Reading from one instruction to other and another the High Court in [2021] 18 ITR-OL 120 (Mad) held that clause 2(C) (v) of instruction No 1914 dated 2.12.1993 which holds the field and by which while considering an application under section 220(6) of the Act, the AO should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order.
In this case, the Court set aside the order as nonspeaking for it failed to discuss and take into consideration the three parameters I.e., the existence of a prima facie case, financial stringency, and the balance of convenience.
Observance of rules by Assessee
Further drawing attention to the procedure to be followed by the assessee it held that the petition under section 220(6) of the Act is to be filed only before the AO Nd, not before CIT(A) and that too post-filing the statutory appeal. The PCIT comes into the picture only if the AO makes a reference or if the assessee is aggrieved by the order passed by the AO. The assessee must also ensure that the petition filed under section 220(6) of the Act contains all the relevant particulars so that the AO can pass an appropriate order bearing in mind the threefold principles.
Observance of rules by the AO
The AO is required to pass a speaking order after taking into account the three parameters. The AO in his role and authority as a quasi-judicial officer following 12 ITR-OL 334 (SC) can order a deposit of a lesser amount than 20 percent. pending appeal without making reference to the Principal Commissioner or Commissioner. The administrative circular will not operate as a fetter to him. Reference of course has to be made if he is of the view that deposit order of a higher amount than 20 percent. the pending appeal is warranted.