Stay of tax recovery granted where a strong prima facie case and hardship justified protection pending appeal.

In stay proceedings, disputed tax recovery may be suspended where the assessee shows a strong prima facie case and the balance of convenience favours protection pending appeal. The Tribunal accepted arguable challenges to business connection in India, income attribution, enhancement of additional income, profit-rate computation, and interest liability, and noted limited precedent on a novel issue. It also considered that partial acceptance of the factual objections could materially reduce the demand and that immediate recovery would cause hardship given the group's losses. Conditional relief was therefore justified, with the outstanding demand kept in abeyance for a limited period subject to deposit and security, and the appeals directed to be heard out of turn.

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Issues: Whether stay of recovery of the outstanding tax demand was warranted pending disposal of the assessee's appeals, having regard to the assessee's prima facie case, the balance of convenience, and the hardship likely to be caused by immediate recovery.

Analysis: The Tribunal noted that the assessee had raised substantial arguable grounds against the assessments, including challenge to the existence of a business connection in India, the attribution of income, the enhancement made in respect of additional sources of income, the profit-rate computation, and liability to interest under section 234B. It also observed that the matter involved a novel question with limited precedent, that even a partial acceptance of the assessee's factual objections could materially reduce the demand, and that recovery of the entire outstanding amount would cause hardship in view of the group's losses. On this basis, the Tribunal found that the assessee had established a sufficiently strong prima facie case and that the balance of convenience favoured protection against recovery pending appeal.

Conclusion: Stay of recovery was justified, and the assessee was granted conditional relief against enforcement of the outstanding demand pending disposal of the appeals.

Final Conclusion: The outstanding demand was kept in abeyance for a limited period, subject to specified monetary deposit and security, while the connected appeals were directed to be heard out of turn.

Ratio Decidendi: In stay proceedings, where the assessee shows a strong prima facie case and the balance of convenience favours it, recovery of disputed tax demand may be stayed subject to reasonable conditions to safeguard the revenue.

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