20% Pre-Deposit Not Mandatory For Stay Of Demand, AO Must Exercise Discretion U/S 220(6) Income Tax Act: Delhi High Court

The Delhi High Court has reiterated that deposit of 20% of the disputed tax demand is not mandatory for grant of stay, and that the Assessing Officer (AO) must independently exercise discretion under Section 220(6) of the Income Tax Act, 1961.A division bench of Justices V. Kameswar Rao and Vinod Kumar relied on National Association of Software and Services Companies (NASSCOM) v. Deputy Commissioner of Income-tax (Exemption)Circle 2 (1), Delhi And Ors (2024) where it was held that 20% pre-deposit demand is not a precondition for consideration of a stay application during the pendency of the first appeal.The Court thus set aside an order whereby Petitioner-assessee's application for stay of demand was rejected solely on the ground that 20% of the demand had not been deposited.Petitioner had challenged the order treating it as an “assessee in default”, contending that the AO had failed to consider the merits of the stay application and had mechanically applied the CBDT instructions prescribing a standard 20% deposit.Allowing the writ petition, the High Court referred to NASSCOM (supra) where it was held “ the administrative circular would not operate as a fetter upon the power otherwise conferred on a quasi-judicial authority and that it would be wholly incorrect to view the OM as mandating the deposit of 20%, irrespective of the facts of an individual case.”Reference was also made to Centre For Policy Research v. Deputy Commissioner of Income-tax (2025) where it was held that 20% is not liable to be viewed as an entrenched or inflexible rule.“The 20% which is spoken of in the OM cannot possibly be viewed as being an inviolate or inflexible condition. The extent of the deposit which an assessee may be called upon to make would have to be examined and answered bearing in mind factors such as prima facie case, undue hardship and likelihood of success” it was held.As such, the Court set aside the impugned order and remanded the matter to the AO for fresh consideration of the stay application.Appearance: Mr Aseem Chawla, Sr Advocate with Mr Atulya Sharma, Ms Pratishtha Chaudhary and Ms Sejal Garg, Advocates for Petitioner; Mr. Indruj Singh Rai, SSC Mr. Sanjeev Menon, Mr. Rahul Singh, JSCs and Mr. Gaurav Kumar, Advocate for RespondentsCase title: Clearmedi Healthcare Private Limited v. Deputy Commissioner Of Income-Tax, Circle 4(2), Delhi & OrsCitation: 2025 LiveLaw (Del) 1808Case no.: W.P.(C) 19495/2025Click here to read order

20% Pre-Deposit Not Mandatory For Stay Of Demand, AO Must Exercise Discretion U/S 220(6) Income Tax Act: Delhi High Court

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