Stay on tax demand pre-deposit may be reduced where the same issue was accepted in earlier years

Where a stay application concerns a demand arising from a recurring revenue-recognition issue already accepted in earlier years, the Office Memorandum required the Assessing Officer to consider whether a lower pre-deposit was justified and, if so, to seek determination by the administrative Principal Commissioner or Commissioner. In the matter described, the 15% pre-deposit requirement was modified on equitable considerations, and stay of the demand was granted on deposit of about 10% of the disputed demand during the pendency of the appeal.

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Issues: Whether the Assessing Officer was justified in insisting on a pre-deposit of 15% for stay of the demand, despite the Office Memorandum prescribing that where additions on the same issue had been deleted in earlier years the matter should be referred to the administrative Commissioner for determination of a lower deposit.

Analysis: The demand arose from an assessment in which the assessee had claimed that its revenue recognition method had been accepted in earlier years by appellate authorities. In that situation, the Office Memorandum required the Assessing Officer to consider para 4(B)(b) and, if a lump sum below 15% was warranted, to refer the matter to the administrative Principal Commissioner or Commissioner for a decision on the appropriate quantum of deposit. Rather than remitting the matter, the Court balanced the equities by fixing an approximate 10% deposit as a condition for stay during pendency of the appeal.

Conclusion: The insistence on a 15% pre-deposit was modified, and stay of the demand was granted on deposit of about 10% of the disputed demand.

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