Settlement Commission pendency does not stay tax recovery; demand notices remain valid, with only payment schedule relief granted.

Pendency of an application before the Settlement Commission does not, by itself, stay recovery of assessed income-tax arrears, because the assessment liability remains enforceable unless stayed or altered. On that basis, demand notices issued for recovery were upheld as lawful and the challenge to quash them was rejected. However, considering the facts and amounts already paid, the Court limited relief to the manner of recovery and directed that recovery steps remain in abeyance if 50% of the arrears is paid within six weeks and the balance within three months.

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Issues: Whether pendency of proceedings before the Settlement Commission stayed recovery of assessed income-tax arrears, and whether the demand notices issued for recovery were liable to be quashed.

Analysis: The assessee had been assessed to income tax for earlier assessment years and had approached the Settlement Commission for relief while appeals against the assessments were also pending. The Court held that the mere pendency of an application before the Settlement Commission does not operate as a stay of collection, and the assessed liability continues to subsist. On that footing, the issuance of demand notices was held to be lawful and the challenge to them was rejected. At the same time, having regard to the facts and the payments already made, the Court restricted the relief to the mode of payment of the arrears.

Conclusion: The demand notices were not quashed, but recovery steps were directed to remain in abeyance on condition that 50% of the arrears be paid within six weeks and the balance within three months.

Ratio Decidendi: Mere pendency of an application before the Settlement Commission does not by itself stay recovery of assessed tax arrears, since the assessment liability remains enforceable until otherwise stayed or altered.

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