Back
Quashes 20% for VSAIPPL-SMC (JV) Tax Stay
A Division Bench of the , comprising Justice P. Sam Koshy and Justice Vakiti Ramakrishna Reddy, has set aside tax authorities' orders that conditioned a on the payment of 20% of the outstanding demand against M/s VSAIPPL-SMC (JV). The court held that such conditions cannot be mechanically imposed based on from the , but must follow an independent under .
A Under Scrutiny
The petitioner, a joint venture, had approached the High Court challenging two orders—one dated passed by the for the assessment years 2022–23, 2023–24, and 2024–25, and another dated passed by the appellate authority. Both orders required the assessee to deposit 20% of the disputed tax demand as a precondition for staying recovery of the balance.
The Petitioner's Stand: Discretion Cannot Be Delegated to Instructions
Arguing for the petitioner,
contended that the authorities had
"substantially relied upon the CBDT instructions dated
, which stood partly modified by another CBDT instructions dated
and again on
."
He submitted that the law is well settled: while deciding a stay application under Section 220(6), the authority must independently consider the merits of the case and cannot treat
as binding. By merely imposing a 20%
without assessing the individual circumstances, the authorities had acted contrary to law.
The Department's Defence: Consideration Was Independent
, representing the , defended the orders. He argued that although the impugned orders referenced the CBDT instructions, the authorities had also considered the petitioner's submissions before imposing the 20% payment condition. Therefore, the orders were valid and the writ petitions should be dismissed.
Court's Analysis: The Missing
The Bench closely examined both impugned orders and found that they
"pre-dominantly taking the stand for the deposit of 20% based upon the CBDT instructions."
The court observed that the order dated
began with a reference to the instructions in its first two paragraphs, and the appellate order dated
also heavily relied on the same circulars.
Referring to the plain language of Section 220(6), the court emphasised that the provision requires the authority to
"exercise its discretion by taking into consideration the overall facts and circumstances of the case, decide the stay application, and also decide whether any conditions, if at all, have to be imposed, and, if so, what should be the nature of such conditions and to what extent."
This holistic exercise was entirely absent from the impugned orders, making them unsustainable.
Key Observations from the Bench
"In the course of deciding an application under Section 220 (6) of the , for grant of , the authorities cannot rely upon any passed by the CBDT, rather, they would have to decide the application on its own merits strictly in accordance with law exercising considering the merits of the application for interim relief."
"A plain reading of the provisions of Section 220(6) of the Act, in itself, very emphatically makes it clear that the authority concerned has to exercise its discretion by taking into consideration the overall facts and circumstances of the case, decide the stay application, and also decide whether any conditions, if at all, have to be imposed, and, if so, what should be the nature of such conditions and to what extent."
"This aspect is totally absent from the impugned orders in the instant writ petitions and, therefore, in the opinion of this Bench, both the orders... being unsustainable in the eye of law, deserve to be accordingly set aside."
The Verdict: Fresh Adjudication Without CBDT Influence
The High Court allowed all three writ petitions and set aside the orders dated and . The matters were remanded to the Income Tax Officer (respondent No.1) for fresh consideration of the stay applications under Section 220(6), strictly in accordance with the Income Tax Act and without being influenced by the CBDT instructions.
The court directed that a fresh decision be taken within four weeks. In the interim, it restrained the from taking any coercive steps to recover the outstanding demand. With these directions, the writ petitions were disposed of with no order as to costs.
The ruling reinforces the principle that cannot be outsourced to administrative circulars, and each stay application under Section 220(6) must be decided on its own facts.
