Section 225 of Income-tax Act, 1961: Stay of Recovery Proceedings and Amendment or Cancellation of Certificate
Section 225 governs what happens to tax recovery proceedings when the Tax Recovery Officer (TRO) grants time for payment or an appellate or other proceeding reduces the tax demand. It also requires a recovery certificate to be amended or cancelled after the relevant order becomes final.
What is Section 225?
Section 225 is a recovery-stage provision. A recovery certificate is the statement drawn up by the TRO under Section 222 specifying tax arrears for recovery under the Second Schedule. A stay is a temporary suspension of recovery proceedings; it does not, by itself, extinguish the underlying demand. Amendment means revising the certificate to reflect the legally recoverable amount; cancellation means withdrawing it where appropriate.
Section 225: Subsection-by-subsection explanation
Section 225(1): Time granted for payment
The TRO may grant an assessee additional time to pay tax. If the TRO grants that time, recovery proceedings for that tax must remain stayed until the granted period expires. This provision concerns time granted by the TRO and should be distinguished from a separate request to the Assessing Officer for instalments or an extension under Section 220(3).
Section 225(2): Reduction in demand while further proceedings are pending
Where an appeal or another proceeding modifies the order giving rise to the certified demand, reducing that demand, but the order is still under further proceedings, the TRO must stay recovery of the portion corresponding to the reduction while those proceedings remain pending. The provision does not automatically stay the unreduced portion of the demand.
Section 225(3): Amendment or cancellation after finality
When an appeal or other proceeding reduces the outstanding demand and the relevant order becomes final and conclusive, the TRO must amend the certificate or cancel it, as the case requires. The certificate should then reflect the amount legally recoverable under the final order.
Practical illustration
| Stage | Illustrative demand | Effect |
|---|---|---|
| Original recovery certificate | Rs. 5,00,000 | Recovery initiated for certified arrears |
| Appellate order reduces demand | Rs. 3,00,000 | If further proceedings are pending, recovery of the reduced Rs. 2,00,000 portion is stayed under Section 225(2) |
| Reduced demand becomes final | Rs. 3,00,000 | TRO amends certificate to reflect the final demand, subject to payments and other applicable adjustments |
Figures are illustrative. Interest, penalties, credits, payments and other lawful adjustments depend on the case.
What should an assessee do?
- Identify the demand notice, recovery certificate, and the officer handling recovery.
- Keep copies of appeal orders, rectification orders, payment challans and evidence of any pending further proceedings.
- If seeking time to pay, submit a reasoned written request to the TRO, supported by relevant documents; do not assume that filing a request automatically stays recovery.
- If the demand has been reduced, provide the relevant order and ask the TRO to apply Section 225(2) to the reduced portion during pending further proceedings.
- Once the reduction becomes final, request amendment or cancellation of the recovery certificate under Section 225(3) and verify the outstanding demand on the tax portal.
How Section 225 interacts with related provisions
Section 222 provides for drawing up a recovery certificate and recovery methods. Section 223 identifies the competent TRO. Section 224 deals with the validity of the certificate and the TRO's power to cancel it or correct clerical or arithmetical mistakes. Section 225 specifically addresses stays and the effect of reductions in tax demands through appellate or other proceedings.
Section 225: Statutory provisions of the 1961 Act
225(1). It shall be lawful for the Tax Recovery Officer to grant time for the payment of any tax and when he does so, he shall stay the proceedings for the recovery of such tax until the expiry of the time so granted.
225(2). Where the order giving rise to a demand of tax for which a certificate has been drawn up is modified in appeal or other proceeding under this Act, and, as a consequence thereof, the demand is reduced but the order is the subject-matter of further proceeding under this Act, the Tax Recovery Officer shall stay the recovery of such part of the amount specified in the certificate as pertains to the said reduction for the period for which the appeal or other proceeding remains pending.
225(3). Where a certificate has been drawn up and subsequently the amount of the outstanding demand is reduced as a result of an appeal or other proceeding under this Act, the Tax Recovery Officer shall, when the order which was the subject-matter of such appeal or other proceeding has become final and conclusive, amend the certificate, or cancel it, as the case may be.
Frequently asked questions
Does filing an appeal automatically stay all tax recovery?
No. The filing of an appeal alone should not be treated as an automatic blanket stay. Section 225(2) addresses the portion of a certified demand reduced by an order that is subject to further proceedings. Other stay powers and conditions may apply separately.
Can the TRO allow more time for payment?
Yes. Under Section 225(1), the TRO may grant time and must stay recovery of the relevant tax until the extended period expires.
What happens when the reduced demand becomes final?
Under Section 225(3), the TRO must amend or cancel the recovery certificate, as appropriate.
Official legal and filing resources
- Income Tax Department - legislation and tax law resources
- India Code - central legislation
- Income Tax e-Filing Portal - demands, responses and tax records
Legal information only. For an active recovery proceeding, verify the applicable statute, the exact order, relevant notices and current departmental instructions.