The Tribunal was hearing the appeal, the stay application was sitting unopened, and the recovery notice arrived anyway

The Patna High Court will not touch a Rs 29.23 crore demand while the Income Tax Appellate Tribunal is seised of it. It will, however, stop the recovery until somebody decides the interim application.

There is a gap in tax practice that every assessee with a large demand eventually falls into. The appeal is admitted and pending. The application for stay of recovery, filed alongside it, is nobody’s priority. And while it lies undecided, the Assessing Officer is under no obligation to pause — the demand is live, the notice goes out, and the assessee is told that failure to comply will invite action under the Act.

On 22 September 2026 a Division Bench of Justice Rajeev Ranjan Prasad and Justice Sunil Dutta Mishra decided what a writ court should do about that, in a case where the sum at stake was Rs 29,23,94,340 and the assessee was a State power utility.

The entity that no longer existed

Bihar State Power (Holding) Company Limited came to the Court over assessment year 2012-13. Its complaint went to the root of the proceedings rather than to the arithmetic: the order under Section 154 of the Income Tax Act, 1961 dated 10 February 2022 had been made in the name of M/s Bihar State Electricity Board.

The Board, Mr. Ajay Kumar Rastogi, Senior Advocate for the petitioner, pointed out, had ceased to exist. By a notification of the Department of Energy, Government of Bihar dated 30 October 2012, made under Sections 131 and 133 and other applicable provisions of the Electricity Act, 2003, the State framed a scheme transferring the Board’s properties, interests, rights, assets, liabilities, obligations, proceedings and personnel to a set of transferee companies — the Holding Company, the Generation Company, the Transmission Company, and the South and North Bihar Power Distribution Companies. The dissolution took effect from 1 November 2012.

From that, Senior Counsel invoked the Supreme Court’s decision in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki (India) Limited, (2020) 18 SCC 331: an assessment order passed by an Assessing Officer in the name of a non-existent entity is void ab initio.

The petitioner had taken the point where it belonged. It was under challenge before the Income Tax Appellate Tribunal in an appeal that had already been heard once — and released, by order dated 27 February 2026, because judgment could not be delivered within ninety days — then taken up again and last heard on 25 August 2026. In parallel, on 2 April 2025, the company had filed a rectification application under Section 154 before the Assessing Officer, saying the same thing about a long chain of orders and notices stretching back to the assessment order of 2 February 2015.

What it asked this Court for was narrow: a mandamus directing the Income Tax Officer to consider and dispose of that rectification application, and an order restraining coercive steps under the recovery notice of 8 May 2026 until it was decided or until the appeal was next effectively heard.

Two answers from the Department

Ms. Archana Sinha, Senior Standing Counsel for the Income Tax Department, opposed the writ application on a ground the Court accepted. The issues being raised before the High Court were pending before the Tribunal; the Tribunal was in seisin of the matter; and for the writ court to entertain the application and pass an order at this stage would amount to usurping the Tribunal’s role.

On the coercive action, her answer was different in kind. The petitioner, she said, could apply for an appropriate interim order before the Tribunal and also before the Assessing Officer.

That answer is the reason the case is worth reading, because Senior Counsel’s response to it was that the petitioner had already done so. There was an application for an interim order before the Assessing Officer. It had not been considered. And in the meantime, coercive steps were being taken.

What the Court would and would not do

On the merits the Bench held back, and said why. Sitting in its extraordinary writ jurisdiction, it need not entertain a challenge to the rectification order at this stage. It was an admitted position that the legality and validity of the order dated 10 February 2022 was pending consideration before the Tribunal. Any observation of the High Court at that point was likely to interfere with the independent assessment and opinion of the Tribunal, and the Court would refrain from making one.

So nothing was said about Maruti Suzuki, about the 2012 transfer scheme, or about whether an order naming the dissolved Board was a nullity. Those questions remain where the assessee put them.

On recovery, the Bench did act. It directed the Assessing Officer or the Income Tax Appellate Tribunal, as the case may be, to consider the petitioner’s application for an interim order within six weeks of receipt or production of a copy of the judgment. And it added the sentence that makes the direction worth anything: in the meantime, no coercive action, in any form, shall be taken against the petitioner.

The writ application was disposed of on those terms.

The point of the order

Read together, the two halves are consistent rather than grudging. The Court refused to decide what a Tribunal was already deciding — the ordinary discipline of alternative remedy. But it declined to let that discipline become a reason for doing nothing, because the Department’s own answer on recovery was that the assessee should go and ask for a stay, and the assessee had asked and been met with silence.

An unheard stay application is not a refusal of stay. It is the absence of a decision, and while it lasts the assessee carries the whole risk of recovery on a demand nobody has yet tested. The Bench closed that gap in the only way available to it: by putting a clock on the interim application and holding recovery in abeyance until the clock runs out.

For the utility, the practical effect is that Rs 29.23 crore stops moving for at least six weeks, and at the end of it there will be a reasoned order on stay — from the Assessing Officer or the Tribunal — that can itself be carried further if it is wrong. For the Department, nothing is lost: the demand survives, the appeal proceeds, and the jurisdictional question about a dissolved Board is decided by the forum that was hearing it all along.