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Often it is found that the revenue authorities reject stay petitions before March 31 only as a reason to enforce recovery by unpleasant means without recording proper reasons and details in such rejection orders. These perfidious acts on the part of the department have lead the Bombay High Court to draw necessary considerations that are to be religiously followed in the fair disposal of stay applications.

The High Court in the case of KEC International Ltd. v. AO (251ITR158) therefore laid down the following four parameters to be complied with by both the AO and the Commissioner (Admn.) while passing expeditious orders on stay application filed before them pending disposal of appeal by the first appellate authority (Commissioner (A): –

a) The authority has to at least set out the case of the assessee briefly. In other words the order passed must be a speaking order stating facts of the case and the prima-facie conclusion.
b) If the assessed income is higher than the returned income the authority has to consider whether the assessee has made out a case for unconditional stay. If not whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited, for which reasons should be given by the authority;
c) If the authority wants the assessee to deposit the amount he can briefly indicate in his order whether the assessee is financially sound and viable to deposit the amount;
d) The authority concerned should not take any coercive measures of recovery such as by attachment of bank accounts etc. till such time the time limitation prescribed under the Act for filing of an appeal.

The P & H High Court in the case of Aggarwal Rice and General Mills Vs. Commissioner of Income-tax (204ITR480) also held that the Income-tax Officer was required to pass a speaking order after affording an opportunity to the petitioner in a matter of stay. In this case the following order was passed by the AO, which subsequently got quashed by the High Court: –

“Your demand fell due on November 12, 1992, and you have applied for stay of demand on November 19, 1992. You have not applied for stay of demand even within 30 days stipulated period. Your application has been carefully considered and rejected. Please make the payment within a week of receipt of this letter failing which recovery will be made through coercive measures. ”

Under section 220 of the Indian Income-tax Act, 1961, the Income-tax Officer has all the discretion to stay outstanding demands as long as an appeal from the assessment remains undisposed of. Commenting on such power the MP High Court in the case of Badrilal Bholaram Vs. B.K. Srivastava, ITO (77ITR954) held that this power to treat the assessee as not being in default is a power coupled with a duty and should be exercised fairly and reasonably and not arbitrarily and capriciously. Where the appeal is not frivolous, it may, in the special circumstances of a case, be the duty of the Income-tax Officer, to refrain from enforcing payment of the tax till the appeal is disposed of. If the officer fails to discharge his duty, he may be compelled by a writ under article 226 of the Constitution to stay his hands. However, so long as the officer has exercised his discretion fairly and reasonably, the High Court will have no power to interfere. Where the Income-tax Officer finds that the assesses had willfully failed to comply with the notice of demand although they were possessed of sufficient assets to enable them to meet the demand and that the entries in their accounts showed that they have been diverting very large sums of money with a view to withhold payment of the tax in their design to defeat the tax demand, and refuses to stay the tax demand under section 45 of the Act, the High Court will not interfere by a writ or direction under article 226 of the Constitution.

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