Retnaraj Joanitta Vs CIT (Appeals) (Madras High Court)
20% Pre-Deposit Not Sacrosanct & Not Mandatory – CBDT Circular Can’t Tie Quasi-Judicial Hands – Madras HC; Stay of Demand Must Be Judicious, Not Mechanical – Madras HC Strikes Down 20% Pre-Deposit
Petitioner challenged recovery proceedings initiated u/s 220(6). An assessment order dated 14.05.2025 for AY 2020-21 had created a disputed demand. While the appeal was pending before CIT(A), the ITO insisted on a pre-deposit of 20% of the disputed tax, citing CBDT’s Circular dated 31.07.2017.
Petitioner argued that such insistence was arbitrary, as authorities are required to consider individual facts while granting stay.
Revenue relied on CBDT instructions & precedents such as Nirmal Kishore Mehta v. ACIT (Bom HC), Saroj Sangwan v. ITO (ITAT Delhi), and Pavan Morarka v. ACIT (Bom HC), to contend that 20% pre-deposit is necessary.
Petitioner cited Delhi HC’s ruling in LG Electronics India Pvt. Ltd. (W.P.(C) 6778/2017), upheld by Supreme Court in Civil Appeal No. 6850 of 2018, where it was clarified that CBDT’s circular cannot fetter quasi-judicial discretion. Other supportive rulings of Madras HC (M/s Queen Agencies), SC (Union Bank v. Rajeev Bansal), and recent HC orders were also relied upon.
Madras HC reiterated that the Supreme Court in LG Electronics has held: CBDT’s circular is directory & cannot curtail the discretion of authorities acting u/s 220(6). The authority must apply its mind to the merits of the stay petition, not mechanically impose 20% deposit. Since the impugned order was a mere reproduction of the CBDT circular without independent reasoning, it could not stand. The Court quashed the recovery order insisting on 20% pre-deposit. The matter was remanded to the authority to reconsider the stay petition on merits, without mechanical application of the circular.
