Recovery of tax: Stay of recovery during pendency of appeal: Section 220(6) of Incometax Act, 1961: AO and Appellate Authorities are not mere tax gatherers: They have to be fair to the assessee.

The assessee is a professional. For the A.Y. 2009- 10, the Assessing Officer passed assessment order u/s.143(3) of the Income-tax Act, 1961 determining the total income at Rs.22.43 crore as against the returned income of Rs.19.41 crore and raised a demand of Rs.1.18 crore. A refund of Rs.78 lakh was due to the assessee for the A.Y. 2010-11. The assessee filed appeal before the CIT(A) and also filed an application for stay of recovery till the disposal of appeal. The CIT(A) directed that the refund of Rs.78 lakh be adjusted and the balance of Rs.41 lakh be paid. He held that considering ‘the financial status and affairs’ of the assessee, the payment of the balance demand would not cause financial hardship.

The Bombay High Court allowed the writ petition filed by the assessee and held as under:

“(i) The power which vested in the Assessing Officer u/s.220(6) and on the CIT(A) to grant a stay of demand is a judicial power. It is necessary for both the Assessing Officer as well the Appellate Authorities to have due regard to the fact that their function is not merely to act as tax gatherers, but equally as quasi-judicial authorities, they owe a duty of fairness to the assessee. This seems to be lost [Nishit M. Desai v. CIT (Bom.), W.P. No. 653 of 2012; dated 15-3-2012] The assessee is a professional. For the A.Y. 2009- 10, the Assessing Officer passed assessment order u/s.143(3) of the Income-tax Act, 1961 determining the total income at Rs.22.43 crore as against the returned income of Rs.19.41 crore and raised a demand of Rs.1.18 crore. A refund of Rs.78 lakh was due to the assessee for the A.Y. 2010-11. The assessee filed appeal before the CIT(A) and also filed an application for stay of recovery till the disposal of appeal. The CIT(A) directed that the refund of Rs.78 lakh be adjusted and the balance of Rs.41 lakh be paid. He held that considering ‘the financial status and affairs’ of the assessee, the payment of the balance demand would not cause financial hardship. The Bombay High Court allowed the writ petition filed by the assessee and held as under: “(i) The power which vested in the Assessing Officer u/s.220(6) and on the CIT(A) to grant a stay of demand is a judicial power. It is necessary for both the Assessing Officer as well the Appellate Authorities to have due regard to the fact that their function is not merely to act as tax gatherers, but equally as quasi-judicial authorities, they owe a duty of fairness to the assessee. This seems to be lost sight of in the manner in which the authority has acted in the present case.

 (ii) The parameters for the exercise of jurisdiction to grant stay of demand has been set out in several judgments of this Court, including in KEC International v. B. R. Balakrishnan, 251 ITR 158.

(iii) The assessee’s submissions on merits require consideration. The CIT(A) ought to have devoted a more careful consideration to the issue as to whether a stay of demand was warranted. As out of total demand of Rs.1.18 crore, Rs.78 lakh has been adjusted, the balance has to be stayed.”