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In a demand case scenario all these years the taxpayer move the Assessing Officer as well the Principal Commissioner simultaneously. Often he does not approach appellate commissioner who seldom would grant a stay in his back of the mind. And that perhaps is also the fact as rarely does an appellate commissioner use his powers to grant stay. To a large extent the mistake is that of the taxpayer’s who has all these years moved application before the Commissioner rather than the Commissioner (Appeals).


Here is a case before the Madras High Court in [2021] 18 ITR-OL 120 (Mad) where the standing counsel for the department while assisting the Court informed the right and wrong course adopted by the assessee in the matters of petition for stay of demand.  Paragraph 14 details them as under:-


“14. It is needless to say that the petition under section 220(6) of the Act will have to be filed only before the Assessing Officer after filing the statutory appeal. The learned standing counsel claim that at present the assessees are indiscriminately filing the stay petitions. They move the appellate authority, the Assessing Officer and also the Principal Commissioner of Income-tax simultaneously. The Principal Commissioner of Income-tax is only the reviewing authority. It is only when the Assessing Officer makes a reference or if the assessee is aggrieved by the order passed by the Assessing Officer, by virtue of Circular dated February 29, 2016, the Principal Commissioner of Income-tax will get the jurisdiction to exercise his power under section 220(6) of the Act and not otherwise. In other words, he cannot assume the jurisdiction in the first instance. The assessees must also ensure that the petition filed under section 220(6) of the Act contain all the relevant particulars so that the Assessing Officer can pass an appropriate order by bearing in mind the threefold principles ( trinity test). The order passed by the Assessing Officer will hold good and will have to give away as and when the appellate authority passes an order on the stay petition filed by the assessee-appellant.”


Therefore the stay application shall lie only to the AO and the Commissioner (Appeals) each of whom shall dispose of the same considering the trinity test viz., the existence of a prima facie case, the financial stringency faced by an assessee and the balance of convenience. Also the Board has, while stating generally that the assessee shall be called upon to remit 20 per cent. of the disputed demand, granted ample discretion to the authority to either increase or decrease the quantum demanded based on the three vital factors to be taken into consideration. [2019] 413 ITR 390 (Mad)



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