Court sets aside tax demand pre-condition, orders new assessment, stay request consideration, personal hearing, expedited appeals, status-quo.

The court set aside the impugned order demanding 20% of the disputed tax as a pre-condition for stay, directing the petitioner to appear with supporting materials for a new assessment. The Assessing Officer was instructed to consider the request for stay, provide a personal hearing, and issue a reasoned order by a specified date. The petitioner was also given liberty to seek expedited resolution of appeals. The writ petition was disposed of with status-quo on recovery, and the related WMP was closed without costs.

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Issues Involved:
1. Legality of the impugned order demanding 20% of the disputed tax as a pre-condition for stay.
2. Examination of the petitioner's financial stringency and balance of convenience.
3. Adherence to CBDT Circulars/Instructions regarding stay of demand.

Issue-wise Detailed Analysis:

1. Legality of the Impugned Order:
The impugned order dated 13.02.2019, passed under Section 220(6) of the Income Tax Act, 1961, required the petitioner to remit 20% of the disputed demand of Income tax as a pre-condition for the grant of stay of recovery. The petitioner, a Trust managing a school, challenged this order, arguing that they had a prima facie case in the appeals and lacked liquidity to make the payment of Rs. 11,68,24,189/-. The respondents contended that the impugned order was discretionary and justified given the seizure of valuables during the search, which were brought to tax as unaccounted income.

2. Examination of Petitioner's Financial Stringency and Balance of Convenience:
The court noted that the Assessing Officer is required to test the existence of a prima facie case, financial stringency, and the balance of convenience when adjudicating a request for stay of recovery. The officer's impugned order was found to be flawed as it treated the payment of 20% of the tax as a mandatory pre-condition for consideration of stay, which is not cast in stone but rather a thumb rule. The court emphasized that the parameters for considering the grant of stay include the existence of a prima facie case, financial stringency, and balance of convenience. The officer's order failed to address these aspects adequately.

3. Adherence to CBDT Circulars/Instructions:
The court referred to various Circulars/Instructions issued by the CBDT, which guide the grant of stay of demand. These include:
- Office Memorandum F.No.1/6/69/-ITCC dated 21.08.1969, emphasizing the need to hold collection of disputed demand in abeyance if the assessed income is substantially higher than the returned income.
- Instruction No.1914 dated 21.03.1996, which provides guidelines for the stay of demand, emphasizing the need to consider financial stringency and balance of convenience.
- Office Memorandum dated 29.02.2016 and 31.07.2017, modifying the guidelines to streamline the grant of stay and standardize the procedure, including the standard rate of 20% of the disputed demand.

The court concluded that the impugned order was mechanically passed without examining the appropriateness of the direction to the facts and circumstances of the petitioner’s case. The court set aside the impugned order and directed the petitioner to appear before the first respondent with all materials in support of its request for stay. The Assessing Officer was instructed to consider the petitioner's request, afford an opportunity for a personal hearing, and pass a reasoned speaking order on the request for stay by 22.03.2019. The court also granted the petitioner liberty to approach the Commissioner of Income Tax (Appeals) for an expeditious disposal of the appeals filed on 24.01.2019.

The writ petition was disposed of with the above observations, and there was an order of status-quo as regards recovery till the new order was passed. Consequently, the connected WMP was closed with no order as to costs.

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