The Assessing Officer has rejected my stay application in two lines saying pay 20%. Is that order sustainable, and can he order less than 20% without going to the Principal Commissioner?
No, a non-speaking order under s.220(6) that simply directs payment of 20% is liable to be set aside; the Assessing Officer must pass a speaking order applying the three parameters - prima facie case, financial stringency and balance of convenience. And yes: because the Assessing Officer exercises a quasi-judicial power, he can himself direct a deposit of LESS than 20% without any reference to the Principal Commissioner; a reference upward is needed only if he wants MORE than 20%.
Decided by the High Court (G.R. Swaminathan J) on 2021-04-08, reported as WP(MD) No. 5550 of 2020 and WMP(MD) Nos. 4853, 4854 and 4855 of 2020 (Madras High Court, Madurai Bench); no law-report citation was visible on the page read. It bears on section 220(6), section 220(3), section 220(7), section 246, section 246A, section 133A of the Income Tax Act 1961, in Demand, Recovery & Stay and Appeals matters.
This is the fullest working out of what the 29.02.2016 Office Memorandum as modified on 31.07.2017 does and does not do. The 20% is administrative, not statutory. The Court also decides a point most stay petitions still get wrong: the CBDT withdrew Instruction No. 95 of 21.08.1969 (the 'twice the returned income' instruction) by Letter F.No.404/10/2009-ITCC dated 01.12.2009, so an argument built on Instruction 95 alone will fail - the surviving source of the speaking-order obligation is clause 2(C)(v) of Instruction No. 1914. It also fixes the forum: the Principal Commissioner is only a reviewing authority and cannot be moved in the first instance.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, a partnership firm distributing ITC products in Ramanathapuram District, was surveyed under s.133A on 05.12.2017. Its assessments for AYs 2015-16 and 2016-17 were reopened and adverse orders passed on 29.12.2018. It appealed to the CIT(A), Madurai, and applied to the Assessing Officer under s.220(6) so as not to be treated as an assessee in default pending appeal. By communication dated 06.02.2020 the Assessing Officer directed it to pay 20% of the demand immediately for stay and warned of follow-up action on non-compliance. The petitioner challenged that communication, arguing that the officer had ignored Instruction No. 95 dated 21.08.1969 and the parameters laid down in Kannammal v. ITO, and that the order was non-speaking. Canara Bank was joined as second respondent. The standing counsel produced Board Letter F.No.404/10/2009-ITCC dated 01.12.2009 stating that Instruction No. 95 no longer exists.
The impugned order was set aside as absolutely non-speaking and the matter remitted to the Assessing Officer to pass fresh orders in accordance with law, with liberty to the petitioner to file a supplementary petition and with all contentions left open; the writ petition was allowed with no costs (para 15). The Court further held that failure to refer to Instruction No. 95 of 21.08.1969 does not vitiate an order under s.220(6), that instruction having ceased to exist on the Board's own Letter dated 01.12.2009 (para 7); that Instruction No. 1914 continues to hold the field and clause 2(C)(v) of it requires a speaking order (para 10); that the Assessing Officer, exercising quasi-judicial power, may himself direct a deposit of less than 20% without a reference to the administrative Pr.CIT/CIT, a reference being necessary only for a figure higher than 20% (para 12); and that the Principal Commissioner is only a reviewing authority who cannot assume jurisdiction in the first instance (para 14).
The Court began from the text of s.220(6) and from the Supreme Court's observation in M.K. Mohammed Kunhi that the power under s.220(6) is a power of stay by treating the assessee as not in default during the pendency of appeal (para 4). It set out Instruction No. 95 dated 21.08.1969 and Instruction No. 1914 dated 02.12.1993 in full (para 5); the Office Memoranda of 29.02.2016 and 31.07.2017 are not reproduced anywhere in the order, being mentioned only in the standing counsel's submission recorded at para 3 and, as the Circular dated 29.02.2016, in the Court's own discussion of the Principal Commissioner's reviewing jurisdiction at para 14. It then dealt with the petitioner's reliance on the Delhi High Court line - Valvoline Cummins, Soul, Taneja Developers - and on N. Jegatheesan, and held that in none of those cases had the Board's Letter of 01.12.2009 been placed before the Court; had it been, it would have been held that Instruction No. 95 had ceased to exist long ago (paras 6 and 7). Turning to what does survive, the Court applied clause 2(C)(v) of Instruction No. 1914 (speaking order), the 'trinity' parameters set out by Anita Sumanth J in Kannammal, and the Bombay High Court's summary of parameters in General Insurance Corporation of India, which itself gathered KEC International and the UTI Mutual Fund cases (paras 8 to 10). On the 20% figure, the Court read the Delhi High Court's order in L.G. Electronics - which had directed the application to be heard 'without reference to the OM dt. 31st July, 2017, which, on the face of it, appears to curtail his discretion' - together with the Supreme Court's clarification in the Revenue's appeal, made on the Additional Solicitor General's submission that the administrative circular does not operate as a fetter on a quasi-judicial authority, and drew the implication that the Assessing Officer may order a lesser deposit himself (paras 11 and 12). Although the stay petition filed was itself bald, the officer ought to have been pro-active and could have applied the trinity principles from the appeal memorandum (para 13).
the assessing officer can grant deposit orders of a lesser amount than 20% pending appeal without making reference to the administrative Pr.CIT/CIT.
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Handle my notice → Ask a CA on WhatsAppNo, a non-speaking order under s.220(6) that simply directs payment of 20% is liable to be set aside; the Assessing Officer must pass a speaking order applying the three parameters - prima facie case, financial stringency and balance of convenience. And yes: because the Assessing Officer exercises a quasi-judicial power, he can himself direct a deposit of LESS than 20% without any reference to the Principal Commissioner; a reference upward is needed only if he wants MORE than 20%. This was decided by the High Court (G.R. Swaminathan J) and bears on section 220(6), section 220(3), section 220(7), section 246, section 246A, section 133A of the Income Tax Act 1961. It is reported as WP(MD) No. 5550 of 2020 and WMP(MD) Nos. 4853, 4854 and 4855 of 2020 (Madras High Court, Madurai Bench); no law-report citation was visible on the page read. This is the fullest working out of what the 29.02.2016 Office Memorandum as modified on 31.07.2017 does and does not do. The 20% is administrative, not statutory. The Court also decides a point most stay petitions still get wrong: the CBDT withdrew Instruction No. 95 of 21.08.1969 (the 'twice the returned income' instruction) by Letter F.No.404/10/2009-ITCC dated 01.12.2009, so an argument built on Instruction 95 alone will fail - the surviving source of the speaking-order obligation is clause 2(C)(v) of Instruction No. 1914. It also fixes the forum: the Principal Commissioner is only a reviewing authority and cannot be moved in the first instance. If it applies to you, the first step is this: File the s.220(6) petition with the Assessing Officer only after the s.246A appeal is filed, and put the appeal grounds into it - the Court holds the officer must read the stay petition in the light of the appeal memorandum.
The petitioner, a partnership firm distributing ITC products in Ramanathapuram District, was surveyed under s.133A on 05.12.2017. Its assessments for AYs 2015-16 and 2016-17 were reopened and adverse orders passed on 29.12.2018. It appealed to the CIT(A), Madurai, and applied to the Assessing Officer under s.220(6) so as not to be treated as an assessee in default pending appeal. By communication dated 06.02.2020 the Assessing Officer directed it to pay 20% of the demand immediately for stay and warned of follow-up action on non-compliance. The petitioner challenged that communication, arguing that the officer had ignored Instruction No. 95 dated 21.08.1969 and the parameters laid down in Kannammal v. ITO, and that the order was non-speaking. Canara Bank was joined as second respondent. The standing counsel produced Board Letter F.No.404/10/2009-ITCC dated 01.12.2009 stating that Instruction No. 95 no longer exists. The matter was decided on 2021-04-08 by the High Court (G.R. Swaminathan J). On those facts the High Court held as follows. The impugned order was set aside as absolutely non-speaking and the matter remitted to the Assessing Officer to pass fresh orders in accordance with law, with liberty to the petitioner to file a supplementary petition and with all contentions left open; the writ petition was allowed with no costs (para 15). The Court further held that failure to refer to Instruction No. 95 of 21.08.1969 does not vitiate an order under s.220(6), that instruction having ceased to exist on the Board's own Letter dated 01.12.2009 (para 7); that Instruction No. 1914 continues to hold the field and clause 2(C)(v) of it requires a speaking order (para 10); that the Assessing Officer, exercising quasi-judicial power, may himself direct a deposit of less than 20% without a reference to the administrative Pr.CIT/CIT, a reference being necessary only for a figure higher than 20% (para 12); and that the Principal Commissioner is only a reviewing authority who cannot assume jurisdiction in the first instance (para 14).
The Court began from the text of s.220(6) and from the Supreme Court's observation in M.K. Mohammed Kunhi that the power under s.220(6) is a power of stay by treating the assessee as not in default during the pendency of appeal (para 4). It set out Instruction No. 95 dated 21.08.1969 and Instruction No. 1914 dated 02.12.1993 in full (para 5); the Office Memoranda of 29.02.2016 and 31.07.2017 are not reproduced anywhere in the order, being mentioned only in the standing counsel's submission recorded at para 3 and, as the Circular dated 29.02.2016, in the Court's own discussion of the Principal Commissioner's reviewing jurisdiction at para 14. It then dealt with the petitioner's reliance on the Delhi High Court line - Valvoline Cummins, Soul, Taneja Developers - and on N. Jegatheesan, and held that in none of those cases had the Board's Letter of 01.12.2009 been placed before the Court; had it been, it would have been held that Instruction No. 95 had ceased to exist long ago (paras 6 and 7). Turning to what does survive, the Court applied clause 2(C)(v) of Instruction No. 1914 (speaking order), the 'trinity' parameters set out by Anita Sumanth J in Kannammal, and the Bombay High Court's summary of parameters in General Insurance Corporation of India, which itself gathered KEC International and the UTI Mutual Fund cases (paras 8 to 10). On the 20% figure, the Court read the Delhi High Court's order in L.G. Electronics - which had directed the application to be heard 'without reference to the OM dt. 31st July, 2017, which, on the face of it, appears to curtail his discretion' - together with the Supreme Court's clarification in the Revenue's appeal, made on the Additional Solicitor General's submission that the administrative circular does not operate as a fetter on a quasi-judicial authority, and drew the implication that the Assessing Officer may order a lesser deposit himself (paras 11 and 12). Although the stay petition filed was itself bald, the officer ought to have been pro-active and could have applied the trinity principles from the appeal memorandum (para 13). In the words reproduced by the source cited on this page: "the assessing officer can grant deposit orders of a lesser amount than 20% pending appeal without making reference to the administrative Pr.CIT/CIT." The decision followed or applied ITO, Cannanore v. M.K. Mohammed Kunhi AIR 1969 SC 430 - applied on the nature of the s.220(6) power; PCIT v. L.G. Electronics India Private Limited (2018) 18 SCC 447 - applied; administrative circular is not a fetter on a quasi-judicial authority; Kannammal v. ITO, Ward 1(1), Tirupur [2019] 413 ITR 390 (Mad) - followed on the three parameters; General Insurance Corporation of India v. ACIT 2019 SCC OnLine Bom 8430 - relied on for the parameters, itself gathering KEC International Ltd v. B.R. Balakrishnan 251 ITR 158 and UTI Mutual Fund v. ITO 345 ITR 71; Valvoline Cummins Ltd v. DCIT [2008] 307 ITR 103 (Delhi), Soul v. DCIT [2010] 323 ITR 305 (Delhi) and N. Jegatheesan v. DCIT (2016) 4 MLJ 479 - distinguished, the Board's Letter of 01.12.2009 not having been before those Courts.
It was decided by the High Court on 2021-04-08 and is reported as WP(MD) No. 5550 of 2020 and WMP(MD) Nos. 4853, 4854 and 4855 of 2020 (Madras High Court, Madurai Bench); no law-report citation was visible on the page read. 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 220(3), section 220(7), section 246, section 246A, section 133A, 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 impugned order was set aside as absolutely non-speaking and the matter remitted to the Assessing Officer to pass fresh orders in accordance with law, with liberty to the petitioner to file a supplementary petition and with all contentions left open; the writ petition was allowed with no costs (para 15). The Court further held that failure to refer to Instruction No. 95 of 21.08.1969 does not vitiate an order under s.220(6), that instruction having ceased to exist on the Board's own Letter dated 01.12.2009 (para 7); that Instruction No. 1914 continues to hold the field and clause 2(C)(v) of it requires a speaking order (para 10); that the Assessing Officer, exercising quasi-judicial power, may himself direct a deposit of less than 20% without a reference to the administrative Pr.CIT/CIT, a reference being necessary only for a figure higher than 20% (para 12); and that the Principal Commissioner is only a reviewing authority who cannot assume jurisdiction in the first instance (para 14). It arises in Demand, Recovery & Stay and Appeals matters, on section 220(6), section 220(3), section 220(7), section 246, section 246A, section 133A of the Income Tax Act 1961, and was decided by G.R. Swaminathan 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. Plead all three limbs separately and with material: prima facie case, financial stringency, balance of convenience. A petition that is 'bald and bereft of details' will not save you, though it does not cure a non-speaking order either. If you want less than 20%, ask the Assessing Officer directly and say so - do not let him tell you he must refer it upward; a reference is required only for a figure higher than 20%. Do not build the case on Instruction No. 95 of 21.08.1969 alone; it was withdrawn by Letter F.No.404/10/2009-ITCC dated 01.12.2009. Rely on clause 2(C)(v) of Instruction No. 1914 and on the trinity of parameters. Do not move the Principal Commissioner first. His jurisdiction arises only on a reference by the Assessing Officer or on review of the officer's order under para 4(C) of the OM. If the order is non-speaking, take that as the ground in writ - the Court set the order aside on that ground alone and remitted it, leaving all contentions open.
Validity check could not be completed. No systematic check of later treatment was carried out. One later decision of the same High Court was read: A K M G Alloys Private Limited v. CIT (Appeals), W.P(MD) No. 25512 of 2019, decided 09.02.2022, which follows this order (citing it by its reserved date of 01.04.2021). The holding that Instruction No. 95 of 21.08.1969 has ceased to exist is in tension with the Delhi High Court line in Valvoline Cummins, Soul and Taneja Developers and with N. Jegatheesan, but the Court expressly explains that tension on the footing that Board Letter F.No.404/10/2009-ITCC dated 01.12.2009 was not before those Courts. Whether any other High Court has since taken a different view of that Letter was not checked. 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 first fetch of the plain indiankanoon /doc/ URL returned a model-written summary rather than the order; a second fetch of the same URL returned the raw text, and this entry is written from that raw text, with the key sentence separately confirmed through /docfragment/. The order was reserved on 01.04.2021 and pronounced on 08.04.2021 - the same High Court in A K M G Alloys cites it by the reserved date, which is why the case is sometimes given as 01.04.2021. The order runs to 15 numbered paragraphs; paragraphs 5, 6, 8, 9 and 11 reproduce CBDT instructions or extracts from other courts, so any paragraph number appearing inside those blocks belongs to the quoted material and not to this order. The order reproduces Instruction No. 1914 as 'DATED 02.12.1993', while the CBDT's own Office Memorandum of 31.07.2017 (reproduced verbatim in Madhya Pradesh Audyogik Kendra Vikas Nigam) describes it as 'Instruction No. 1914 dated 21.3.1996'; the library's existing CBDT entry dates it 02.02.1993. The date of Instruction 1914 is reported inconsistently across sources and none of the three could be resolved from a live departmental page. 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 impugned order was set aside as absolutely non-speaking and the matter remitted to the Assessing Officer to pass fresh orders in accordance with law, with liberty to the petitioner to file a supplementary petition and with all contentions left open; the writ petition was allowed with no costs (para 15). The Court further held that failure to refer to Instruction No. 95 of 21.08.1969 does not vitiate an order under s.220(6), that instruction having ceased to exist on the Board's own Letter dated 01.12.2009 (para 7); that Instruction No. 1914 continues to hold the field and clause 2(C)(v) of it requires a speaking order (para 10); that the Assessing Officer, exercising quasi-judicial power, may himself direct a deposit of less than 20% without a reference to the administrative Pr.CIT/CIT, a reference being necessary only for a figure higher than 20% (para 12); and that the Principal Commissioner is only a reviewing authority who cannot assume jurisdiction in the first instance (para 14).
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