If an assessee does not pay the amount demanded under the notice issued u/s 156 within 30 days or within shorter time prescribed by the Assessing Officer then he will be treated as an assessee deemed to be in default. Once the assessee is treated as assessee deemed to be in default the recovery proceedings can be initiated against him. The assessee has right u/s 220(6), where the defaulting assessee has preferred an appeal u/s 246A, to make an Application for Stay of demand. It is the right of the assessee to make an Application for Stay if the appeal is filed u/s 246A. If no appeal is filed and demand raised against the assessee is accepted but the assessee does not have means to make the full payment then also he has a right to make an Application for Stay of the demand and make out a case based on the facts. The obligation of the assessee is to make the payment within the stipulated time under section 220(1) or make an Application for Stay within the stipulated time under section 220(3). The Stay Application u/s 220(3) must be made before the amount stated in the notice of demand becomes due for payment.

In case of Stay proceedings, what are the powers and obligations of Assessing Officer (AO) and Tax Recovery Officer (TRO)?

Once a Stay Application is filed before an AO or TRO, then he has a power to grant Stay or has a power to Stay the demand by asking the assessee to make certain payments within such time as he deems fit. He has an obligation to give an opportunity to the assessee and has to consider the facts judiciously submitted before him. He cannot summarily reject the Stay Application without giving reasons. The AO and TRO has power to stipulate such conditions as he deems fit which is reasonable for Stay of demand or for permitting the assessee to make the payments in instalments. AO and TRO must consider the following:

Instructions and Circulars issued by CBDT:

(i)	Circular 530 dt. 6-3-1989
(ii)	Circular 589 dt. 16-1-1991
(iii)	Instruction No. 1914 dt. 27-8-1997

The AO must also consider the observation of the Bombay High Court in the case of KEC International Ltd. 251 ITR 158. The Hon. High Court has given guidelines to the Income Tax Authorities which should be kept in mind while deciding the Stay Application.

What are powers of CIT (Adm) qua Stay proceedings?

Under Income-tax Act, 1961 there are no specific powers given to the CIT (Adm) for Stay of demand. The Stay Application u/s 220(6) can be made only before the AO and the AO only has a right to Stay the demand. However, the CIT (Administration) being the administrative head of the particular charge where the jurisdiction of the assessee lies, the CIT (Administration) can consider the Stay Application. In fact, the CIT (Administration) exercises the power and considers the Stay Application where the AO rejects the Stay Application of the assessee. The Income Tax Appellate Tribunal also insists (though not rightly) for the rejection of the Stay of demand by CIT (Administration) before considering the Stay Application in cases where appeal is pending before ITAT.

Where an Application for Stay is decided by AO by granting instalments, whether it amounts to rejection of Stay Application and whether an assessee can file appeal before CIT (A) against such order?

The assessee can file an appeal before CIT(A) u/s 246A against order passed under certain sections which are enumerated u/s 246A. The rejection of the Stay Application made u/s 220(6) is not covered by provisions of section 246A and hence no appeal can be filed before CIT (A).

The AO has rejected the Stay Application. The assessee has filed Stay Application before CIT (Adm). CIT (Adm) is on leave. What are the remedies available to the assessee?

An assessee can request the AO to Stay the recovery proceedings till the disposal of the Stay Application by CIT (Administration). The Hon. Courts in various cases have held that pending the Stay Application before higher authorities the lower authority cannot proceed with the recovery proceedings. However, if the AO refuses to Stay the demand till the disposal of the Stay Application by CIT (Administration), then only recourse available is to file writ petition before the High Court.

Whether an Application for Stay of demand u/s 220(6) can be filed beyond the period of 30 days from the date of receipt of notice? Does the AO have power to extend the time limit?

Under section 220(6), the AO can consider an Application for Stay of demand even if it is filed beyond 30 days from the date of receipt of the notice. Under the section, AO has power to grant Stay subject to such conditions as he may think fit, even though the time limit for payment has expired so long as the appeal remains undisposed. As there is no time limit within which Stay Application is to be made u/s 220(6), the question of extension of time limit does not arise.

What are the factors that AO / CIT (Adm) would generally consider while deciding Stay Application? Will a high pitched order be a factor in favour of the assessee?

The assessee has to bring out in a Stay Application two issues. One being that he has a prima facie case for getting the relief at the appellate stage and secondly, the financial position is such that he is not in a position to make the full payment demanded against him. The AO and CIT (Administration) also will have to consider these two aspects while deciding the Stay Application. If the assessee has established that there is a prima facie case for relief at the appellate stage and also has established that his financial position does not permit him to make the full payment then the AO and the CIT(Adm) will have to deal with both these issues judiciously. High pitched order will have to be reviewed and if it is established that the demand is not justified, then the AO and CIT (Administration) can consider the same for granting Stay.

If the appeal of the assessee is pending before CIT(A), is the AO mandatorily required to grant the Stay ?

No. The filing of appeal itself is not the sufficient ground. The assessee has to make out the prima facie case for a relief and also has to make out a case that his financial position does not permit him to make the full payment. Merely writing in the Stay Application that appeal is filed is not sufficient for seeking Stay of demand. In the case of Paullons Litho Works vs. ITO 208 ITR 676 (Mad) it has been held that mere filing or pending of an appeal does not constitute an automatic Stay.

If the assessee has filed Stay Application within 30 days before filing the appeal before CIT(A), whether AO can reject the Stay Application ? Whether AO has to wait for the expiry of 30 days for disposing the Stay Application?

Section 220(6) provides that where an assessee has presented an appeal u/s 246A then the AO in his discretion and subject to conditions may treat the assessee as not being in default. If the time limit of 30 days is prescribed in notice u/s 156, then the assessee cannot be treated as assessee in default before the expiry of 30 days. The assessee can make an Application before the AO within 30 days but will have to file evidence of filing the appeal u/s 246A. The AO will be able to treat the assessee as assessee in default only after the expiry of 30 days and hence he will be in a position to dispose of the Stay Application only after the expiry of 30 days.

Whether AO has power to Stay the recovery proceedings after the appeal is decided by CIT (A) and the matter is pending before ITAT?

The AO will not have any power to Stay the recovery proceedings and grant Stay after the appeal is decided by the CIT (A). The pre condition of section 220(6) is that the appeal remains undisposed by CIT(A). If the assessee has filed appeal before ITAT against the order of CIT (A) then the Stay Application can be filed before ITAT who has a power to grant Stay.

Is there a time limit within which AO/ TRO/CIT (Adm) should dispose of Stay Application?

Under the Act there is no specific time limit within which the Stay Application is to be decided by the Authorities. However, the Stay Application must be decided within a reasonable time. No recovery actions can be taken against the assessee if valid Stay Application is filed which is pending for disposal.

Has TRO power to Stay the demand, if yes, is the power of AO concurrent with that of TRO?

The TRO has power to Stay the demand or to grant instalments subject to such conditions as he deems fit. These powers run concurrent with the powers of the AO to grant time for payment of demand.

However, once a Certificate u/s 222 is drawn up by TRO, the AO cannot adopt any of the measures stipulated in that section. TRO assumes exclusive jurisdiction in this regard. Once an AO has issued tax recovery certificate to TRO then the TRO will have jurisdiction and the AO will not be in a position to grant Stay.

Can assessee file an Application directly to CIT (Adm) without filing the Stay Application before the AO u/s 220(6)?

No. The AO has power to consider the Application u/s 220(6). CIT (Administration) can deal with the matter as the head of the administrative jurisdiction only after the AO has judiciously dealt with the Stay Application. If an Application is made before CIT (Administration), the assessee can be directed first to make an Application before AO. Such decision of CIT (Administration), cannot be challenged as there is no specific provision under the Act to deal with such situation.

If an Application u/s 154 is pending before AO whether the same should be first disposed of before recovery proceedings can be initiated?

Yes. The AO is bound to decide the rectification Application made u/s 154 before dealing with recovery proceedings. The correct demand should be determined before an assessee can be treated as assessee in default. In the case of Sultan Leather Finishers Pvt. Ltd. vs. ACIT 191 ITR 179 (All.), it has been held that no recovery proceedings are possible during pendency of a rectification Application.

If an assessee has filed a revision Application u/s 264 before CIT (Administration) whether the Stay Application can be made u/s 220(6)? Is AO bound to wait till the disposal of the revision Application before deciding the Stay Application?

Section 220(6) only deals with appeal filed u/s 246A. There is no reference to section 264 in section 220(6). The AO is not legally bound to Stay the demand, if revision petition is filed before CIT (Administration). On rejection of the Stay Application by AO, the assessee can file the Stay Application before CIT (Administration). If there is a prima facie case in revision petition, then assessee can insist CIT (Administration) to first decide the revision petition before considering the Stay Application.