Recovery and stay – Knowledge on direct taxes and general law will help the tax consultants to make better representation.

Recovery is one of the very important subject in direct taxation, of which all of us are very much concerned in our day-to-day practice, either as consultants or while dealing with our own taxation matters. Every year January to March there is pressure on the revenue officials to meet the target of tax collections The law of recovery is based on Civil Procedure Code, 1908. Therefore, knowledge of Civil Procedure Code relating to recovery will help us to make a better representation and to render correct advice, when an issue comes for consideration.

When an assessee is treated as being assessee in default, the assessee may be held liable to pay mandatory interest under Section 220(2), penalty under Section 221, attachment/auction of movable/Immoveable properties, appointment of receiver for managing of properties Prosecution/arrest/detention etc. It is always advisable for an assessee to make an application for stay of disputed demand before the Assessing Officer on or before the expiry of time prescribed in notice of demand. In most of the matters the assessee gives a simple reply stating that we have filed an appeal and keep the demand in abeyance. It is advisable to file a detailed reply with reasons why the assessee is entitled for stay of recovery, how addition made is not proper, financial difficulties etc. . If the issue is covered by Jurisdictional Tribunal, High or Apex Court, refer the case laws. Assessee may also refer the financial difficulties faced by him. This will help the assessee, when they approach for stay of recovery before Commissioner, Tribunal or High Court. The assessee must request for stay of recovery till the disposal of appeal.

Stay petition before the Appellate Tribunal can be filed when an appeal is pending before the Appellate Tribunal. If the appeal is pending before the CIT(A) one cannot file the stay petition before the Appellate Tribunal. Various Courts have taken the view that when an appeal is pending before the CIT(A) one may also approach the CIT(A) for stay of the disputed demand as well as early hearing of the matter.

Various courts have held that it is not mandatory that when an appeal is pending before the First Appellate Authority the assessee must pay 20% of tax in dispute. In an appropriate case the Commissioner can grant the stay for the entire tax in dispute or he may direct to pay the tax in dispute by installments.

Various courts have also held that the CBDT’s Circulars & Instructions are in the nature of guidelines & cannot substitute or override the basic tenets. The AO is required to assist a taxpayer in every reasonable way. Even if the assessee has not specifically invoked the three parameters for grant of stay, it is incumbent upon the AO to do so & pass a speaking order. While disposing the stay application the Officers have to pass speaking order.

When an application for stay is filed before the ITAT it will be taken up for hearing every Friday, however in case of urgency the stay application can be mentioned before Bench of Honourable President, Vice-President or before the Bench of seniormost member of the Bench for taking up for hearing. The Honourable Court may take up the hearing of the stay immediately or afternoon by giving sufficient notice to Revenue Officials.

When a stay application is pending for disposal the revenue officials cannot recover the stay.

To understand the implications of tax recovery proceedings, we have requested a senior member of the tax profession to write a detailed article on the subject which will be published in due course.

H. N. Motiwalla
Editor

“We are responsible for what we are, and whatever we wish ourselves to be, we have the power to make ourselves. If what we are now has been the result of our own past actions, it certainly follows that whatever we wish to be in the future can be produced by our present actions; so we have to know how to act.”

— Swami Vivekanand