CBDT on stay of demand

Analysing CBDT's Office memorandum dated 29.02.2016 regarding stay of demand

Reference to the relevant paragraph in the Union Budget Speech 2016	Paragraph 169 of the Union Budget 2016 "The Income-tax Department is also issuing instruction making it mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals). In case of deviation, assessing officer has to get orders of his superiors. The tax payer also has an option to go to superior officer in case he does not agree with conditions of stay order passed by the subordinate officer."
Reference to the present office memorandum	F.No.404/72/93-ITCC dated 29.02.2016
Why this new office memorandum?	For partial modification of Instruction No. 1914 dated 21.03.1996 to provide for guidelines for stay of demand at the first appeal stage
What is the existing provision in Instruction No. 1914 dated 21.03.1996 on the subject?	Ref: part 'C'of the Instruction • A demand will be stayed only if there are valid reasons for doing so • Mere filing of an appeal against the assessment order will not be a sufficient reason to stay the demand. • While granting stay, the Assessing officers (AO) may require the assessee to offer a suitable security (bank guarantee, etc.) and/ or require the assessee to pay a reasonable amount in lump sum or in installments.
What is the hardship faced by assessees at present	AOs often insist on payment of a very high proportion of the disputed demand before granting stay of the balance demand. This often results in hardship for the taxpayers seeking stay of demand.
What is sought to be achieved through this new office memorandum?	To streamline and standardize the quantification of the 'lumpsum amount' to be paid by the assessee in order to grant stay of the balance amount by the AO
What are the new conditions vis-à-vis grant of stay?	• the outstanding demand shall be disputed before CIT (A) • the AO shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand • Subject to the two exceptions that are listed below
Exception 1 – AO can demand payment of a sum higher that 15%	If the AO is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted (e.g. in a case where addition on 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 favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc.) or,
Exception 2 – AO can permit payment of a sum lower that 15%	If the AO is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.)
What should the AO do in cases of Exception 1 or Exception 2?	The AO shall refer the matter to the administrative Pr. CIT/ CIT, who after considering all relevant facts shall decide the quantum/ proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.
The AO grants stay of demand after payment of 15% of disputed tax by assessee and if the assessee is still aggrieved, what shall he do?	The assessee can approach the jurisdictional administrative Pr. CIT/ CIT for a review of the decision of the assessing officer.
Time limit for disposing off the stay application by AO	The AO shall dispose of a stay petition within 2 weeks of filing of the petition
Time limit before PrCIT or CIT of disposing off AO's reference application or assessee's review application	The same shall be disposed of by the Pr. CIT/ CIT within 2 weeks of the assessing officer making such reference or the assessee filing such review, as the case may be.
Conditions that can be imposed by the AO for granting stay of demand	The AO may impose such conditions as he may think fit. He may, inter alia • require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; • reserve the right to review the order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; • reserve the right to adjust refunds arising, if any, against the demand, to the extent of the amount required for granting stay and subject to the provisions of section 245.
Effective date	Immediate effect from 29.02.2016

CA PRASANTH