The ITAT may, on an application made by the assessee and after considering the merits of the application, pass an order of stay in any proceedings relating to an appeal filed under section 253(1). If the ITAT is not able to dispose off the appeal under first proviso, the stay can be extended upto 365 days subject to the condition that appeal shall be disposed within the extended period. If for any reason, ITAT is not able to dispose off the appeal within 365 days, the order of the stay shall stand vacated even if the delay in disposing the appeal is not attributable to the assessee.
ITAT may grant stay subject to deposits not less than 20% of the amount [First proviso to Section 254(2A) – With effect from 01.04.2020]
The first proviso to Section 254 (2A) of the Act, provides that the ITAT may, grant stay under the first proviso subject to the condition that the assessee deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof in any proceedings against the order of the Commissioner of Income-tax (Appeal).
Total stay granted by ITAT cannot exceed 365 days [Second proviso to Section 254(2A) – With effect from 01.04.2020]
Second proviso to section 254(2A) provides that no extension of stay shall be granted by ITAT, where such appeal is not so disposed of which the said period of stay as specified in the order of stay. However, on an application made by the assessee, a further stay can be granted, if the delay in not disposing of the appeal is not attributable to the assessee and the assessee has deposited not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof.
The aggregate of the period of stay originally allowed and the period of stay so extended shall not exceed 365 days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed.
Text of Section 254(2A)
(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253:
Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order subject to the condition that the assessee deposits not less than twenty per cent. of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnishes security of equal amount in respect thereof and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:
Provided further that no extension of stay shall be granted by the Appellate Tribunal, where such appeal is not so disposed of within the said period of stay as specified in the order of stay, unless the assessee makes an application and has complied with the condition referred to in the first proviso and the Appellate Tribunal is satisfied that the delay in disposing of the appeal is not attributable to the assessee, so however, that the aggregate of the period of stay originally allowed and the period of stay so extended shall not exceed three hundred and sixty-five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed:
Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.
Powers of Tribunal to grant stay of demand
Assessee can approach to stay the recovery only when a valid appeal is pending before the Tribunal.
Fee for application for stay of demand [Section 253(7)]
An application for stay of demand shall be accompanied by a fee of five hundred rupees.
Procedure for Stay Petition– Rule 35A of the Income -tax (Appellate Tribunal) Rules 1963
Rule 35A of the Income-tax Appellate Tribunal Rules prescribes the procedure for filing the Stay Petition. As per this rule, any assessee filing an appeal under taxation Laws, before the Income Tax Appellate Tribunal may prefer stay application in the following manner.
Procedure for filing and disposal of stay petition [Rule 35A Income-Tax (Appellate Tribunal) Rules, 1963]
(1) (a) Every application for stay of recovery of demand of tax, interest, penalty, fine, estate duty or any other sum shall be presented in triplicate by the applicant in person, or by his duly authorised agent, or sent by registered post to the Registrar or the Assistant Registrar, as the case may be, at the headquarters of a Bench or Benches having jurisdiction to hear the appeals in respect of which the stay application arises.
(b) Separate applications shall be filed for stay of recovery of demands under different enactments.
(2) Every application shall be neatly typed on one side of the paper and shall be in English and shall set forth concisely the following :-
(i) short facts regarding the demand of the tax, interest, penalty, fine, estate duty or any other sum, recovery of which is sought to be stayed ;
(ii) the result of the appeal filed before the Appellate Assistant Commissioner, if any;
(iii) the exact amount of tax, interest, penalty, fine, estate duty or any other sum demanded, as the case may be, and the amount undisputed therefrom and the amount outstanding ;
(iv) the date of filing the appeal before the Tribunal and its number, if known;
(v) whether any application for stay was made to the revenue authorities concerned, and if so the result thereof (copies of correspondence, if any, with the revenue authorities to be attached);
(vi) reasons in brief for seeking stay ;
(vii) whether the applicant is prepared to offer security, and if so, in what form ;
(viii) prayers to be mentioned clearly and concisely (stating exact amount sought to be stayed);
(ix) the contents of the application shall be supported by an affidavit sworn by the applicant or his duly authorised agent ;
(3) An application which does not conform with the above requirement is liable to be summarily rejected.]
Documents to be Annexed while filing stay petition before Hon’ble ITAT
In Wipro Ltd v. ITO (2003) 86 ITD 407 (ITAT Bangalore) the Tribunal held that separate stay petitions should be filed seeking stay and recovery of different assessment years. But the Bombay bench of the Tribunal in Chiranjilal S. Goenka v. WTO (2000) 66 TTJ 728 (ITAT Bombay) has held that a single application can be filed.
Order of Tribunal granted the stay is affirmed – Appeal is held to be misconceived
During pendency of appellate proceedings, assessee filed application for stay of demand. Tribunal allowed assessee’s application. High Court confirmed order passed by Tribunal. Followed Pepsi Food (P) v. ACIT (2015) 376 ITR 87 (Del). High Court also held that appeal of the revenue is misconceived as the appeal of the revenue and cross objection of the assessee is restored to the file of the Tribunal to decide the appeals. – [CIT v. MSD Pharmaceuticals (P) Ltd. (2020) 269 Taxman 49 : 113 taxmann.com 136 (Del)]
KEY NOTE : SLP of revenue is dismissed; CIT v. MSD Pharmaceuticals (P) Ltd. (2020) 269 Taxman 48 (SC)
Where High Court upheld Tribunal’s order allowing assessee’s application for stay of demand during pendency of appellate proceedings, SLP filed against said order was to be dismissed. – [CIT v MSD Pharmaceuticals (P) Ltd. (2020) 113 taxmann.com 137 (SC)]
In cases where there is stay of recovery of demand of tax, the Tribunal should deal with the appeals pending before it on a higher priority
It was held that in cases where there is stay of recovery of demand of tax, the Tribunal should deal with the appeals pending before it on a higher priority. The Tribunal should consider forming a separate list of such cases which should be heard on priority after arranging the cases on the basis of their seniority as well as the quantum involved in the stay. (Related Assessment year : 2011-12) – [PCIT v. Nokia Solutions & Networks India (P) Ltd. – Date of Judgement : 21.10.2019 (Del)]
While deciding an application for stay of demand, the Appellate Tribunal can only consider the prima facie case of merits. It cannot give a final finding on the merits and decide the appeal itself
Not only that the stay application was dismissed, but while deciding the stay application, even the appeal was dismissed by the Appellate Tribunal on the ground that the same did not have merit. It was held that the approach of the Appellate Tribunal is completely erroneous. What was heard before the Appellate Tribunal was the application for stay. There was no occasion for the Appellate Tribunal to go into the merits and decide the appeal itself by holding that it was devoid of any merits. – [Maharashtra State Road Transport Corporation v. CST – Date of judgement : 13.11.2017 (Bom)]
100% stay of demand has to be granted in high pitched assessments as per Instruction No. 96 of 1969
The Tribunal granted 100 percent stay of demand because (a) The assessed income was more than 10 times the returned income. (Instruction 96 of 1969 was relied upon) & (b) The stand taken by the Assessing Officer was at variance with the stand taken by TPO. (Related Assessment year : 2011-12) – [Dimension Data Asia Pacific (P) Ltd v. DCIT – date of Judgement : 08.03.2016 (ITAT Mumbai)]
Stay Application in Tribunal maintainable despite non-filing of stay petition before lower authorities
The assessee filed an application in the Tribunal seeking stay on recovery of demand of Rs. 7.05 crores raised pursuant to the order of the Dispute Resolution Tribunal. The stay application was filed without approaching the lower authorities for stay. The department, relying on RPG Enterprises Ltd v. DCIT 251 ITR 20 (AT) (Bom), opposed the application on the ground that the assessee ought to have approached the lower authorities first so that “the department would get an opportunity to study the situation and gather the necessary data for evaluating the application for stay and may also get an opportunity in protecting the interests of the Revenue”. HELD rejecting the objection:
There are differences in the approach of the Tribunal on whether the tribunal can be directly approached for stay of demand without approaching the lower authorities. In view of the decision in Broswel Pharmaceutical Inc v. ITO 83 TTJ 126 (All) it is not mandatory on the part of the assessee to move application before the Revenue Authorities for granting of stay of outstanding demand. Accordingly, there is no merit in the argument of the department that the stay application should be rejected outright since the assessee has not moved any petition before the Revenue Authorities seeking stay of the demand. Seeking stay before the lower authorities is directory and not mandatory.– [DHL Express (India) Pvt. Ltd. (2011) 140 TTJ 38 (ITAT Mumbai)]
The assessee filed a stay application before the Assessing Officer, Addl CIT & CIT but none of the authorities dealt with it. The assessee also filed a stay application before the Tribunal which was opposed by the Department on the ground that the application was not maintainable without there first being a rejection by the lower authorities. HELD dismissing the department’s objection:
(i) It is settled law that a Direct Stay Application filed before the Tribunal is maintainable and it is not the requirement of the law that assessee should necessarily approach the CIT before approaching the Tribunal for grant of stay. It does not make any difference whether the assessee filed any application before the Revenue and not awaited their decisions before filing application before the Tribunal or directly approached the Tribunal without even filing the applications before the Revenue authorities, when there exists threat of coercive action by the Assessing Officer;
(ii) In deciding a stay application, the following aspects have to be considered: (a) liquidity of the funds of the assessee to clear the tax arrears out of own funds at the relevant point of time based on the assessee’s financial status at the time of the stay petition hearing; (b) creditworthiness of the assessee to outsource the funds to clear the departmental dues; (c) prima facie views on the likely decision of the Tribunal on the issues raised in the appeal; (d) departmental urgencies in matters of collection and recovery; (e) guarantees provided by the assessee to safe guard the interest of the revenue etc. – [Honeywell Automation India Ltd (2011) 138 TTJ 373 (ITAT Pune)]
If the circumstances so warrant, the assessee can move a second stay application before the Hon’ble Tribunal. – [S K JAIN v. DCIT (2003) (130 Taxman 86) (ITAT Nagpur)]
If the appeal before the Tribunal is against order of the Commissioner under section 263 which is pending and the Assessing Officer is proposing to pass an order in pursuance of an order under section 263, the Tribunal can stay the assessment proceeding. – [ITO v. Khalid Khan (1997) 110 ITR 79 (AP), Puranmal v. ITO (1975) 98 ITR 39 (Pat), Ritz Ltd. v. Vyas (1990) 185 ITR 311 (Bom)]
It was held that the Tribunal can not only stay the recovery proceedings but can also stay the proceedings before the Assessing Officer. Therefore, in a case where order under section 263 is passed and if the appeal is pending before Tribunal and in the meantime, if the Assessing Officer starts the assessment proceedings then in such circumstances, the assessee can file stay petition before the Tribunal and the Tribunal can stay the proceedings before the Assessing Officer. – [ITO v. Khalid Mehdi Khan (minor) (1977) 110 ITR 79 (AP)]
Specimen Stay Application before Hon’ble ITAT
APPENDIX X (e)
SPECIMEN FORM OF APPLICATION FOR GRANT OF STAY IN THE INCOME TAX APPELLATE TRIBUNAL
Stay Application No. ……………………………………….. of ……………………………………………………………………….. in the case of …………………………………………………………………………………………………………………………………… For the assessment year(s) ……………………………………………………………………………………………………………….. under the ……………………………………….. Act ………………………… ………………………………………………..for stay of recovery of tax/ interest/ penalty/ fine/ other items.
1. Name and address of the applicant :
2. Act under which the demand is raised (i.e. Income-tax etc. for which stay application is moved) :
3. Assessment year(s) involved :
4. Date of filing of appeal before the Tribunal and its number, if known :
5. From the demand give break up Tax :
6(a) Amount already paid :
6(b) Amount outstanding :
6(c) Amount which is not disputed out of (b) :
7(a) Details of application for stay made to the revenue authorities.
AO 2. CIT :
(b) Result :
* Reasons for seeking stay :
(a) Whether the applicant is prepared to offer security :
(b) If yes, in what form :
Prayer stating exact amount sought to be stayed :
If stay is sought in relation to a matter pending before the High Court, give full particulars. :
Signature of the applicant
* Separate sheet may be used if space is not sufficient.
1. The application shall be made in Triplicate and shall be neatly typed on one side of the paper with copies of all the relevant documents including demand notice, copies of correspondence with the Revenue authorities relating to stay of demand and copy of letter refusing stay of demand.
2. The contents of the application shall be supported by an affidavit duly sworn in by the applicant or his authorized agent.
3. The application shall be presented by the applicant in person or by his authorized agent or sent by registered post to the Bench of the Tribunal where appeal was filed or which has jurisdiction to hear the appeal.