CPT V24P7-Art1 (Content).pmd - Taxmann

Direct Tax Laws
4. GENERAL PRACTICES FOLLOWED IN
DEALING WITH THE APPLICATIONS FOR
STAY OF DEMAND
4.1 Such requests are generally rejected without
hearing the assessee - Such requests are generally
rejected without hearing the assessee. The legal
view is that as the exercise of discretion by
the AO under section 220(6) is quasi-judicial
function and he has to exercise his power
fairly and reasonably and not arbitrarily or
capriciously, the AO should give reasons for
dismissing an application made by an assessee
in his discretion and should also hear the
assessee – Seth Gopaldas Paliwal v. WTO [1983]
139 ITR 900(MP). Moreover, the order should
be a speaking order – Teletube Electronics Ltd.
v. CIT [1998] 96 Taxman 278 (Delhi); Chesebrough
Pond’s Inv. v. A.A.C. (C.T.) [1973] 32 STC 464
(Mad.).
4.2 Such applications are also rejected on the
ground of assessee’s sound financial position -
Such applications are also rejected on the ground
that the assessee’s financial position is sound
against legal views. Normally, once the officer
is satisfied that an appeal has been filed (and
the grounds are not frivolous), he has to treat
the assessee as not in default to the extent of
the portion of tax disputed in the appeal. Though
section 220(6) does not indicate in what cases
denial of discretion shall be justified, yet the
fact that the assessee is financially sound and
is in a position to pay is not in itself a ground
for refusing to exercise the discretion in granting
the stay – R.P. David v. Ag. ITO [1972] 86 ITR
699 (Mad.).
4.3 Stay applications are disposed of without
passing a speaking order - Stay applications
are, many a times, disposed of without passing
a speaking order and such orders even get
approved by the higher authorities. In one
case, relating to stay of demand, the AO passed
an order on a detailed application by the taxpayer
as to why demand should be stayed till the
disposal of appeal as under:
640
“Stay of demand is not automatic as a
result of filing of first appeal before CIT(A).
In view of above, your request for keeping
the demand in abeyance till the disposal
of the appeal by the CIT(A) is rejected
and you are directed to pay the entire
demands within 10 days of the receipt of
this letter. Non-compliance will lead to
actions as per provisions of IT Act without
any further reference”.
CIT’s order:
When the taxpayer appealed to the CIT against
the AO’s decision, the CIT passed a still short
and cryptic order to the following effect
communicated to the taxpayer by an officer
in his office-
“I am directed to inform you that your
request for stay of demand for the above
mentioned two years has not been acceded
to by the CIT…. You are, therefore,
requested to make necessary correspondence
with the AO in the matter of payment
of the outstanding demand immediately.”
4.4 Often cryptic orders are passed by Assessing
Officers and Commissioners - In cases, related
to stay of demand, often cryptic orders are
passed by the AOs and Commissioners without
assigning any reasons, just saying ‘refused’/
‘rejected’, etc., without stating as to why the
prayer mentioned in the assessee’s application,
giving varied reasons for staying demand, are
not acceptable.
WHY CIT(A) ARE NOT STAYING
DEMANDS?
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 20
5. The foregoing discussion candidly shows
that authorities functioning on the administrative
side are most reluctant to favourably consider
applications for stay of demand during the
pendency of appeals, ignoring the legal
requirements of section 220(6) [supra]. Even if
these are taken up, the orders on the same are
not passed judiciously. There could be some
grounds for the AOs/CIT(A) on the administration
side not to accept such requests because
of their concern/enthusiasm for meeting the
budget targets fixed for them by the CBDT,