Interim stay of tax demand may be granted despite a pending administrative stay request when coercive recovery has begun.

The Tribunal's power to entertain a stay petition is not barred merely because the assessee's stay application remains pending before the Commissioner. Although the usual practice is to await the tax authority's decision, that practice is flexible and may be departed from where coercive recovery action has begun and urgent intervention is required. In such circumstances, interim protection may be granted to prevent unfair recovery while the administrative application is still undecided, and the stay may be made conditional on the Commissioner's later order.

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Issues: (i) Whether the Tribunal could entertain and grant a stay petition before the assessee had obtained a disposal of its stay application from the Commissioner of Income-tax; (ii) Whether interim stay of the demand was justified on the facts because coercive recovery steps had already been initiated.

Issue (i): Whether the Tribunal could entertain and grant a stay petition before the assessee had obtained a disposal of its stay application from the Commissioner of Income-tax?

Analysis: The usual practice was that the Tribunal would not ordinarily intervene until the assessee had exhausted the remedy before the tax authorities. At the same time, there was no legal bar preventing the Tribunal from passing orders on a stay petition at any stage of the proceedings. The practice was not inflexible and could be departed from where the authorities were not responding with urgency and coercive steps were being taken.

Conclusion: The Tribunal held that it could entertain the stay petition notwithstanding the pendency of the application before the Commissioner.

Issue (ii): Whether interim stay of the demand was justified on the facts because coercive recovery steps had already been initiated?

Analysis: The record showed that the Tax Recovery Officer had issued summons and that pressure was being applied for immediate payment. In such matters urgency was a prime consideration, and a prompt decision on the stay request was necessary to avoid unfair coercive recovery while the administrative request remained undecided. On those facts, the Tribunal directed the Commissioner to decide the application and protected the assessee in the meantime.

Conclusion: The Tribunal granted stay of the impugned demand until the Commissioner passed an order on the assessee's application, with the stay to stand vacated seven days after service of that order.

Final Conclusion: Interim protection was extended in the assessee's favour because the recovery process had become coercive while the stay request before the Commissioner remained pending.

Ratio Decidendi: The Tribunal may depart from the ordinary practice of awaiting disposal of a stay request by the tax authorities and grant interim stay where coercive recovery is being pursued and urgency requires immediate intervention.

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