s.220(6) — Stay of demand while an appeal is pending
The Assessing Officer's discretion to treat an assessee as not in default for the disputed demand while a first appeal is pending, and the limits of that discretion.
The sub-section refers to appeals under section 246 and section 246A and has no proviso. Because it is keyed to those appeals, it does not reach a demand raised by an assessment whose appeal lies directly to the Tribunal, which is the position for an assessment determining a consequence under Chapter X-A. Under the Income-tax Act, 2025 the provision is section 411(12), and the appeals it refers to are those under sections 356 and 357, the counterparts of sections 246 and 246A.
Income-tax Act, 1961
s.220(6)
Income-tax Act, 2025
s.411(12)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 220(6) of the Income-tax Act, 1961 provides that where an assessee has presented an appeal under section 246 or section 246A, the Assessing Officer may, in his discretion and subject to such conditions as he may 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 has expired, as long as the appeal remains undisposed of. Three features decide most disputes about it. The power is conditional on an appeal having been presented, so it is not available before one is filed. It is discretionary, and a discretion has to be exercised rather than surrendered to a formula; the sub-section itself prescribes no reasons, but a refusal that recites a standard proportion and nothing else is open to challenge on ordinary administrative-law grounds. And it attaches only to the amount in dispute in the appeal, not to the whole demand. The sub-section fixes no proportion, but administrative instructions do, and in practice an officer works to the standard proportion of the disputed demand those instructions set, with an express power in the same instructions to require more or less where the case warrants it; the governing office memorandum has been revised more than once, so the current figure should be read from it rather than assumed. The corresponding provision in the Income-tax Act, 2025 is section 411(12), which keeps the same scheme but refers to an appeal under section 356 or 357.
What the provision does
Confers a discretion to suspend default status for the disputed amount while a first appeal is pending, and allows conditions to be attached. It does not create a right to stay, fixes no percentage, does not touch the running of interest under section 220(2), does not displace the separate power in section 220(3) to extend time for payment before an appeal is filed, and does not reach a demand whose appeal lies elsewhere than to the Commissioner (Appeals).
Threshold questions
- Whether an appeal has actually been presented under section 246 or section 246A, since the discretion does not arise before that and does not reach an appeal lying elsewhere
- Whether the amount in question is the amount in dispute in that appeal, as distinct from the whole demand
- Whether the order records reasons that engage with the case, or refuses by reciting the standard proportion
- Whether the proportion required is the one the governing instruction sets, and whether the instruction's own power to depart from it was considered and recorded
- Whether the prima facie merits, the financial position and the balance of convenience were considered, which the instructions direct even though the sub-section does not
- Whether interest under section 220(2) has been accounted for separately, since holding recovery over is not a waiver of interest
- Whether, on a refusal or on conditions the assessee cannot meet, the application has been renewed before the Principal Commissioner or Commissioner, which the governing instructions provide for rather than the sub-section, since it provides no appeal against the Assessing Officer's order and the alternative is a writ
In practice
The recurring disputes.
Whether a fixed percentage can be demanded as the price of a stay
Administrative instructions set a standard proportion of the disputed demand to be paid before recovery is held over. The taxpayer's argument is that section 220(6) confers a discretion on the Assessing Officer and that an instruction converting it into a tariff fetters that discretion, so an order that recites the proportion and nothing else is no exercise of the power. The Revenue's argument is that the instructions structure a discretion rather than remove it, that uniformity protects assessees from arbitrariness, and that the officer retains power to vary the proportion on a proper case being made. Whether an instruction may fix a proportion at all under a sub-section conferring an unstructured discretion, and whether an order applying the proportion without more is bad for failing to exercise the discretion or good for following guidance lawfully issued, has not been resolved.
Whether interest continues while recovery is held over
Treating an assessee as not in default removes the consequences of default but does not touch the charge under section 220(2). The taxpayer's argument is that it is incongruous to charge interest for a period during which the Department itself has agreed not to recover, and that the reduction and waiver power in section 220(2A) exists precisely for that. The Revenue's argument is that interest is compensatory and runs on an amount that was always payable, and that the statute keeps the two questions separate. Whether an order under sub-section (6) can itself carry a direction about interest for the period during which recovery is held over, or whether the assessee must come separately under the waiver power, is not settled.
What happens to the stay once the first appeal is decided
The sub-section keys the treatment to the appeal remaining undisposed of, and section 411(12) of the 2025 Act puts it as running till the time the appeal remains undisposed of. The taxpayer's argument is that the words fix the occasion for the power rather than cap it, that the sub-section names no terminal date and the power to impose conditions is expressed without limit, and that an assessee who has succeeded in part and gone on in further appeal still holds a demand that has not been finally determined, so recovery in the interval between disposal of the first appeal and the hearing of a stay application defeats what the sub-section exists to do. The Revenue's argument is that the words are plain, that the discretion is tied to the first appeal, and that any further protection must come from the appellate forum. Whether the words fix the outer limit of the power, or merely describe the ordinary case so that an officer may continue the treatment while a further appeal is pending, has not been decided.