Interim stay of tax demand granted conditionally under section 254(2A) subject to payment or security safeguards

Interim stay of outstanding tax demand was considered on the settled tests of prima facie case and balance of convenience under section 254(2A). Because the rival contentions required detailed verification in the main appeal, an unconditional stay was refused. The Tribunal granted partial protection against recovery, but only on condition that the assessee pay 20% of the outstanding demand in two instalments or furnish equivalent security within the stipulated time. The demand remained in abeyance for the prescribed period, and recovery proceedings were barred until the stipulated date if the conditions were met.

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Issues: Whether the assessee was entitled to stay of the outstanding tax demand pending disposal of the appeal, and on what conditions, under section 254(2A) of the Income-tax Act, 1961.

Analysis: The request for stay was examined on the settled parameters of prima facie case and balance of convenience. Since the rival contentions required detailed verification in the main appeal, the Tribunal did not accept an unconditional stay. Instead, it exercised its power under section 254(2A) to grant interim protection against recovery while securing the Revenue's interest by requiring the assessee to pay 20% of the outstanding demand in two instalments, or alternatively furnish security of equivalent value, within the stipulated time.

Conclusion: The stay request was allowed in part. The demand was kept in abeyance for the prescribed period subject to compliance with the payment or security conditions, and no recovery proceedings were to be initiated until the stipulated date.

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