INTRODUCTION
Whenever assessing officer issues assessment order u/s 143(3), 147, 271(1)(c) along with it notice of demand u/s 156 is also raised. This demand notice is usually required to be paid within 30 days of service/receipt of the same. In case assessee fails to pay the demand within the required time, he/she becomes assessee in default.
Then as per section 220(2) assessee is required to pay simple interest at 1 % for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in demand notice and ending with the day on which demand is paid. This default may also accompany penalty u/s 271. In case demand amount along with interest and penalty if any is not paid within respective time, then AO may take coercive methods to recover the same such as attachment of bank account of assessee etc.
WHY NEED FOR STAY
If assessee feel aggrieved by the order, he/she can go for CIT (Appeals). But one thing should be kept in mind that mere filing appeal does not equate to stay over demand. It is clearly evident from section 220(1A) that demand is valid till the disposal of appeal by last appellate authority. This view is also taken in Instruction No. 1914 F. No.
in part C which states that a demand will be stayed only if there are valid reasons for doing so, mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand.
So along with filing CIT (A), assesse should also get petition for stay on demand approved from jurisdictional AO. This right is available to assessee by virtue of section 220(6) which gives discretionary power to AO to grant stay order. This stay order curbs assessee from becoming assessee in default till the disposal of appeal by CIT(A).
PROCEDURE TO GET STAY
Assessee can file petition u/s 220(6) with his jurisdictional AO stating therein to kindly stay the demand raised till the disposal of appeal by CIT(A). Here’s the catch, before filing the petition CBDT OM circular dated 31.07.2017 asks assessee to pay 20% of the disputed demand. Further as per circular, this 20% may get higher or lower in case the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or Jurisdictional High Court is in favor of department or assessee as the case may apply, but with prior approval of Pr.CIT/CIT. The assessing officer shall dispose of a stay petition within 2 weeks of filing of the petition.
However in case AO refuses petition, assessee can approach Jurisdictional CIT for consideration of petition as he/she being the administrative head of the particular charge where the jurisdiction of the assessee lies, can grant stay. There is also a very welcome judgment of Supreme Court in “LG ELECTRONICS” dated August 2018 which clarifies that CBDT circulars cannot affect Pr.CIT/CIT in carrying out it’s quasi-judicial functions and held that commissioner can grant stay on payment of amount lesser than 20% depending upon the facts of the case.
Considerable points
One thing has to be clearly understood that if assessee’s appeal gets rejected by CIT(A) then interest u/s 220(2) has to be paid even for the period when demand is not enforceable i.e during the period of stay order and other proceedings will follow. This view is taken in “Girnar Investment Ltd Vs The Commissioner of income tax” (Delhi High Court) dated 05.01.2012.
As soon as demand notice u/s 156 is raised, an outstanding tax can be seen on income tax portal. The stay order is required to be uploaded on income tax portal, failing to do so will result in levy of the interest u/s 220(2) by CPC Bangalore.
It has been observed in many cases that AO ignores genuine cases and insists on 20% demand pay, I think AO seems less bothered inspite of court’s directions to consider the merits of each case which has resulted in undue hardship to assessee. But the judgment of Apex Court will surely help to some extent.
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