Income Tax--Current Issues

Practice Update

V.K. Subramani

EXERCISING THE OPTION OF STAY OF DEMAND DURING PENDENCY OF APPEAL

After the income-tax assessment is completed, the taxpayer who wants to prefer appeal against such assessment may prefer stay of tax recovery. This is a fundamental right to contest tax assessment and at the same time request the tax authorities to keep the disputed tax recovery proceedings in abeyance. Both the Assessing Officer and the first appellate authority can grant stay of tax recovery. Since a notice of demand is issued after completion of assessment, the assessee has to file stay petition within the specified time as mentioned in the notice of demand as regards disputed additions and tax demand. Else, he would be treated as assessee in default. As regards undisputed tax, there is no specific guideline. Based on facts of the case such as financial distress, recession in business etc. a tax payer make seek stay or instalment payments for discharge of undisputed tax liability.

The Assessing Officer must either grant or reject stay petition filed by the taxpayer. In the recent times, lot of clarity in tax administration is achieved by prescribing certain guidelines. Presently, the assessee has to pay 20% of the disputed tax demand and seek stay of the balance of disputed tax recovery till disposal appeal by the first appellate authority. This could be less than 20% of disputed tax in appropriate cases which could be granted by the Assessing Officer with the previous approval of administrative Principal Commissioner or Commissioner. Taxpayers can also approach directly the jurisdictional administrative Pr. Commissioner or Commissioner for reducing the tax payment to less than 20% of disputed tax demand when the Assessing Officer has not given the relief as prayed by him. Reference could be made to CBDT Press Release dated 3.3.2016 and 31.7.2017.

With faceless assessment which got completed recently, the taxpayers bruised by huge additions to returned income may wish to seek stay of recovery proceedings as regards disputed tax. Section 231 presently provides for devising a faceless recovery mechanism. But it has not been enabled so far. Thus the taxpayers may file petition for stay of tax recovery both with jurisdictional Assessing Officer as well besides the NFAC. Going one step further, filing stay petition with jurisdictional Pr. CIT or CIT may also be contemplated by them.