Abdul Kalaam Vs Union of India And 4 Others (Allahabad High Court)
Stay of disputed tax demand cannot be rejected mechanically merely because an appeal is pending and 20% of the demand has not been paid; the authority must exercise its discretion by considering the relevant facts and merits and pass a reasoned order.
Core Issue.
Whether an application for stay of recovery of disputed income-tax demand could be rejected solely on the grounds that the assessee’s appeal was pending before the CIT(A), no stay order had been granted by the appellate authority, and 20% of the disputed demand had not been deposited in accordance with the CBDT Office Memorandum dated 31 July 2017, without examining the facts and merits relevant to the grant of stay.
Facts.
The petitioner, who had retired as a Lieutenant Colonel of the Indian Army on 31 March 2023, filed his return for AY 2024-25 declaring total income of Rs. 19,34,780/- and exempt income of Rs. 61,61,122/- towards gratuity and pension. The assessment was completed under section 143(3) on 27 December 2025, determining total income at Rs. 4,36,73,569/- after making an addition of Rs. 3,90,28,863/- under section 69 and a further addition relating to an alleged difference in short-term capital gains. The petitioner stated that he had paid the tax and interest attributable to the short-term capital-gain addition but disputed the substantial addition of Rs. 3.90 crore and filed an appeal before the CIT(A), NFAC, on 11 May 2026. He also filed an application before the Assessing Officer seeking stay of recovery of the disputed demand.
Stay Application and Rejection
The Assessing Officer rejected the stay application by order dated 15 September 2026. The order stated that merely filing an appeal before the CIT(A) was not sufficient to stay recovery and that the petitioner had not paid the minimum 20% of the disputed outstanding demand before submitting the stay application. The authority accordingly declined to keep the recovery proceedings in abeyance, while suggesting that the petitioner could seek payment of the demand in instalments if he was facing financial difficulty.
Petitioner’s Contention.
The petitioner contended that the stay application had been rejected mechanically without examining the circumstances of the case. Reliance was placed upon the decision of the Delhi High Court in Turner General Entertainment Networks India Pvt. Ltd. v. ITO, where an order rejecting stay merely for non-payment of 20% of the disputed demand had been set aside and the Assessing Officer was directed to exercise discretion after considering the facts and circumstances. Reliance was also placed upon the Supreme Court decision in Mool Chand Yadav v. Raza Buland Sugar Company Ltd., concerning interim protection where an appeal and its consequences warranted such protection.
Revenue’s Contention.
The Revenue submitted that pendency of an appeal by itself could not justify stay of recovery and that the petitioner was required to comply with the CBDT’s administrative guidelines concerning payment of 20% of the disputed demand. It was, however, ultimately submitted that the matter could be remitted to the competent authority for passing a fresh order.
High Court Finding.
The High Court examined the stay-rejection order and found it to be non-speaking and unreasoned. The Court observed that the authority had rejected the application merely on the basis that the appeal was pending and that 20% of the disputed demand had not been deposited. According to the Court, something more was required: the authority was required to consider the relevant facts and the merits at least to the extent necessary for determining whether the case warranted stay of recovery.
The Court relied upon Turner General Entertainment Networks India Pvt. Ltd. v. ITO, where it had been held that the CBDT instructions require the authorities to apply their mind to an application for stay and do not permit the Assessing Officer to impose payment of a specified percentage as an inflexible pre-condition without exercising the discretion contemplated by the instructions.
Cases Relied Upon. The Court considered Mool Chand Yadav v. Raza Buland Sugar Company Ltd., 1982 (10) TMI 209 (SC) and Turner General Entertainment Networks India Pvt. Ltd. v. ITO, 2019 (1) TMI 1365 (Delhi High Court). The latter decision specifically dealt with rejection of a stay application solely for failure to deposit 20% of the disputed demand and held that the Assessing Officer must apply his mind to the stay request and exercise discretion having regard to the facts and circumstances.
Outcome.
The High Court set aside the order dated 15 September 2026 rejecting the stay application and remitted the matter to the competent authority for fresh consideration. The authority was directed to pass a fresh, reasoned order within one month.
The Court expressly clarified that it had not examined the merits of the underlying tax dispute, and its observations were not to influence the competent authority while deciding the stay application afresh.
Cases Discussed
- Turner General Entertainment Networks India Private Limited v. Income Tax Officer, Ward No. 76(1), New Delhi and others (Delhi High Court), W.P.(C) No. 682/2019 & C.M. Appl. 3018/2019, decided on 22.01.2019 — Relied upon by the petitioner. The Delhi High Court held that the Assessing Officer must apply his/her mind while considering a stay application and cannot mechanically impose payment of 20% of the disputed demand as a pre-condition. The impugned stay rejection was set aside and reconsideration was directed.
- Mool Chand Yadav Vs. Raja Buland Sugar Company Ltd., Civil Appeal No. 3343 of 1982 (Supreme Court), decided on 15.10.1982 — Relied upon by the petitioner for the proposition that where an order under appeal entails serious consequences, interim protection should be accorded during pendency of the appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. The matter is before this Court pursuant to nomination by Hon’ble the Chief Justice on 15.09.2026.
2. Shri Mohd. Haleem, learned counsel for the petitioner, Shri Anant Kumar Tiwari for the Respondent No.1 and Shri Parv Agarwal for Respondent Nos. 2, 3 and 4 and Shri Manish Trivedi for respondent No. 5.
3. The counsel for the rival parties have made a joint statement that they do not propose to file any further affidavits, thus, with the consent of the parties, the application is being decided at the admission stage.
4. The case of the writ petitioner is that the writ petitioner retired as a Lieutenant Colonel of the Indian Army on 31.03.2023. The writ petitioner made substantial investments and he filed his return for the Assessment Year 2024-25 declaring a total income of Rs. 19,34,780/-. The writ petitioner declared exempted income of Rs. 61,61,122/- towards gratuity and pension upon his retirement from military service. The assessment was ultimately completed on 27.12.2025 under Section 143(3) of the Income Tax Act, whereby an addition of Rs. 3,90,28,863/- was made under Section 69 of the Income Tax Act and further addition was made towards alleged difference in short term capital gains and the total assessed income was computed to be Rs. 4,36,73,569/-. The writ petitioner claims to have paid the tax and the interest attributable to the addition towards the alleged difference in short term capital gains and also challenged the substantial disputed addition amounting to Rs. 3.90 crores by filing a statutory appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre on 11.05.2026. Apart from the statutory appeal, the petitioner also filed an application for stay of the recovery of the disputed demand before the competent authority i.e. Assessing Officer. Since, according to the writ petitioner, the bank account in the bank ICICI stood attached and the writ petitioner was also harboring under the impression that this account in HDFC Bank having Account No. 50100301662980 in Coimbatore at Thudiyalur branch whereby the monthly pension of the petitioner is credited would also be attached / freezed, so the writ petitioner preferred the present writ petition seeking the following reliefs:
“I. Issue a writ, order or direction in the nature of Mandamus commanding the respondents not to attach, freeze, debit, appropriate or otherwise subject to coercive recovery the bank account of the petitioner maintained with HDFC Bank having а/с по.50100301662980 in Coimbatore-Thudiyalur into which the monthly pension of the petitioner is credited, pursuant to or in furtherance of the recovery proceedings relating to Assessment Year 2024-25, at least until the petitioner’s pending stay application and/or statutory appeal is considered and decided by the competent authority;
II. Issue a writ, order or direction in the nature of Mandamus commanding the concerned respondent authority to consider and decide the petitioner’s pending application for stay of recovery of the disputed demand expeditiously and within such period as may be fixed by this Hon’ble Court;
III. Issue a writ, order or direction in the nature of Mandamus commanding the concerned appellate authority to consider the petitioner’s pending appeal for Assessment Year 2024-25 expeditiously, preferably within such time as may be fixed by this Hon’ble Court;
IV. Issue any other suitable writ, order or direction which this Hon’ble Court may deem fit and proper in the facts and circumstances of the present case, and
V. Award the costs of the present writ petition in favour of the petitioner.”
5. However, during the pendency of the writ petition, the said application so preferred by the writ petitioner came to be rejected by virtue of the order dated 15.09.2026 being DIN & letter No. ITBA/RCV/F/17/2026- 27/1093462910(1), the same was subject matter of challenge while filing an amendment application which was allowed by this Court on 18.09.2026. The relief sought therein is quoted as under: ”
(v)(a). Issue a writ, order or direction in the nature of Certiorari quashing the order dated 15.09.2026 bearing DIN & Letter No. ITBA/RCV/F/17/2026-27/1093462910(1), passed by the respondent no.4, whereby the petitioner’s application seeking keeping of the recovery proceedings in abeyance for Assessment Year 2024-25 has been rejected.
(v)(b). Issue a writ, order or direction in the nature of Mandamus commanding the respondents to keep the recovery proceedings in respect of the disputed demand for Assessment Year 2024-25 in abeyance during pendency of the statutory appeal, without treating the petitioner’s inability to deposit 20% of the disputed demand, arising from his genuine financial hardship, as an admission of the disputed tax liability
(v)(c). Issue a writ, order or direction in the nature of Mandamus restraining the respondents from attaching, freezing, debiting, appropriating or otherwise subjecting the petitioner’s HDFC Bank Account No. 50100301662980, Coimbatore-Thudiyalur, into which his monthly pension is credited, to any coercive recovery pursuant to the disputed demand for Assessment Year 2024-25.”
6. Learned counsel for the applicant has sought to argue that though the action of the opposite parties in attaching the ICICI bank account as well as other ancillary reliefs are there, but at present at this juncture the applicant is confining his relief with regard to rejection of the stay application in this regard. He submits that the stay application has been rejected in a mechanical manner taking two grounds: firstly, mere filing of an appeal before CIT (Appeal) is not sufficient to stay the recovery of the demand / keep the recovery proceedings in abeyance, and secondly, the applicant has not paid 20% of the disputed demand outstanding for A.Y. 2024-25 before submitting the application, thus there is no occasion to stay the said proceedings. Learned counsel for the applicant submits that there happens to be an order of the Delhi High Court in W.P.(C) No. 682/2019 and C.M. APPL. 3018 of 2019 (Turner General Entertainment Networks India Private Limited v. Income Tax Officer, Ward No. 76(1), New Delhi and others), decided on 22.01.2019, whereby the such type of orders was set aside. Reliance has also been placed upon the decision of the Hon’ble Apex Court in Civil Appeal No. 3343 of 1982; Mool Chand Yadav Vs. Raja Buland Sugar Company Ltd., decided on 15.10.1982, wherein once an order in appeal results in serious consequences, then interim protection is to be accorded.
7. Shri Parv Agarwal as well as Shri Tiwari who appears for the respondents submits that whatever might be, no universal formula can be laid down.
However, here there are two aspects; firstly, mere pendency of an appeal cannot be a ground not to recover and secondly, 20% of the disputed amount ought to have been deposited in terms of the circular of the Government of India, Ministry of Finance, Department of Revenue, CBDT dated 31.07.2017.
8. I have heard learned counsel for the parties and gone through the records carefully.
9. Apparently, the petitioner had preferred a stay application which has been rejected by the Income Tax Officer, Ward-1(1)(1), Meerut, Uttar Pradesh denuding itself from according interim order to the applicant on the two premises that the appeal before CIT(A) is pending and there is no stay order and secondly, 20% of the disputed amount as per the Circular dated 31.07.2017 has not been paid.
10. The bone of contention between the parties is whether the order dated 15.09.2026 can be sustained on the face of the recitals contained therein. The order dated 15.09.2026 reads as under:
“Request for keeping recovery proceedings in abeyance in the case of Sh. Abdul Kalaam – PAN- ALLPK9104B for A.Y. 2024-25 – Reg Please refer to your application seeking to keep the recovery proceedings in abeyance for assessment year 2024-25.
2. Your application has been considered sympathetically in the light of the guidelines for stay of demand issued by CBDT O.M. dated 29.02.2016 further modified vide O.M. dated 31. 07. 2017 but found not acceptable for the following reasons:
(i) Merely filling of appeal before the Ld.CIT (Appeal) is not a sufficient reason to stay the recovery of demand/keep the recovery proceeding in abeyance.
(ii) Further, you have not paid the minimum amount of 20% of the disputed demand outstanding for AY 2024-25 before submitting your application.
3. In view of the above, your application seeking to keep the recovery proceedings in abeyance for assessment year 2024-25 doesn’t deserve to be accepted.
4. However, keeping in mind the financial crunch, if you find yourself unable to pay the demand in toto, you may also consider filing an application for grant of installments to cover up the outstanding demand in your case to enable this office for considering the matter sympathetically.
With the above remarks, your application for stay of demand stands disposed off.”
11. InTurner General Entertainment Networks India Private Limited (Supra),a question arose wherein the stay application came to be rejected and the order passed in the said case in Turner General Entertainment Networks India Private Limited (Supra) is quoted hereinunder:
“1. Issue notice. Mr.Ashok Kumar Manchanda, Senior Standing Counsel accepts notice.
2. The petitioner’s grievance is that its request for stay of demand [made for Assessment Year 2011-2012, regarding Financial Year 2010-2011], has not been considered on merits at all and that the concerned Assessing Officer (AO) has required the deposit of 20% of the demand as a pre- condition, for consideration of the application for exemption/stay of demand.
3. We have heard learned counsel for the parties. The instructions/office memorandum of the Central Board of Direct Taxes – Instruction No.1914 dated 02.12.1993 outlined the broad principles, which the Assessing officers and other authorities had to keep in mind while considering the applications for stay of demand. This was subsequently amended by CBDT Office Memorandum dated 29.02.2016 [F.No.404/72/93-ITCC]. The latter instructions of 2016 directs the concerned authorities to adhere to the following principles:
“(A) In a case where the outstanding demand is disputed before CIT(A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case falls in the category discussed in para (B) hereunder.
(B) In a situation where,
(a) the assessing officer 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 o n 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,
(b) the assessing officer 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.), the assessing officer 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 balanced demand.”
4. The figure of 15% mentioned has subsequently been increased to 20% by Office Memorandum [F.No.404/72/93-ITCC] dated 31.07.2017.
5. It is evident that the concerned authorities and tax officials have to apply their mind to decide an application for stay of demand. This does not, however, mean that any particular AO in a given case has to impose a per se condition that pending consideration of the application for stay of demand, certain minimum amount has to be deposited.
6. In the present case, the impugned order reads as follows:
“To
The Principal Officer
M/s TurnerGeneral Entertainment Networks India Pvt. Ltd.
5th Floor, Radisson Commercial Plaza,
National High Way No.8, Mahipalpur, New Delhi-110037.
Sir,
Sub: Stay Petition under Section 220(6) of the Income Tax Act, 1961 against the tax liability determined u/s 201(1)/101(1A) of the I.T. Act, 1961 for the F.Y. 2010-11 (Α.Υ. 2011-12) – reg. Please refer to your application dated 04.05.2018 & letter dated 26.10.2018 for stay of demand amounting to Rs. 11,79,69,539/determined – u/s 201(1) / 201 * (1A) of 1. T. Act, 1961 for F.Y. 2010-11(Α.Υ. 2011- 12).
In this regard, it is intimated your application dated 04.05.2018 & your submission dated 26.10.2018 has been considered. Your request for keeping the demand in abeyance only till disposal of appeal by Ld.CIT(A), New Delhi cannot be accepted as you have failed to make payment of 20% of the disputed demand in accordance with CBDT 9Mdated 31:07.2017.
Therefore, your application for stay of demand of Rs. 11,79,69,539/- is hereby rejected as you have failed to comply with the conditions laid down in CBDT OM dated 31.07.2017.
Yours Faithfully,
(Rajendra Kumar Parmar)
Income Tax Officer Ward-76(1), New Delhi.”
7. This Court is of the opinion that the AO had to necessarily apply his/her mind to the application for stay of demand and pass appropriate orders having regard to the extant directions and circulars including the memorandum of 29.02.2016. This in turn meant that AO could not have imposed a pre-condition of the kind that has been done in the impugned order. Consequently, the impugned order is hereby set aside. The AO shall consider the application for stay of demand made by the AO in its letter dated 04.05.2018 and pass necessary and appropriate orders, and exercise his discretion having regard to the facts and circumstances of the case, within three weeks from today.
8. In the meanwhile, the respondents are directed not to take any coercive action for enforcing the demands.
9. The writ petition is partly allowed to the above extent. No costs.”
12. A bare look of the order impugned herein would reveal that the same is non-speaking, unreasoned and further merely relying upon the Circular dated 31.07.2017 as well as the fact that the appeal is pending and there is no stay order, the order came to be passed against the applicant.
13. In the opinion of the Court, something more was required. There had to be a recital of the merits at least for considering whether it was a case for stay or not in that regard.
14. At this juncture, Shri Parv Agarwal, who appears for the Income Tax Department, submits that the matter be remitted back and a fresh order would be passed within one month.
15. To such a submission, learned counsel for the petitioner has no objection.
16. Accordingly, the order dated 15.09.2026 passed by the Income Tax Officer, Ward-1(1)(1), Meerut, U.P. in DIN & Letter No. ITBA/RCV/F/17/2026-27/1093462910(1) is set aside.
17. The matter stands remitted back to the respondent / competent authority to pass a fresh order within a period of one month.
18. Needless to point out that this Court has not gone into the merits of the matter and any observations made, may not be construed to be obsessed or influenced the authority in passing a fresh order.
19. Accordingly, the writ petition stands disposed of. September 28, 2026
