Prima facie case and reasoned stay orders justify interim protection against tax recovery pending appeal.

Where an assessee shows a prima facie case in a tax dispute, including support from earlier appellate deletions of similar additions and an arguable royalty claim, interim protection against recovery may be justified pending appeal. A stay rejection order must disclose reasons; an unreasoned refusal cannot withstand judicial scrutiny in such a matter. Applying CBDT Instruction No. 1914, the court protected the assessee from coercive recovery until disposal of the appeal and directed expeditious hearing, while holding that the rejection order could not stand.

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Issues: Whether the assessee was entitled to stay of demand pending disposal of the appeal, and whether the rejection of the stay application without reasons could be sustained.

Analysis: The assessee showed a prima facie case by pointing out that in earlier assessment years similar additions had been deleted in appeal and that the royalty claim also had some substance. The rejection order of the Commissioner of Income Tax contained no reasons for refusing stay. An order that does not disclose reasons is incapable of sustaining judicial scrutiny in such a matter, and the guidelines in CBDT Instruction No. 1914 supported grant of protection where the dispute had arguable merit.

Conclusion: The assessee was entitled to interim stay of the demand until disposal of the appeal, and the unreasoned rejection order could not stand.

Final Conclusion: The writ petition was disposed of by protecting the assessee from recovery during pendency of the appeal and directing expeditious disposal of the appeal.

Ratio Decidendi: In tax matters, where the assessee establishes a prima facie case and the stay rejection is unsupported by reasons, interim protection against recovery may be granted pending appeal.

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