Scope of ITOs powers u/s 220(6). - Income Tax - 1362/CBDT

INSTRUCTION NO. 1362/CBDT Dated: October 15, 1980 During the last conference many Commissioners sought a review of the existing instructions on the above subject. They felt that the existing instruction had led to a situation in which stay of recovery is being requested for and granted in most of the cases where the assessee is in appeal before the AAC/CIT(Appeals). The need for review was felt particularly in the context of the urgency attached to the recovery of tax payers. 2. The present instruction is issued as a result of the review of the existing instructions. The instructions contained herein supersede all previous instructions on this subject. 3. U/s.220(6) of the I.T.Act the ITO may in his discretion subject to such conditions as he may think fit to impose treat the assessee as not being in default in respect of the amount in dispute in the appeal as long as such appeal remains undisposed of even though the time for payment has expired. 4.It should be noted that sec.220(6) does not refer to stay of demand, it only empowers an ITO to treat an assessee as not being in default. Though in the succeeding paragraphs of this instruction, the word 'stay' has been used for the sake of brevity whenever an ITO passes an order under the provisions of sec.220(6) he should invariably use in such order only the expression which is found in the section subject to such conditions as he may deem fit to impose. He should not repeat not use the expression 'stay' in any order that will be communicated by him to the assessee. 5. In exercising this discretion the ITO should take into account factors such as: whether the points in dispute relate to facts whether they arise from different interpretation of law; whether the additions have been made as a result of detailed investigation whether the additions are based on materials gathered through enquiry/survey/search and seizure operations whether the disputed addition to income has been assessed elsewhere by way of protective assessment and the tax thereon has been paid by such person etc. The magnitude of addition to income returned cannot be the sole determinant in this regard. Each disputed addition will need to be considered to arrive at the quantum of tax that may need to be stayed. 6. However in exercising this discretion the ITO should decide in favour of the assessee's application for stay in the following situations:- i) the points in dispute have been decided in favour of the assessee in an earlier order by the AAC/CIT(Appeals) or ITAT or the High Court and; ii) the disputed point arises because the ITO had adopted an interpretation of law in respect of which there exist conflicting decisions of one or more High courts or the High court of jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgement. 7. It needs to be pointed out that even in the situations indicated in para 6 above what should be stayed is only the demand attributable to such disputed points. 8. When a request for stay has been considered by the ITO his decision should always be recorded in writing and communicated to the assessee. 9. As stated in para 3 above in granting stay the ITO may impose such conditions as he may think fit. Thus the ITO may : i) require the assessee to offer suitable security to safeguard the interests of revenue; ii) require, during the pendency of the appeal, the assessee to pay towards the disputed taxes a reasonable amount in lumpsum or in instalments. iii) require an undertaking from the assessee that he will cooperate in the early disposal of the appeal failing which the stay order will be cancelled. iv) reserve a right to review the order passed by him after the expiry of a reasonable period say upto 6 months even if the appeal remains undisposed of until then to ascertain if the assessee has fulfilled the undertaking at (iii) above as well as to consider any other development such as a pronouncement of a higher court on the points indicated in para 6 above. While the ITO will exercise his discretion in this matter after taking note of the specific situation obtaining in each case and pass appropriate orders, conditions (iii) and (iv) should invariably be imposed. 10. In exercising discretion under this sub-section what the ITO has to consider is the nature of the dispute which has generated the additional demand and not the financial capacity of the assessee to pay. 11. Where additions to returned income have been made after directions of the IAC, u/s.144A/144B orders on application for stay will be passed by the ITO after seeking approval of the IAC. 12. Even where recovery of demand has been thus stayed the ITO will continue to review the situation to ensure that the conditions imposed are being fulfilled by the assessee, failing which the stay order would need to be withdrawn. 13. The instructions contained in Instruction No.1287 12-11-79 viz., that the ITO has the right to adjust any refend that may fall due to the assessee in respect of any other year even against demand which has been stayed are reiterated. 14. Where the demand thus stayed by the ITO is Rs.25,000 or more the ITO will intimate the relevant particulars i.e., the details of pending appeals, the quantum of demand stayed and the condition imposed to the IAC/CIT who will request the appellate authorities for early disposal of such appeals in accordance with existing instructions on the subject. 15. These instructions apply mutatis mutandis to demands created under other direct taxes enactments. 16. The ITOs working in your charge may please be instructed to deal with applications u/s.220(6) in accordance with these instructions. The subsisting orders passed by them u/s.220(6) may also be got reviewed in the light of these instructions after giving the assessee an opportunity of being heard.