Conditional stay of tax recovery granted after refund adjustment, with balance demand protected pending appeal

Recovery of an outstanding tax demand was sought to be stayed pending appeal on the ground that the demand was inflated by duplicated additions, the assessment order was infirm, and a substantial refund was available for adjustment. The ITAT Delhi declined to examine the merits at the stay stage, but granted conditional protection on the facts presented. It directed adjustment of the stated refund of Rs. 39 crores against the demand and stayed recovery of the balance demand for 180 days or until disposal of the appeal, whichever was earlier. The appeal was fixed for out-of-turn hearing, with a warning that unnecessary adjournment could lead to vacation of stay.

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Issues: Whether recovery of the outstanding tax demand should be stayed pending disposal of the appeal and, if so, on what terms.

Analysis: The application sought stay of recovery on the ground that the demand was stated to be inflated by duplication in additions, that the assessment order allegedly suffered from infirmities, and that a substantial refund was available for adjustment. The Tribunal declined to enter into the merits at the stay stage, but on the facts placed before it found a case for conditional protection. It directed adjustment of the stated refund of Rs. 39 crores against the demand and granted stay only for the balance demand for 180 days or until disposal of the appeal, whichever was earlier. The appeal was also fixed for an out-of-turn hearing, with a caution that unnecessary adjournment could result in vacation of stay.

Conclusion: Recovery of the balance demand was stayed conditionally after adjustment of the stated refund, and the stay application was partly allowed.

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