Can I stop the tax department from recovering a disputed demand while my appeal is pending

Question

I have filed an appeal against a tax demand but the department is still sending recovery notices, and I want to know if I can get the recovery stayed. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

Can I stop the tax department from recovering a disputed demand while my appeal is pending is governed in India primarily by Income-tax Act, 1961, Section 220(6), Income-tax Act, 1961, Section 245 and Income-tax Act, 2025. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 220(6) of the Income-tax Act, 1961 empowers the assessing officer to treat a taxpayer as not being in default in respect of the disputed demand for the period the appeal is pending, effectively staying recovery, and the Central Board of Direct Taxes has issued guidelines generally requiring payment of a specified percentage of the disputed demand, often around twenty percent, as a condition for granting this stay, unless the case falls within a category warranting a lower or nil pre-deposit.

You should file a stay application to the assessing officer along with, or soon after, filing the appeal, clearly setting out the grounds for stay, such as a strong prima facie case, financial hardship, or that the issue is covered by a favourable decision of an appellate authority or court in your own case or a similar case, since a well-supported application is more likely to result in stay on reasonable terms.

If the assessing officer refuses to grant a reasonable stay or insists on a higher pre-deposit than the guideline percentage without adequate reason, you can approach the jurisdictional Principal Commissioner or Commissioner of Income Tax for a review of that decision, and in appropriate cases, taxpayers have also approached the High Court through a writ petition where recovery action is pressed in an unreasonable manner despite a pending appeal.

Section 245 separately allows the department to adjust any refund due to you against an outstanding demand, including a disputed demand, after giving you a prior intimation and opportunity to respond, so even where physical recovery is stayed, you should watch for an adjustment of a refund against the disputed demand and object promptly if you believe the adjustment is improper.

What to do next: 1) File a stay application alongside your appeal; 2) Offer to pay the guideline percentage of disputed demand if reasonable; 3) Escalate to the Commissioner if the assessing officer refuses a reasonable stay; 4) Watch for and object to any refund adjustment against the disputed demand.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Income-tax Act, 1961, Section 220(6) carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.