer to that: the percentage is guidance, the discretion is statutory, and the officer must actually exercise it.
Binding on every court and authority in India.
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The Assessing Officer levied a penalty on LG Electronics India under s.271(1)(c) for assessment year 2007-08 and raised a demand. The assessee applied under s.220(6) for stay of recovery. The Assessing Officer directed a deposit of 15 per cent of the demand under the Office Memorandum of 29 February 2016. On a further stay application to the Principal Commissioner the assessee was directed to pay 20 per cent, under the Office Memorandum of 31 July 2017 which had modified the earlier one. The Delhi High Court, by order dated 8 August 2017 in WP(C) No. 6778 of 2017, set that order aside and directed the Commissioner to pass an order without reference to the Office Memorandum. The Revenue appealed.
The order is four sentences long and carries no numbered paragraphs. Delay was condoned, leave granted, and the Court clarified that in all cases like the present it is open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20 per cent pending appeal. The appeal was disposed of on that basis. The Court did not set aside the High Court's order, did not decide that the Office Memoranda are ultra vires or that they cannot bind, and made no order on the merits of the assessee's stay application.
There is no reasoning in the ordinary sense. The Court recorded that the Additional Solicitor General had argued that the administrative Circular would not operate as a fetter on the Commissioner because the Commissioner is a quasi-judicial authority, said it was giving credence to that submission, and on that footing clarified that a deposit of less than 20 per cent may be ordered on the facts of an individual case. The proposition that the Office Memoranda cannot curtail the quasi-judicial discretion of the Assessing Officer or the Commissioner is therefore the Revenue's own concession recorded by the Court, not a conclusion the Court reasoned to.
we only need to clarify that in all cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal.
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Handle my notice → Ask a CA on WhatsAppLess is possible. The CBDT Office Memoranda of 29 February 2016 and 31 July 2017 do not fetter the quasi-judicial discretion of the officer or the Commissioner, who may on the facts grant stay on a deposit of under 20%. This was decided by the Supreme Court (Rohinton Fali Nariman J and Indu Malhotra J) and bears on section 220(6), section 271(1)(c) of the Income Tax Act 1961. It is reported as Civil Appeal No. 6850 of 2018; [2018] 96 taxmann.com 656 (SC); [2018] 18 SCC 447. Almost every stay application is met with '20% and no discussion'. This is the one-line Supreme Court answer to that: the percentage is guidance, the discretion is statutory, and the officer must actually exercise it. If it applies to you, the first step is this: In the stay application, make a specific case on financial hardship with figures — bank balances, receivables, commitments.
The Assessing Officer levied a penalty on LG Electronics India under s.271(1)(c) for assessment year 2007-08 and raised a demand. The assessee applied under s.220(6) for stay of recovery. The Assessing Officer directed a deposit of 15 per cent of the demand under the Office Memorandum of 29 February 2016. On a further stay application to the Principal Commissioner the assessee was directed to pay 20 per cent, under the Office Memorandum of 31 July 2017 which had modified the earlier one. The Delhi High Court, by order dated 8 August 2017 in WP(C) No. 6778 of 2017, set that order aside and directed the Commissioner to pass an order without reference to the Office Memorandum. The Revenue appealed. The matter was decided on 2018-07-20 by the Supreme Court (Rohinton Fali Nariman J and Indu Malhotra J). On those facts the Supreme Court held as follows. The order is four sentences long and carries no numbered paragraphs. Delay was condoned, leave granted, and the Court clarified that in all cases like the present it is open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20 per cent pending appeal. The appeal was disposed of on that basis. The Court did not set aside the High Court's order, did not decide that the Office Memoranda are ultra vires or that they cannot bind, and made no order on the merits of the assessee's stay application.
There is no reasoning in the ordinary sense. The Court recorded that the Additional Solicitor General had argued that the administrative Circular would not operate as a fetter on the Commissioner because the Commissioner is a quasi-judicial authority, said it was giving credence to that submission, and on that footing clarified that a deposit of less than 20 per cent may be ordered on the facts of an individual case. The proposition that the Office Memoranda cannot curtail the quasi-judicial discretion of the Assessing Officer or the Commissioner is therefore the Revenue's own concession recorded by the Court, not a conclusion the Court reasoned to. In the words reproduced by the source cited on this page: "we only need to clarify that in all cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal." The decision followed or applied Order of the Delhi High Court in WP(C) No. 6778/2017, dated 8 August 2017 - reversed.
It was decided by the Supreme Court on 2018-07-20 and is reported as Civil Appeal No. 6850 of 2018; [2018] 96 taxmann.com 656 (SC); [2018] 18 SCC 447. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 220(6), section 271(1)(c), 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 department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The order is four sentences long and carries no numbered paragraphs. Delay was condoned, leave granted, and the Court clarified that in all cases like the present it is open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20 per cent pending appeal. The appeal was disposed of on that basis. The Court did not set aside the High Court's order, did not decide that the Office Memoranda are ultra vires or that they cannot bind, and made no order on the merits of the assessee's stay application. It arises in Demand, Recovery & Stay matters, on section 220(6), section 271(1)(c) of the Income Tax Act 1961, and was decided by Rohinton Fali Nariman J and Indu Malhotra 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. Ask expressly for a deposit below 20% and give the reason; the discretion has to be invoked to be exercised. If refused without reasons, that non-speaking refusal is itself the ground for the next step.
Still good law. Followed by the Madras High Court in Air Liquide Medical Systems (P.) Ltd. v. Dy. CIT [2023] 155 taxmann.com 409 / [2023] 456 ITR 712 (Mad), decided 14 February 2022, whose case review records this decision as followed at para 21; applying it, that Court reduced a required deposit from 20 per cent to 15 per cent of a demand of about Rs 12.87 crores rather than remanding. This order reversed the Delhi High Court in WP(C) No. 6778/2017 dated 8 August 2017. Note its narrowness: it clarifies that a lesser deposit may be ordered on the facts of an individual case, and does not hold the Office Memoranda invalid. 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 is four sentences long and does less than it is usually cited for. Two things to be careful about. First, the proposition that the CBDT Office Memoranda cannot fetter the quasi-judicial discretion of the Assessing Officer or the Commissioner is recorded as the Additional Solicitor General's submission, to which the Court gave credence; it is not a holding the Court reasoned to, and the Court did not hold the Office Memoranda invalid. Second, the order under appeal was the Delhi High Court's order of 8 August 2017 in W.P.(C) No. 6778 of 2017, S. Muralidhar and Prathiba M. Singh JJ, which set aside the Principal Commissioner's order and directed that the application be heard again on merits 'and without reference to the OM dated 31st July, 2017, which, on the face of it, appears to curtail his discretion' (para 8). The Supreme Court did not set that direction aside, and nothing in its order says the appeal succeeded. An earlier version of this entry said the High Court's order had been reversed; that came from a case-review database and is not what either order shows. What survives for assessees is the clarification that authorities may, on the facts of an individual case, order a deposit of less than 20 per cent pending appeal. The page carrying the text of both orders has now been read. It does not print the (2018) 303 CTR 649 / 168 DTR 353 (SC) references that an itatonline digest entry gives for this order, so those remain uncorroborated. 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 order is four sentences long and carries no numbered paragraphs. Delay was condoned, leave granted, and the Court clarified that in all cases like the present it is open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20 per cent pending appeal. The appeal was disposed of on that basis. The Court did not set aside the High Court's order, did not decide that the Office Memoranda are ultra vires or that they cannot bind, and made no order on the merits of the assessee's stay application.
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