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May 2012

Recovery of tax: Stay of recovery during pendency of appeal: Section 220(6) of Income-tax Act, 1961: If prima facie the case is in favour of the assessee, stay should be granted for the full demand.

By K. B. Bhujle, Advocate
Reading Time 2 mins
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The assessee filed appeal against the order u/s.201 of the Income-tax Act, 1961 before the CIT(A). The assessee also filed an application for stay of the demand before the CIT(A). The CIT(A) observed that there is ‘enough strength in the plea of the assessee for stay of demand’. However, he directed to pay 30% of the demand.

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

(i) If on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. From the perusal of the materials brought on record, we are of the view that the Commissioner having himself expressed opinion on the order that there is enough strength in the plea of the assessee for stay of the demand, there was no occasion to direct for deposit of 30%.

(ii) In view of the above, we provide that during the pendency of the appeal the demand against the petitioner shall be kept in abeyance. However, the petitioner shall furnish adequate security in respect of the said 30% of the demand.”

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