Yes. Under s.220(6) the Assessing Officer can treat you as not in default while your CIT(A) appeal is pending, and the CBDT Office Memorandum dated 31 July 2017 sets the normal condition at payment of 20% of the disputed demand. That 20% is a norm, not a ceiling or a floor — the Supreme Court in PCIT v. LG Electronics India held the officer can take less.
A notice of demand under s.156 must be paid within 30 days of service (s.220(1)); the AO can shorten that with the prior approval of the Joint Commissioner. If you do not pay, s.220(2) charges simple interest at 1% for every month or part of a month, and you become an assessee in default.
Filing an appeal does not by itself stop recovery. Section 220(6) gives the AO a discretion: where an appeal under s.246A is pending, he may, subject to conditions, treat you as not in default in respect of the disputed amount. You have to ask.
The CBDT's Office Memorandum F.No. 404/72/93-ITCC dated 29 February 2016, which modified Instruction No. 1914, said in para 4(A) that where the demand is disputed before the CIT(A) the AO shall grant stay till disposal of the first appeal on payment of 15% of the disputed demand. The Office Memorandum of 31 July 2017 replaced every reference to 15% with 20%.
The same OM keeps discretion alive. Para 4(B) lets the AO refer the case to the Pr.CIT/CIT where a higher or lower payment is warranted — higher where, for example, the issue is covered against you by a decision of the jurisdictional High Court or Supreme Court; lower where appellate decisions or judicial pronouncements favour you. Para 4(C) lets you go to the Pr.CIT/CIT if the AO's decision aggrieves you. Para 4(D) expects the stay petition to be disposed of within two weeks.
The Supreme Court in PCIT v. LG Electronics India Pvt Ltd (Civil Appeal No. 6850 of 2018, 20 July 2018) recorded that it is open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20% pending appeal. The OMs do not fetter the quasi-judicial discretion.
The Madras High Court in Mrs. Kannammal v. ITO set out what a proper order looks like: the AO must examine the trinity of prima facie case, financial stringency and balance of convenience, and must do so even if you have not expressly pleaded them. A one-line order saying 'mere filing of appeal is not a ground for stay' is not a speaking order. The same court in Uthangarai Sri Vidya Mandir set aside an order that mechanically called for 20% without examining the facts.
Once the appeal reaches the Tribunal, s.254(2A) governs: stay for up to 180 days on deposit of not less than 20% of the disputed demand or security of that value, extendable, with an aggregate cap of 365 days. In DCIT v. Pepsi Foods Ltd (6 April 2021) the Supreme Court struck down the third proviso as violative of Article 14, so a stay no longer vacates automatically at 365 days where the delay is not attributable to you.
Recovery under the Act is not suspended by an appeal, so a demand can be attached, adjusted against a refund, or recovered from your bank while the appeal sits in a queue for years. The difference between a mechanical 20% and a properly reasoned lower figure is real cash. And a badly reasoned stay order is one of the few things a High Court will interfere with quickly under Article 226.
The provision can be read two ways. Which reading wins?
Your Tribunal stay lapsed at 365 days through no fault of yours. Is that constitutional?
The Commissioner dismissed my revision and the officer will not issue a demand notice so I cannot appeal. Is the revisional order beyond the reach of a writ because it is administrative?
My appeal is pending before the Tribunal and recovery of the demand is going on. Can the Tribunal stay recovery when no section gives it that power?
My assessment was reduced in appeal after the officer had already sent a recovery certificate to the Collector and my property was attached. Can he carry on with the old certificate?
My assessment order does not compute the tax — the figures are only on the ITNS-150. Does that make the assessment bad?
I paid the original demand in full, got a refund when I won in appeal, and repaid on a fresh demand after losing in reference. The department now wants s.220(2) interest for the period in between. Must I pay it?
Is 20% of the disputed demand a fixed price for a stay, or can the officer take less?
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