20% stay calculation must be based on disputed demand, not total outstanding demand under section 253(1)

ITAT Mumbai held that 20% stay calculation should be based on disputed demand, not total outstanding demand. Assessee challenged capital gain addition before AO and Tribunal under section 253(1). TDS deposited exceeded 20% of disputed demand per AO's computation. AO incorrectly demanded payment of entire outstanding amount plus additional 20%, ignoring Tribunal's directions. ITAT granted stay for balance disputed demand for six months or until order disposal, citing no fault by assessee and department's repeated adjournment requests. AO's interpretation was deemed incorrect.

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Issues:
Stay of demand calculation based on disputed demand or outstanding demand specified under section 156 of the Act.

Analysis:
The applicant assessee was assessed for short term capital gain on the sale of shares in a company, resulting in a rectified demand on total income. The assessee filed a stay application before the ld. AO, claiming to have already paid more than 20% of the disputed tax liability through TDS. The Tribunal remitted the matter to the AO for verification of the 20% payment based on the disputed demand, not the outstanding demand under section 156. The AO, however, directed the assessee to pay the entire outstanding demand, violating the Tribunal's direction. The Tribunal reiterated its stance, directing compliance with Section 254(2A) and granting stay subject to the condition of depositing 20% of the disputed amount.

The AO, despite repeated directions, again asked the assessee to pay 20% of the outstanding demand without considering the TDS paid. The assessee approached the High Court through a writ petition, challenging the AO's order. The High Court observed discrepancies in the AO's calculation and the Tribunal's directions, emphasizing the need to calculate 20% of the disputed tax demand, not the outstanding demand. The AO's failure to comply prompted the Tribunal to grant a stay on the balance demand for six months or until the order is passed, citing the department's repeated adjournment requests and the misinterpretation of the earlier granted stay.

The entire controversy revolves around the correct calculation of 20% of the demand for staying the balance demand, whether based on the disputed demand or the outstanding demand specified under section 156 of the Act. The Tribunal clarified that the disputed demand, challenged in the appeal, should be the basis for calculating the 20% requirement, not the overall outstanding demand. The Tribunal granted the stay application, highlighting the department's adjournment requests and the AO's misinterpretation of the earlier granted stay. Consequently, the stay was extended for a further six months or until the order is passed, whichever is earlier, in favor of the assessee.

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