2025 (12) TMI 1654 - HC - Income Tax

Tax recovery of outstanding demand during pending stay plea under s 220(6); no stay granted, decision ordered fast.

The dominant issue was whether the HC should grant a mandatory stay of recovery of outstanding tax demand under s 220(6) when the assessee's stay ... Stay of demand u/s 220(6) - petitioner said that application has not yet been disposed of and while keeping the said application pending, the respondents-Revenue Authorities are proceeding to recover the sums due in terms of the outstanding demand - HELD THAT:- In view of the facts that the petitioners’ appeal before the Income Tax Appellate Tribunal has not yet been restored and in view of the petitioners letter dated October 17, 2025 whereby the petitioners have themselves indicated to the AO that the petitioners would be making payment of outstanding demand by way of installments, no mandatory order of stay of the demand can be passed by this Court. Since the petitioners have made an application for stay of notice u/s 156 the respondents-Revenue Authorities shall be free to take a decision on such application as expeditiously as possible preferably within a period of four weeks from the date of communication of this order, strictly in accordance with law. As clarified that this order shall not be treated as a mandate to stay the demand and the authority concerned shall be free to take appropriate decision independently in accordance with law. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the Court should grant a mandatory stay of recovery pursuant to notices of demand issued under Section 156 of the Income Tax Act, 1961, when the assessee's appellate remedy before the Tribunal has not yet been restored and the assessee had communicated a willingness to pay the outstanding demand in instalments. (ii) What directions, if any, should be issued regarding the assessee's pending application under Section 220(6) seeking stay of demand, including the timeframe and the nature of discretion to be exercised by the Revenue authorities. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Grant of mandatory stay of demand under Section 156 Legal framework (as noticed by the Court): The impugned recovery steps flowed from notices issued under Section 156 of the Income Tax Act, 1961. The Court also considered the status of the assessee's appellate proceedings before the Tribunal, noting that restoration had not yet occurred and only a fresh restoration-related application was pending. Interpretation and reasoning: The Court treated two circumstances as decisive against granting a mandatory stay: (a) the assessee's appeal before the Tribunal had not yet been restored; and (b) the assessee's own letter/e-mail dated October 17, 2025 recorded an indication that the assessee would pay the outstanding demand by instalments, which had led to lifting of the bank attachment. The Court rejected the prayer for a court-directed stay in view of these facts, notwithstanding the assessee's contention that it had never undertaken to pay. Conclusion: No mandatory order staying the demand/recovery arising from the Section 156 notices was granted. Issue (ii): Direction for decision on the pending Section 220(6) stay application Legal framework (as discussed by the Court): The Court recognised that the assessee had filed an application under Section 220(6) seeking stay of the demand, and treated it as a matter to be decided by the competent Revenue authority 'strictly in accordance with law.' Interpretation and reasoning: While declining to impose a judicial stay, the Court noted the existence of the assessee's stay request and directed the Revenue authorities to decide it expeditiously. The Court also clarified that its order should not be construed as any mandate to grant stay; the authority was required to exercise independent discretion under law. Conclusion: The Revenue authorities were directed to decide the Section 220(6) stay application as expeditiously as possible, preferably within four weeks from communication of the order, with an express clarification that there was no court-mandated stay and the authority remained free to decide independently in accordance with law.