Stay of recovery pending appeal granted where tax was paid and balance demand was mainly interest and penalty.

Where the tax component had already been substantially paid and the balance demand comprised mainly interest and penalty, the ITAT considered stay of recovery pending appeal appropriate because coercive recovery would cause undue hardship. The assessee's bank accounts and debtors had been attached, preventing payment of wages and continuation of business, and the appeal disclosed a prima facie arguable case. As the Revenue's interests were not shown to be prejudiced, recovery of the remaining demand was stayed and the connected garnishee attachments were lifted, subject to compliance with stated conditions.

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Issues: Whether the assessee was entitled to stay of recovery of the outstanding demand and suspension of garnishee proceedings pending appeal.

Analysis: The outstanding demand represented only interest and penalty after the tax component had substantially been paid. The assessee's bank accounts and debtors had been attached, leaving it unable to meet wage obligations and continue its business. The appeal was found to disclose a prima facie arguable case, and the revenue's interests were not considered to be prejudiced by keeping recovery in abeyance, particularly where the assessee had already discharged its tax liability and the remaining demand was principally on account of interest and consequential levies.

Conclusion: The assessee was granted stay of recovery of the outstanding demand and the garnishee orders were suspended.

Final Conclusion: Recovery of the remaining demand was stayed pending disposal of the appeal, and the connected garnishee attachments were lifted, subject to compliance with the stated conditions.

Ratio Decidendi: Where the tax component has already been paid and the remaining demand is primarily towards interest and consequential levies, stay of recovery may be granted if coercive recovery would cause undue hardship and the assessee shows a prima facie arguable case in appeal.

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