Court reiterates that CBDT Office Memorandums do not fetter discretion under Section 220(6) and remands matter for fresh consideration
Meetu Kumari | Jan 1, 2026 |
HC Quashes Mechanical Rejection of Stay Application; AO Cannot Insist on 20% Deposit as Mandatory
The petitioner, Clearmedi Healthcare Private Limited, filed its income-tax return for Assessment Year 2023-24, declaring a loss of Rs. 58,35,700. The case was selected for scrutiny, resulting in an assessment order creating a tax demand. The petitioner preferred an appeal before the Commissioner of Income Tax (Appeals) and simultaneously applied Section 220(6) of the Income-tax Act, 1961, seeking stay of recovery during the pendency of the appeal.
By order dated 13.11.2025, the Assessing Officer rejected the stay application and required the petitioner to deposit 20% of the outstanding demand, relying mechanically on CBDT Office Memorandums. The petitioner challenged the said order before the High Court, contending that the order was non-speaking and passed without considering prima facie case, the balance of convenience, or hardship.
Main Issue: Whether the Assessing Officer can reject a stay application under Section 220(6) of the Income-tax Act solely on the ground of non-payment of 20% of the disputed demand by mechanically relying on CBDT Office Memorandums.
HC’s Order: The High Court set aside the impugned order dated 13.11.2025, holding that the Assessing Officer had failed to exercise discretion vested under Section 220(6) and had mechanically proceeded on the assumption that a 20% pre-deposit was mandatory. The Court reiterated that the CBDT Office Memorandums only provide guidance and do not mandate a fixed precondition of deposit. The Assessing Officer is required to consider factors such as a prima facie case, balance of convenience, undue hardship, and likelihood of success.
Relying on NASSCOM and Centre for Policy Research, as well as Supreme Court precedent in LG Electronics India Pvt. Ltd., the Court held that the impugned order was unsustainable. The matter was remitted to the Assessing Officer to reconsider the stay application afresh in accordance with the law.
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