Judicious exercise of discretion under section 220(6) required; non-speaking rejection and attachment could not stand

Section 220(6) gives the assessing authority discretion to treat an assessee as not in default in respect of a disputed demand after the payment time has expired, but that discretion must be exercised judiciously and with reasons. A rejection order that gives no reasons and does not show such an exercise is unsustainable. On that basis, the rejection was set aside, the assessee was directed not to be treated as in default pending the appeal, and the attachment was kept in abeyance.

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Issues: Whether the rejection of the application under section 220(6) of the Income-tax Act, 1961 was sustainable and whether the assessee could be treated as not in default pending disposal of the appeal.

Analysis: Section 220(6) confers discretion on the assessing authority to treat the assessee as not being in default in respect of the disputed demand even after the time for payment has expired, and that discretion must be exercised judiciously. The impugned rejection disclosed no reasons and did not show a judicious exercise of discretion.

Conclusion: The rejection order was unsustainable and was set aside. The assessee was directed not to be treated as in default, and the attachment was kept in abeyance.

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