Circular No. 589

Whether Assessing Officer can exercise discretion under section 220(6) to treat assessee as not being in default in respect of amounts disputed in first appeal pending before Deputy Commissioner (Appeals)/Commissioner (Appeals)

What this is

Circular No. 589 was issued by the Central Board of Direct Taxes on 16 January 1991. Its subject is Whether Assessing Officer can exercise discretion under section 220(6) to treat assessee as not being in default in respect of amounts disputed in first appeal pending before Deputy Commissioner (Appeals)/Commissioner (Appeals).

What it does

Rewrites paragraph 4 of Circular No. 530, dated 6th March, 1989 on the Assessing Officer's discretion under section 220(6) to treat an assessee as not in default while a first appeal is pending. The old paragraph 4 told the Assessing Officer, in cases outside the two situations in paragraph 2, to take all relevant factors into account and pass a speaking order, but expressly said that the assessee's financial capacity to pay the demand was not relevant. The substituted paragraph drops that exclusion: the Assessing Officer is to consider all relevant factors having a bearing on the demand raised and communicate his decision by a speaking order.

Why it was issued

Representations were received that shutting out the assessee's financial capacity from the factors relevant to a stay under section 220(6) worked against assessees who are not financially sound.

Who it reaches

Assessees seeking stay of demand pending first appeal
Assessees in financial difficulty facing recovery
Assessing Officers passing orders under section 220(6)
Deputy Commissioners (Appeals) and Commissioners (Appeals) before whom the appeal is pending

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.220	s.411

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

Whether Assessing Officer can exercise discretion under section 220(6) to treat assessee as not being in default in respect of amounts disputed in first appeal pending before Deputy Commissioner (Appeals)/Commissioner (Appeals)

1. Reference is invited to Board’s Circular No. 530 [F. No. 404/82/88-ITCC], dated March 6, 1989 regarding the above-mentioned subject.
2. According to paragraph 2 of the said Circular, the Assessing Officer is, in the two situations referred to in that paragraph, bound to treat the assessee as not in default in respect of the amount in dispute in appeal. In respect of other cases, the Circular stated in paragraph 4—
"In respect of other cases, not covered by para 2 above, Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of a speaking order. While exercising discretion under this provision, the financial capacity of the assessee to pay the demand will not be relevant."
3. Representations have been received by the Board that the exclusion of financial capacity of the assessee to pay the demand, from the factors relevant for exercise of Assessing Officer’s discretion under section 220(6) of the Income-tax Act, is prejudicial to those assessees who are not financially sound.
4. The matter has been reconsidered by the Board. It has been decided to substitute paragraph 4 of Circular No. 530 by the following paragraph :
"In respect of other cases not covered by paragraph 2 above, the Assessing Officer, while considering the situation for treating the assessees to be not in default, would consider all relevant factors having a bearing on the demand raised and communicate his decision to the assessee in the form of a speaking order."
Circular : No. 589, dated 16-1-1991.

What to watch

Only paragraph 4 of Circular No. 530 is replaced; the two situations in paragraph 2, where the Assessing Officer is bound to treat the assessee as not in default, stand as they were.
The requirement of a speaking order survives the amendment, and is the handle in a writ against a bare refusal.
The substituted paragraph does not direct that financial capacity must be given weight; it simply stops excluding it by naming all relevant factors bearing on the demand.
The Board has issued later instructions on stay of demand; this text speaks only to the 1989 circular.

Where you meet it

In an application for stay of demand under section 220(6) after an assessment order, and in the speaking order or its refusal that follows.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 15/2024 — Order under section 119(1) of the IT Act, 1961 fixing the monetary limits of the Income-tax authorities in respect of re 4 November 2024
Circular No. 530 — Whether Assessing Officer can exercise discretion under section 220(6) to treat assessee as not being in default in resp 6 March 1989
Circular No. 334 — 1211. Levy of interest under sub-section (2) when original assessment is set aside/cancelled 3 April 1982
Circular No. 251 — Circular dated 25-7-1969 granting stay of recovery of tax under sub-section (7) to assessees having income in Pakistan w 29 January 1979
Circular No. 25 — Circular dated 25-7-1969 granting stay of recovery of tax under sub-section (7) to assessees having income in Pakistan w 25 July 1969

← Circular No. 591 · Circular No. 588 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.