Gspc Gas Company Ltd v. Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 14746 of 2013With SPECIAL CIVIL APPLICATION NO. 14698 of 2013With SPECIAL CIVIL APPLICATION NO. 14747 of 2013With SPECIAL CIVIL APPLICATION NO. 14748 of 2013With SPECIAL CIVIL APPLICATION NO. 14751 of 2013With SPECIAL CIVIL APPLICATION NO. 15075 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH - sd/-andHONOURABLE MR.JUSTICE R.P.DHOLARIA - sd/- ============================================= 1.Whether Reporters of Local Papers may be YESallowed to see the judgment ?2.To be referred to the Reporter or not ?YES3.Whether their Lordships wish to see the fair copy NOof the judgment ?4.Whether this case involves a substantial question NOof law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?5.Whether it is to be circulated to the civil judge ?NO ============================================= GSPC GAS COMPANY LTD....Petitioner(s) Versus DEPUTY COMMISSIONER OF INCOME TAX....Respondent(s) =============================================Appearance: MR. S.N. SOPARKAR LD. SR ADV WITH MR B S SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MR. MANISH R BHATT LD SR. ADV for the Respondent(s) No. 1 Special Civil Application No.14746 of 2013 MR SUDHIR M MEHTA, ADVOCATE for the Respondent(s) No. 1============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 18/11/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0.As common question of law and facts arise in this group of petitions, they are disposed of by this common judgment and order. 2.0.Special Civil Application No.14746 of 2013 under Article 226 of the Constitution of India has been preferred by the petitioner-assessee to quash and set aside the impugned order dated 19.08.2013 passed by the Deputy Commissioner of Income Tax, Gandhinagar Circle, Gandhinagar (Annexure A), by which, while considering the request for stay of demand for AY 2010-11, demand is stayed only to the extent of 50% of the demand and the balance 50% of the demand is directed to be paid in six equal installments. 2.1.Special Civil Application No.14747 of 2013 under Article 226 of the Constitution of India has been preferred by the petitioner- assessee-Gujarat State Energy Generation Limited to quash and set aside the impugned notice dated 19.08.2013, by which, against the outstanding demand of Rs.322.35 lacs for the AY 2010-11, the petitioner is directed to pay 50% demand pending the decision of the First Appellate Authority, as per the instruction no.1914 dated 2.12.1993 of the CBDT, New Delhi. 2.2.Special Civil Application No.14748 of 2013 under Article 226 of the Constitution of India has been preferred by the petitioner-assessee Gujarat State Petroleum Corporation Limited to quash and set aside the impugned communication / notice dated 07.08.2013 and 27.08.2013 by the Deputy Commissioner of Income Tax, Gandhinagar Circle, Gandhinagar, by which, the request made by the petitioner to stay the demand for AY 2010-11, during the pendency of the appeal before the CIT(A), has been rejected. 2.2.Special Civil Application No.14748 of 2013 under Article 226 of the Constitution of India has been preferred by the petitioner-assessee Gujarat State Petroleum Corporation Limited to quash and set aside the impugned communication / notice dated 07.08.2013 and 27.08.2013 by the Deputy Commissioner of Income Tax, Gandhinagar Circle, Gandhinagar, by which, the request made by the petitioner to stay the demand for AY 2010-11, during the pendency of the appeal before the CIT(A), has been rejected. 2.3.Special Civil Application No.14698 of 2013 under Article 226 of the Constitution of India has been preferred by the petitioner-assessee Shukan Builders to quash and set aside the order passed by the Commissioner of Income Tax, Ahmedabad -IV dated 23.08.2013 (Annexure A), by which, the demand of Rs.3.65 crores for AY 2010-11 has been stayed in exercise of powers under Section 220(6) of the Income Tax Act on condition that Rs. 50 lacs to be paid by 15.09.2013 and Rs.25 lacs per month to be paid from October 2013 onwards till March 2014 or upto appeal decision. The petitioner also prayed to quash and set aside order dated 17.07.2013 passed by the Deputy Commissioner of Income Tax in Application for stay of demand of Rs.5,65,69,480/- AY 2010-11, by which, the petitioner is communicated that his stay application can be acceded to subject to payment of Rs.50% of demand on or before 31.07.2013 and the balance demand will be stayed till the disposal of first Appeal or 31.12.2013 whichever is earlier. 2.4.Special Civil Application No.15075 of 2013 under Article 226 of the Constitution of India has been preferred by the petitioner-assessee Tudor India Limited for appropriate writ, direction and order to quash and set aside the impugned order dated Exh.I and M rejecting the application of the petitioner of total stay of demand of Rs.6,98,01,220/- till disposal of the appeal by the CIT(A). 3.0.At the outset, it is required to be noted that in all theses cases the demand has been raised against the respective petitioners pursuant to the order of assessment passed by the concerned respective Assessing Officers and respective petitioners are before the Commissioner of Income Tax (Appeals). Respective petitioners submitted the application before the concerned officers to stay the entire demand during the pendency and final disposal of the appeal before the CIT(A), in exercise the powers under Section 220(6) of the Income Tax Act (hereinafter referred to as the “Act”) and by impugned communication / order / notice 50% demand has been stayed on certain conditions and / or same may be rejected. Hence, respective petitioners have preferred present Special Civil Applications under Article 226 of the Constitution of India challenging the impugned orders passed by the appropriate authority / concerned officer under Section 220(6) of the Act and the respective petitioners are treated as assessee in default under Section 220 of the Act. 4.0.Shri S.N. Soparakar, learned Senior Advocate has appeared on behalf of the petitioner in Special Civil Application Nos. 14746 of 2013, 14698 of 2013, 14748 of 2013, 14747 of 2013 and 14751 of 2013 and Shri Manish Shah, learned advocate has appeared on behalf of the petitioner of Special Civil Application No.15075 of 2013. 4.0.Shri S.N. Soparakar, learned Senior Advocate has appeared on behalf of the petitioner in Special Civil Application Nos. 14746 of 2013, 14698 of 2013, 14748 of 2013, 14747 of 2013 and 14751 of 2013 and Shri Manish Shah, learned advocate has appeared on behalf of the petitioner of Special Civil Application No.15075 of 2013. 5.0.Shri S.N. Soparkar, learned Senior Advocate for the respective assessee has vehemently submitted that the impugned action of the respondent in treating the petitioner as assessee in default under Section 220(6) of the Act is bad, illegal and contrary to the law. It is further submitted by Shri S.N. Soparkar, learned Senior Advocate for the respective assessee that while exercising the discretion under Section 220(6) of the Act, the Assessing Officer (hereinafter referred to as the “AO”) is obliged to take into consideration instruction and circulars issued by the CBDT issued in exercise of powers under Section 119 of the Act. It is submitted that accordingly while exercising the powers under Section 220(6) of the Act, the AO is obliged to follow instruction laid down in instruction nos. 96 of 1969 dated 21.08.1969, 530 of 1989 dated 06.03.1989 and 1914 of 1993 dated 02.12.1993. It is submitted that on conjoint reading of these circulars they lay down two broad principles i.e. (1) recovery of the outstanding tax demands shall be deferred if the issues from which demand arises are decided in favour of assessee, inter alia, by an earlier appellate order in the assessee’s own case and (2) in case where the income determined on assessment is substantially higher than the returned income i.e. twice the returned income or more, the collection of the tax in dispute should be held in abeyance till the decision in the appeals. 5.1. It is further submitted by Shri S.N. Soparkar, learned Senior Advocate for the respective assessee that as per Circular No.530 dated 6.3.1989 as also circular no.1914 of 1993 dated 2.2.1993 recovery of outstanding tax demand is required to be deferred if the final decision in appeals, if the issues from which the demand arises are decided in favour of assessee, inter alia, by an earlier appellate order in the assessee’s own case, however further appeal against an earlier appellate order in the assessee own case is pending before the Higher Appellate Forum. It is submitted that as such the aforesaid is upheld by this Hon’ble Court in the case of Madhu Silica Pvt. Ltd vs. Commissioner of Income Tax reported in 227 ITR 350 (Guj). It is submitted that therefore, submission, on behalf of the department that even in such a situation the AO may treat the assessee as in default on the ground that power is discretionary, cannot be accepted. It is submitted that AO is conferred with the power coupled with the duty to exercise the same in case conditions stated in th aforesaid circulars are satisfied and the AO is duty bound to grant relief to the assessee. In support is his above submission, Shri S.N. Soparkar, learned counsel for the respective assessee has relied upon the decision of the Hon’ble Supreme Court in the case of Bachahan Devi and Another vs. Nagar Nigam, Gorakhpur and Another reported in (2008) 12 SCC 372. It is submitted that therefore, any contrary view would result into giving of wholly arbitrary and uncanalised powers to the AO. 5.2.It is submitted that in the case where the income determined on assessment is substantially higher than the returned income i.e. twice the latter amount or more, the collection of the tax in dispute should be kept in abeyance till the decision of the appeals. In support of his above submission, Shri S.N. Soparkar, learned counsel for the respective assessee has relied upon the decision of the Delhi High Court in the case of Soul vs. Deputy Commissioner of Income Tax reported in (2010) 323 ITR 305 and the decision of the Rajasthan High Court in the case of Urban Improvement Trust vs. Assistant Commissioner of Income Tax and Ors in Civil Writ Petition No.1169 of 2012. 5.3.It is further submitted that even if the view is taken that instruction no. 96 dated 21.08.1969 is not operative any more, for the purpose of deciding, as to which assessment would be regarded as high pitched, the criteria laid down under Instruction No. 96 of 1969 would be a valid criteria and therefore, in such an event the assessee would be entitled to the relief of being treated as not in default. 5.4.It is further submitted by Shri S.N. Soparkar, learned counsel for the respective assessee that even otherwise the order passed by the AO under Section 220(6) of the Act must be a reasoned and speaking order. In support of his above submission, he has relied upon the decision of the Hon’ble Supreme Court in the case reported in 199 ITR 530 @ 555. 5.5.Shri S.N. Soparkar, learned counsel for the respective assessee has submitted that in the present cases either the issue is covered in favour of the assessee in previous year and / or assessment is high pitched i.e. more than double the returned income declared in the return and therefore, AO was bound to keep in abeyance the entire demand as per the respective assessment order during the pendency of the appeals before learned CIT(A) and ought to have treated the respective assesee as not being in default. Making above submissions and relying upon the above decisions, it is requested to quash and set aside the impugned communication / notice / order passed by the AO under Section 220(6) of the Act and direct the concerned respondent not to treat the concerned assessee as being in default till final disposal of the appeal by the learned CIT(A). 6.0. Shri Manish Shah, learned advocate appearing on behalf of the petitioner of Special Civil Application No.15075 of 2013 has adopted the submissions made by Shri S.N. Soparkar, learned counsel for the respective assessee in other petitions. 7.0.All these petitions are opposed by Shri Manish R. Bhatt, learned Senior Advocate appearing on behalf of the department/ revenue as well as Shri Sudhir Mehta, learned advocate for the revenue in Special Civil Application No.14746 of 2013. As such Shri Manish R. Bhatt, learned Senior Advocate has made elaborate submissions on behalf of department / revenue. 7.1.Shri Manish Bhatt, learned counsel for the revenue has vehemently submitted that as such in the assessment proceedings culminating into assessment orders under Section 143(3) of the Act, adequate opportunity would always be provided to the assessee with respect to the additions made. It is submitted that only thereafter and upon quantification of the taxes, a demand under Section 156 would be issued. It is submitted that as per Section 220(1) of the Act the amount specified in the notice of demand under Section 156 shall be paid within 30 days of the service of the notice of demand. It is submitted that thus as per the statute, there is a mandate on the assessee to pay the demand within 30 days. It is submitted that however as per Section 220(6) of the Act, discretion is given to the AO to treat the assessee as not being in default, on such conditions as he may think fit to impose in the circumstances of the case. 30 days of the service of the notice of demand. It is submitted that thus as per the statute, there is a mandate on the assessee to pay the demand within 30 days. It is submitted that however as per Section 220(6) of the Act, discretion is given to the AO to treat the assessee as not being in default, on such conditions as he may think fit to impose in the circumstances of the case. 7.2.It is submitted that in order to ensure that AO does not exercise discretion on his own whims, the board has therefore, issued instructions / circulars from time to time. It is submitted that instruction no.96 dated 21.08.1969 was issued in respect of the circumstances then prevailing. It is submitted that thereafter circular no.530 dated 6.3.1989 required the assesssee to be treated as not being in default in respect of circumstances (i) and (ii) as stated in para 2 of the said circular. It is submitted that in respect of non covered issues, the aspect of financial hardship was required to be considered, as clarified in circular No.589. It is submitted that thus even as per circular No.530 r/w circular no.589, though the assessee may be treated as not being in default in respect of “covered issues” but in so far as the other demands are concerned, discretion was given to the AO. It is submitted that thereafter in supersession of all earlier instructions on the subject, the CBDT has issued instruction no.1914 dated 2.12.1993. It is submitted that as per para 2 of the said instruction, demand could be kept in abeyance for valid reasons and “only in accordance with the guidelines .....”. It is submitted that para 2 of the said instructions is divided in four parts i.e. A to D. It is submitted that as per para 2A(i), in the first instance, it is the responsibility of the AO to collect every demand except those enumerated in paras A to D and none other. It is submitted that para 2B requires the stay petition to be disposed of by the AO. It is submitted that administrative superior officer is required to interfere with the decision of the AO “only in exceptional circumstances ....”. It is submitted that para 2B(iii) is for the benefit of the assessee and acts as safeguard against any arbitrary exercise of powers by the AO. It is submitted that thus it can be said that this is a general order issued by the Board under Section 119(2)(a) giving powers to the superior officers to ensure that the Assessing Officers do not pass any arbitrary orders. It is submitted that it is not the intention of the CBDT when powers under Section 220(6) of the Act are exercised the stay petition is required to be decided by the officer superior to the AO. It is further submitted that as such guidelines for treating the assessee not to in default are given in para 2C. It is submitted that as per para 2C(i), illustrations are given where stay could be granted which are contained in para (a) to (c). It is submitted that as per clarification at the foot of para (c), it is stated that even in such circumstances, stay may be granted only in respect of amount attributable to such disputed points. It is submitted that in para 2C(ii), the conditions for grant of stay have been enumerated. It is submitted that the said conditions would therefore, have to be read and incorporated while granting stay “towards the disputed taxes”. It is submitted that it would be also open to the AO to require the assessee to pay taxes in lump sum or in installments, as also require the assessee to give an undertaking to cooperate in early disposal of the appeal, reserving right, as also to adjust refunds arising from other assessment against the disputed demand. It is submitted that even to protect the interest of revenue, AO may pass an order to furnish the security to ensure that in the event in the further challenge to the order which is favourable to the assessee if the revenue succeeds, the recovery can be effected. It is submitted that as against the stipulated requirement of payment of taxes by 30 days from service of notice under Section 156, as per para 2C(iii), liberal installments are provided. It is submitted that speaking order contemplated/ provided in para 2C(v) is only with regard to ascertaining as to whether the demand arises out of “covered issues” or otherwise. It is submitted that as the instruction no. 1914 has been issued in supersession of all earlier instructions, including instruction no.96 dated 21.08.1969, the aspect “high pitched assessment”, i.e. twice the returned income is not required to be considered as one of the factors for granting stay. 7.3.It is further submitted by Shri Mansih R. Bhatt, learned counsel for the revenue that once the AO passes a speaking order and holds that either there are no covered issues or with regard to other additions discretion is not required to be exercised, on a petition being filed under Article 226 of the Constitution of India, the Court is required to apply well settled principle for invoking jurisdiction as to whether the principles of natural justice have been followed; whether the impugned order is arbitrary or oppressive. It is submitted that in these proceedings therefore, financial hardship faced by the assessee may not be considered, as equity is ruled out in taxation matters. In support of his above submission, Shri Manish R. Bhatt, learned counsel for the revenue has heavily relied upon the decision of this Court in Special Civil Application No.3179 of 2012. 7.4.It is further submitted that even while examining as to whether order under Section 220(6) of the Act is arbitrary, the aspect of of arbitrariness has to be specifically alleged and proved. In support of his above submission, Shri Bhatt, learned counsel for the revenue has relied upon the decision of the Hon’ble Supreme Court in the case of Third Income Tax, Officer, Manglore vs. M. Damodar Bhat reported in 1971 ITR 806(SC). 7.5.It is further submitted by Shri Bhatt, learned counsel for the 7.4.It is further submitted that even while examining as to whether order under Section 220(6) of the Act is arbitrary, the aspect of of arbitrariness has to be specifically alleged and proved. In support of his above submission, Shri Bhatt, learned counsel for the revenue has relied upon the decision of the Hon’ble Supreme Court in the case of Third Income Tax, Officer, Manglore vs. M. Damodar Bhat reported in 1971 ITR 806(SC). 7.5.It is further submitted by Shri Bhatt, learned counsel for the revenue that taxes are the price a tax prayer pays for civilization. It is submitted that in the event, discretion properly having been exercised under Section 220(6) of the Act, based on which the budgetary estimates are carried out, is required to be interfered with in exercise of Article 226 of the Constitution of India, it will be next to impossible for the Government to proceed further with its budgetary estimates. Relying upon the decisions of the Hon’ble Supreme Court in the case reported in 154 ITR 172 (SC), 146 ITR 624(SC), 270 ITR 237 (DELHI), 291 ITR 116(ALLABABAD) as well as decision of this Court in the case reported in 182 ITR 413 (Guj). It is submitted that there cannot be any automatic stay on presentation of appeal. 7.6.Now, so far as reliance placed upon the decision of the Delhi High Court in the case of Soul (supra) by the learned counsel for the assessee, it is submitted by Shri Bhatt, learned counsel for the revenue that the same proceeds on incorrect reading of instruction no.1914. It is submitted that the Delhi High Court in the case of Volvaline Cummins Ltd (supra) has proceeded to read instruction no.96 dated 21.08.1969 as forming part of and imbibed in instruction no.1914. It is submitted that the Delhi High Court has not properly appreciated the fact that instruction no.1914 dated 2.12.1993 has been issued by the CBDT, New Delhi in supersession of “all earlier instructions” i.e. also including instruction no.96. It is further submitted that even the Delhi High Court placed undue reliance on para 2B(iii) of Instruction No.1914 which only gave powers to the superior officer to interfere only in case of unreasonably high pitched assessment or in the case of genuine hardship. It is submitted that the Delhi High Court read this powers which were to safeguard the interest of the assessee, though contained in para 2B(iii), also in para 2C i.e. guidelines for staying demand though instructions did not stipulate so. It is submitted that therefore, only the prevailing instructions no.1914 are required to be looked into for the purpose of Section 220(6) of the Act and stay of demand in respect of covered issues as enumerated in para 2C(i)-(q) to (c) could be issued only on terms and conditions as stated in para 2C(ii). 7.7.It is submitted that assuming without admitting that the existing circular, namely circular no.530 is also required to be read in Instruction no.1914, in that case also, in respect of the issues which are not covered, no blanket stay has been provided. It is submitted that even in respect of the demands arising out of uncovered issues, it is open for the AO to impose conditions as enumerated in para 2C(ii). prevailing instructions no.1914 are required to be looked into for the purpose of Section 220(6) of the Act and stay of demand in respect of covered issues as enumerated in para 2C(i)-(q) to (c) could be issued only on terms and conditions as stated in para 2C(ii). 7.7.It is submitted that assuming without admitting that the existing circular, namely circular no.530 is also required to be read in Instruction no.1914, in that case also, in respect of the issues which are not covered, no blanket stay has been provided. It is submitted that even in respect of the demands arising out of uncovered issues, it is open for the AO to impose conditions as enumerated in para 2C(ii). 7.8.Now, on the issue whether CIT / Additional CIT can interfere with orders passed by AO under Section 220(6) of the Act , Shri Manish Bhatt, learned counsel for the revenue has submitted that as per Section 119(2)(a) of the Act, the Board may...... for the purpose of ....... collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of Sections ..... or otherwise) ..... setting forth directions or instructions (not being prejudicial to assessee) as to the guidelines, principles or procedures to be followed by other income tax authorities in the work relating ..... or collector of revenue or .........”. It is submitted that only way CBDT can issue instruction is under the provisions of Section 119 of the Act. It is submitted that Instruction no.1914 is also issued in the same manner. It is submitted that Section 119(2) (a) enables the CBDT to pass directions or instructions not being prejudicial to assessee to other income tax authorities. It is submitted that para B(ii) and (iii) of CBDT instruction no.1914 speaks of role of higher authorities. It is submitted that, therefore, it would be wrong to say that higher authorities cannot intervene. It is submitted that the intervention by higher authorities can be suo motu or on application of assessee. 7.9.Now, so far as the issue with respect to the high pitched assessments and additions exceeding double the returned income and to exercise the powers under Section 220(6) of the Act with respect to such high pitched assessment and / or additions exceeding double of the returned income is concerned, Shri Bhatt, learned counsel for the revenue has submitted that the aforesaid has to be seen on case by case basis. It is submitted that a straight jacket formula of double the returned income cannot be adopted. It is submitted that otherwise a return of income of Rs.1 may result in an absurd situation of any addition above Rs.1 to be unenforceable. It is submitted that similar is the case of “NIL” and “Loss” returns. It is submitted that even nature of assessee’s business is also important. It is submitted that for example builders usually open one firm for each project and then dissolve the firm after completion of project. It is submitted that in such situation how can revenue recover the demand if the decision is subsequently reversed ? It is submitted that even whether any issue is covered by CIT(A) or ITAT or High Court would also be material, as its significance and certainty of finality varies. 7.10.It is submitted that in case of addition of unexplained cash credit cannot be compared with addition on ad hoc basis. It is submitted that in a given case PSU / government entity may have higher standing vis-a-vis private parties. However, if the PSU goes into losses, further recovery becomes difficult. 7.11.It is submitted that even past conduct of the assessee in payment of demand is also important. It is submitted that security offered by the assessee and its financial standing are also vital. It is submitted that therefore, para 2C(ii) of CBDT circular envisaging laying down of conditions is very crucial and is no mechanical formality. 7.10.It is submitted that in case of addition of unexplained cash credit cannot be compared with addition on ad hoc basis. It is submitted that in a given case PSU / government entity may have higher standing vis-a-vis private parties. However, if the PSU goes into losses, further recovery becomes difficult. 7.11.It is submitted that even past conduct of the assessee in payment of demand is also important. It is submitted that security offered by the assessee and its financial standing are also vital. It is submitted that therefore, para 2C(ii) of CBDT circular envisaging laying down of conditions is very crucial and is no mechanical formality. 7.12.Now, so far as submission on behalf of the assessee that speaking order is required to be passed by the AO while exercising power under Section 220(6) of the Act is concerned, it is submitted by Shri Bhatt, learned counsel for the revenue that as such AO cannot be compelled by assessee during stay proceedings to give comments on each and every issue of disallowance or addition. It is submitted that such demand would tantamount to review of his own order, which is not permissible in law. It is submitted that the onus of showing that an issue is squarely covered would rest on the assessee. It is submitted that even otherwise in case where the Court is of the view that AO has not exercised the power vested in him under Section 220(6) of the Act by way of speaking order, the Court may direct the AO to reconsider the matter afresh. However, to sit on such a decision of the AO on merits directly by the Court would influence the ongoing appellate process on merits. 7.13.It is submitted that in the present cases the respective AO have dully exercised the powers under Section 220(6) of the Act and as such they are neither capricious nor arbitrary. Therefore, it is requested to dismiss the present petitions. 8.0.Heard the learned advocates for the respective parties at length. The short question which is posed for consideration of this Court is which exercising the discretionary powers under Section 220(6) of the Act under which circumstances and when AO may treat the assessee as not being in default in respect of amount in dispute in the Appeal ? 8.1.It is the case on behalf of the respective assessee that where demand in dispute have been decided in favour of the assessee in earlier order by the Appellate Authority or Court in assessee’s own case, the assessee is not to be treated as being in default in respect of that amount in dispute in appeal and / or where assessment is high pitched or substantially higher than the returned income, say twice the latter amount or more, the assessee is not to be treated has been default in respect of that amount in dispute in appeal and in both the aforesaid eventualities the AO in exercise of powers under Section 220(6) of the Act is bound to pass an order in favour of the assessee and to treat the assessee as being not in default, during the pendency of the appeal before the First Appellate Authority. 8.2.The other question which is posed for consideration of this Court is whether while exercising the powers under Section 220(6) of the Act, AO is required to pass detailed speaking order? 8.3.The another question which is posed for consideration of this Court is whether the AO while exercising the powers under Section 220(6) of the Act and granting stay of the demand during the pendency of the appeal wholly or partly can impose condition either requiring assessee to offer suitable security or requiring the assessee to pay towards disputed taxes a reasonable amount in lump sum or in installment or requiring an undertaking from the assessee that he will cooperate in the early disposal of the appeal, failing which stay order will be cancelled ? 8.2.The other question which is posed for consideration of this Court is whether while exercising the powers under Section 220(6) of the Act, AO is required to pass detailed speaking order? 8.3.The another question which is posed for consideration of this Court is whether the AO while exercising the powers under Section 220(6) of the Act and granting stay of the demand during the pendency of the appeal wholly or partly can impose condition either requiring assessee to offer suitable security or requiring the assessee to pay towards disputed taxes a reasonable amount in lump sum or in installment or requiring an undertaking from the assessee that he will cooperate in the early disposal of the appeal, failing which stay order will be cancelled ? 8.4.While considering the aforesaid issues / questions few provisions of the Income Tax Act are required to be referred to and considered. On conclusion of the assessment proceedings after giving adequate opportunity to the assessee, order of assessment is passed by the AO under Section 143(3) of the Act; At the stage of assessment adequate opportunity would be provided to the assessee with regard to the additions made. That upon quantification of the taxes, demand under Section 156 of the Act would be issued. As per Section 220(6) of the Act the amount specified in the notice of demand under Section 156 is required to be paid within 30 days of the service of notice. However, sub-section (6) of Section 220 of the Act provides that where an assessee has preferred an appeal under Section 246, AO may in his discretion and subject to such conditions as he may deem think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment (as provided under Section 220(2) of the Act) has expired, as long as such appeal remained undisposed of. As such the discretion is given to the AO to treat the assessee as not being in default in respect of amount in dispute when an assessee presents an appeal under Section 246 of the Act and subject to such conditions as the AO may deem think fit in the circumstances of the case. How and under what circumstances and on what conditions AO while exercising the powers under Section 220(6) of the Act treat the assessee as not being in default is provided in the instruction / direction issued by the CBDT from time to time. Therefore, as such considering the aforesaid provisions of the Act, on raising the demand under Section 156 and after service of notice of damand, the assessee is required to make the payment within a period of 30 days, failing which assessee is required to be treated as in default. However, sub-section (6) of Section 220 is an exception and a discretion is vested with the AO not to treat the assessee being in default, where an appeal has been preferred against the order of assessment under Section 246 of the Act, however subject to such condition as the AO may deem think fit. 9.0.Under Section 119 of the Income Tax Act, the Board may, from time to time, issue such orders, instructions and directions to other income tax authorities as it may deem think fit for the proper administration of Income Tax Act, and as such authorities and all other persons employed in the execution of the Act are to observe and follow the said order, instruction and direction subject to the conditions that no such direction can be issued to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner, or to interfere with the discretion of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the exercise of its appellate function. Therefore, under Section 119 of the Income Tax Act, the CBDT has been conferred with the powers to issue such orders, directions and instructions to the Income Tax Authority as it may deem fit for the proper administration of the Income Tax Act. 10.It appears that in exercise of powers under Section 119 of the Income Tax Act the CBDT had issued the circulars / instructions from time to time with respect to the discretion to be exercised by the AO under Section 220(6) of the Act. First Instruction being No. 96 dated 21.08.1969 came to be issued, which reads as under: Instruction No. 96 dated 21.08.1969: Income determined on assessment was substantially higher than returned income whether collection of tax in dispute is to be held in abeyance till decision on appeal. 1.One of the points that came up for consideration in the 8[th] meeting of the Informal Consultative Committee was that income tax assessments were arbitrarily pitched at high figures and that the collection of disputed demands as a result thereof was also not stayed in spite of the specific provision in the matter in Section 220(6). 2.The then Deputy Prime Minister had observed as under: “.... where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapse on the part of the assessee.” 3.The Board desire that the above observations may be brought to the notice of all the Income Tax Officers working under you and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner / Commissioner of Income Tax. 10.1. 10.1.That thereafter, in exercise of powers under Section 119 of the Act, Board issued circular no.530 dated 6.3.1989. The relevant para 2 to 4 of the circulars which reads as under: Circular No.530 dated 6.3.1989: 1215. Whether Assessing Officer can exercise discretion under Section 220(6) to treat assessee as not being in default in respect of amounts disputed in first appeal pending before the Deputy Commissioner (Appeals)/ Commissioner (Appeals). 2.Having regard to the proper and efficient management of the work of collector of revenue, the Board has considered it necessary and expedient to order that on an application being filed by the assessee in this behalf, the Assessing Officer will exercise his discretion under Section 220(6) of the Act (subject to such conditions as he may think fit to impose) so as to treat the assessee as not being in default in respect of the amount in dispute in the appeal in the following situations; (i).the demand in dispute has arisen because the AO had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts or, the High Court or jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment, or (ii).The demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order by an appellate authority or Court in assessee’s own case. Further, where it is subsequently found that the assessee has not cooperated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or Court alters the situation referred to in para 2 about, the Assessing Officer will no longer be bound by the instructions and will exercise his discretion independently . 4.In respect of other cases, not covered by para 2 above, the Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of speaking order. While exercising discretion under the provision, the financial capacity of the assessee to pay demand will not be relevant. 10.2.It appears that thereafter, Board in exercise of powers under Section 119 of the Act has issued a comprehensive instruction being instruction no.1914 dated 2.12.1993 which has been issued in supersession of all earlier instructions on the subject. Instruction no.1914 dated 2.12.1993 issued by the Board, reads as under: 4.In respect of other cases, not covered by para 2 above, the Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of speaking order. While exercising discretion under the provision, the financial capacity of the assessee to pay demand will not be relevant. 10.2.It appears that thereafter, Board in exercise of powers under Section 119 of the Act has issued a comprehensive instruction being instruction no.1914 dated 2.12.1993 which has been issued in supersession of all earlier instructions on the subject. Instruction no.1914 dated 2.12.1993 issued by the Board, reads as under: Instruction No.1914 dated 2.12.1993 The Board has felt the need for a comprehensive instruction on the subject of recovery of tax demand in order to streamline recovery procedures. This instruction is accordingly being issued in supersession of all earlier instructions on the subject and reiterates the existing Circulars on the subject. 2. The Board is of the view that, as a matter of principle, every demand should be recovered as soon as it becomes due. Demand may be kept in abeyance for valid reasons only in accordance with the guidelines given below : A. Responsibility: (i)It shall be the responsibility of the Assessing Officer and the TRO to collect every demand that has been raised, except the following : (a) Demand which has not fallen due; (b) Demand which has been stayed by a Court or ITAT or Settlement Commission;(c) Demand for which a proper proposal for write-off has been submitted; (d) Demand stayed in accordance with paras B & C below. (ii).Where demand in respect of which a recovery certificate has been issued or a statement has been drawn, the primary responsibility for the collection of tax shall rest with the TRO. (iii). It would be the responsibility of the supervisory authorities to ensure that the Assessing Officers and the TROs take all such measures as are necessary to collect the demand. It must be understood that mere issue of a show cause notice with no follow-up is not to be regarded as adequate effort to recover taxes. B. Stay Petitions: (I). Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the tax- payer. The assessee must be intimated of the decision without delay. (ii) Where stay petitions are made to the authorities higher than the Assessing Officer (DC/CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately. (iii). The decision in the matter of stay of demand should normally be taken by Assessing Officer/TRO and his immediate superior. A higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances; e.g., where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee. The higher authorities should discourage the assessee from filing review petitions before them as a matter of routine or in a frivolous manner to gain time for withholding payment of taxes. C. Guidelines for staying demand: (I). A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are: (a). If the demand in dispute relates to issues that have been decided in assessee’s favour by an appellate authority or Court earlier; or C. Guidelines for staying demand: (I). A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are: (a). If the demand in dispute relates to issues that have been decided in assessee’s favour by an appellate authority or Court earlier; or (b). If the demand in dispute has arisen because the AO had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts (not of the High Court under Rules, jurisdiction the AO is working); or (c) if the High Court having jurisdiction has adopted a contrary interpretation but the department has not accepted that judgment. It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to such disputed points. Further where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive. (ii)In granting stay, the Assessing Officer may impose such conditions as he may think fit. Thus he may — a.require the assessee to offer suitable security to safeguard the interest of revenue; b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in installments; c. require an undertaking from the assessee that he will co-operate in the early disposal of appeal failing which the stay order will be cancelled. d. reserve the right to review the order passed after expiry of a reasonable period, say up to 6 months, or if the assessee has not co-operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; e. reserve a right to adjust refunds arising, if any, against the demand. (iii) Payment by instalments may be liberally allowed so as to collect the entire demand within a reasonable period not exceeding 18 months. (iv).Since the phrase "stay of demand" does not occur in section 220(6) of the Income-tax Act, the Assessing Officer should always use in any order passed under section 220(6) [or under section 220(3) or section 220(7)], the expression that occurs in the section viz., that he agrees to treat the assessee as not being default in respect of the amount specified, subject to such conditions as he deems fit to impose. (v) While considering an application under section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. D. Miscellaneous: (I). Even where recover