Tax Payable Pending Appeal and Stay of Demand: Section 369 Income Tax Act 2025

Under section 369 of the Income-tax Act, 2025, tax stays payable as per the assessment made in the case even though an appeal has been filed in the High Court or the Supreme Court. Filing an appeal does not by itself cancel or pause a demand. The main routes to a pause are separate steps: the Assessing Officer treating you as not in default (section 411(12)), a Tribunal stay on a deposit of at least 20% (section 363(6)), or a stay by the Tax Recovery Officer (section 415).

This guide explains how these pieces fit together, with worked figures and a checklist. Every rule and number is taken from sections 358, 363, 365, 369, 411 and 415 of the Act (as amended by the Finance Act, 2026) and rule 193 of the Income-tax Rules, 2026. Last reviewed against that text on 10 November 2026.

What does section 369 say about tax payable during an appeal?

Section 369 is one sentence: irrespective of the fact that an appeal has been preferred to the High Court or the Supreme Court, tax shall be payable as per the assessment made in the case.

Two things follow from the text. First, the demand does not disappear because a higher court has been approached. Second, the section is about liability. It does not say who may grant relief while the appeal is pending. That relief comes from other provisions, covered below.

Section 411(2) points the same way for every stage of appeal. Where a notice of demand has been served and an appeal or other proceeding is filed on the amount in it, the demand is deemed valid until the last appellate authority or proceeding is disposed of.

Is my demand paused when I file an appeal?

No. A notice of demand under section 289 must be paid within 30 days of service, or within a shorter period stated in the notice with the previous approval of the Joint Commissioner (section 411(1)). If you miss that date you are deemed to be in default (section 411(10)), and simple interest runs at 1% for every month or part of a month from the day after the due date until payment (section 411(3)(a)). There is a carve-out for demands raised on a penalty under section 439: no interest is charged on them up to the date of the section 359 order, or the section 363 order where the assessment followed Dispute Resolution Panel directions (section 411(3)(b)). Our guide to demand, default and tax recovery covers that process in full.

How can the Assessing Officer treat me as not in default?

Where you have presented a first appeal under section 356 or 357, the Assessing Officer (AO) may, in his discretion and on conditions he thinks fit, treat you as not in default on the amount in dispute, even though the time for payment has expired, until the appeal remains undisposed of (section 411(12)).

• It is discretionary. The text says "may", so you have no automatic right to it.
• It covers only the amount in dispute in the appeal.
• The AO decides the conditions. Part payment is a common condition in practice, but the Act does not set a percentage for this route.
• It is tied to appeals under sections 356 and 357. Tribunal stays are governed by section 363.

You can also ask the AO for more time or instalments, but the application must be made before the 30-day due date expires (section 411(5)). If you miss one instalment, you are in default on the whole outstanding amount (section 411(11)).

How does a Tribunal stay of demand work?

When your appeal is before the Appellate Tribunal under section 362(1), the Tribunal may, after considering the merits of your application, stay proceedings relating to the appeal (section 363(6)).

Point	Rule	Where
Application fee	Rs 500 for an application for stay of demand	Section 362(8)
First stay	Not more than 180 days from the date of the order	Section 363(6)
Condition	Deposit not less than 20% of the tax, interest, fee, penalty or other sum payable, or furnish security of equal amount	Section 363(6)(a), (b)
Extension	Only on your application, with the 20% condition met, and only if the Tribunal is satisfied the delay in disposing of the appeal is not attributable to you	Section 363(7)
Outer limit	Original and extended stay together cannot exceed 365 days	Section 363(7)
If appeal is not disposed of in time	The stay stands vacated, even if the delay is not your fault	Section 363(8)

The appeal itself is made in Form No. 115 (rule 193(1)). The Tribunal aims to decide an appeal within four years from the end of the financial year in which it was filed, where possible (section 363(5)). Because the stay can run for at most 365 days, a stay does not outlast a slow appeal. Plan for the demand to revive.

What happens at the Tax Recovery Officer stage?

If the demand has gone to a Tax Recovery Officer (TRO) and a certificate has been drawn up, section 415 applies:

• The TRO may grant time for payment and, until that time expires, must stay recovery proceedings for that tax (section 415(1)).
• If the outstanding demand is reduced because the underlying order was modified in appeal, and that order is still under further proceeding, the TRO must stay recovery of the reduced part while that proceeding is pending (section 415(2)(a)).
• If the order has become final and conclusive, the TRO must amend or cancel the certificate (section 415(2)(b)).

What happens to interest if the appeal succeeds?

Section 411(6) adjusts the 1% monthly interest when an order under sections 287, 288, 359, 363, 365(10), 368 or 378 reduces the amount on which interest was payable. The interest is reduced accordingly and any excess interest paid is refunded. If a later order increases the amount again, interest is payable from the day after the first notice of demand period ended until payment (section 411(6)(b)).

For hardship, a Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner may reduce or waive the interest on your application if payment causes genuine hardship, the default was due to circumstances beyond your control, and you have co-operated in the inquiry and recovery proceedings (section 411(7)). The order is due within twelve months from the end of the month the application is received, and a rejection needs a hearing first (section 411(8), (9)).

Does the High Court appeal change anything?

An appeal lies to the High Court from an order of the Appellate Tribunal only if the High Court is satisfied that the case involves a substantial question of law (section 365(1)). It must be filed within 120 days of receiving the order (section 365(2)(a)). Section 369 then makes the point that this appeal does not by itself suspend payment of tax as assessed. When the High Court delivers a judgment, the AO gives effect to it on the basis of a certified copy (section 365(10)).

This article does not set out any stay power of the High Court or Supreme Court because none is stated in the sections above. If you need interim relief there, take advice on the route open to you.

Worked example 1: a Tribunal stay and the 20% deposit (tax year 2026-27)

Assumptions: The Tribunal appeal is pending. The amount payable is tax Rs 14,00,000, interest Rs 2,60,000 and penalty Rs 1,40,000. The Tribunal grants a stay by order dated 10 January 2027, on the minimum condition in section 363(6).

Step	Working	Result
1. Total payable	14,00,000 + 2,60,000 + 1,40,000	Rs 18,00,000
2. Minimum deposit (20%)	18,00,000 x 20 / 100	Rs 3,60,000
3. First stay ends (not later than)	10 Jan 2027 plus 180 days	9 July 2027
4. Latest end of any extended stay	10 Jan 2027 plus 365 days	10 Jan 2028
5. Maximum extension	365 - 180	185 days

Step 3 counts 21 days left in January, 28 in February, 31 in March, 30 in April, 31 in May, 30 in June, which is 171, plus 9 days in July. If the appeal is not decided by 9 July 2027 and no extension is granted, the stay stands vacated (section 363(8)). Extension needs a fresh application, the 20% condition still met, and a finding that the delay is not yours (section 363(7)).

Worked example 2: interest if you pay late and the demand is reduced (tax year 2026-27)

Assumptions: A notice of demand for Rs 5,00,000 is served on 1 December 2026. The demand is not paid on time and the appeal is later partly allowed, reducing the demand to Rs 3,00,000. The reduction is a result of an order under section 359, and the amount is paid on 20 March 2027. Interest is at 1% per month or part of a month on the amount in the notice.

Step	Working	Result
1. Due date	30 days from service (section 411(1)(a)), counting from the day after service	Period ends 31 Dec 2026
2. Interest period starts	Day after the 30 days end (section 411(3)(a)(ii))	1 Jan 2027
3. Months or part months to 20 Mar 2027	1 Jan to 31 Jan, 1 Feb to 28 Feb, 1 Mar to 20 Mar (counted as month or part of a month)	3 months
4. Interest on Rs 5,00,000	5,00,000 x 1% x 3	Rs 15,000
5. Interest on reduced Rs 3,00,000	3,00,000 x 1% x 3	Rs 9,000
6. Excess interest, refunded if already paid (section 411(6)(a))	15,000 - 9,000	Rs 6,000

The month counting above is a simple reading of "every month or part of a month" for this example. Check how the department's system counts months for your case before relying on it.

Real-life example 1: Ravi and the High Court appeal

Ravi, a trader, lost his case before the Tribunal and files an appeal in the High Court on a substantial question of law. He assumes the demand is on hold. It is not. Section 369 says tax remains payable as per the assessment made in the case. He should speak to his adviser about what relief is available and in the meantime watch the interest running under section 411(3), because the interest comes down only if an order reduces the demand (section 411(6)) or the Commissioner grants a hardship waiver (section 411(7)).

Real-life example 2: Meena asks the AO for no-default treatment

Meena, a consultant, appeals to the Commissioner (Appeals) against an addition and the 30 days to pay lapse. She applies to her Assessing Officer to be treated as not in default on the disputed amount. The AO may agree, on conditions, until the appeal is disposed of (section 411(12)). If the AO declines, the demand continues to carry 1% a month interest and the AO can treat her as in default (section 411(10)).

What are the common mistakes?

• Assuming an appeal pauses the demand. Section 369 and section 411(2) say the opposite unless a stay or no-default order is obtained.
• Missing the application window for instalments. The request to the AO must be made before the 30-day due date ends (section 411(5)).
• Treating a Tribunal stay as open-ended. It is capped at 180 days, extendable to 365 in all, and it ends if the appeal is not decided (section 363(6) to (8)).
• Paying the 20% and stopping there. The 20% is a condition for the stay. It does not cancel the balance.
• Not tracking interest. Interest runs at 1% a month on the unpaid demand and is recalculated only when an order reduces the amount, unless it is waived for hardship (section 411(3), (6), (7)).

Quick reference

Item	Rule	Where
Tax payable during High Court or Supreme Court appeal	Payable as per the assessment made	Section 369
Pay demand within	30 days of service, or shorter if specified with Joint Commissioner's approval	Section 411(1)
Interest on late payment	1% per month or part of a month	Section 411(3)
Extension or instalments	Apply before due date expires	Section 411(5)
No-default treatment on first appeal	AO's discretion, on conditions	Section 411(12)
Tribunal appeal form	Form No. 115	Rule 193(1)
Tribunal stay fee	Rs 500	Section 362(8)
Tribunal stay	Max 180 days; 20% deposit or security; 365 days outer limit	Section 363(6) to (8)
High Court appeal	120 days; substantial question of law	Section 365(1), (2)
TRO stay	Time to pay; reduced part under appeal	Section 415

Are there other cases where I am not treated as in default?

Yes, one more case sits in section 411. If you have been assessed on income arising outside India in a country whose laws prohibit or restrict remittance of money to India, the Assessing Officer must not treat you as in default on the part of the tax due on that income that cannot be brought into India, and must keep treating you that way until the restriction is removed (section 411(13)). Income counts as brought into India if it has been, or could have been, used for expenditure actually incurred outside India, or has been brought in in any form, capitalised or not (section 411(14)). Unlike section 411(12), this is not discretionary.

Separately, interest under section 411(3) is not charged on an amount for a period where interest is already charged on the same amount for the same period under section 398(3) on the tax in a section 399 intimation (section 411(4)).

Where this is in the Act

• Section 369: tax to be paid irrespective of appeal.
• Section 411(1) to (14): payment time, valid demand, interest, instalments, interest relief, default and no-default treatment.
• Section 362(8) and section 363(5) to (8): Tribunal stay fee and stay conditions.
• Section 365(1), (2), (10): High Court appeal and effect given to its judgment.
• Section 415: TRO stay and amendment of certificate.
• Rule 193(1): Form No. 115 for Tribunal appeals.

For the appeal process itself, see our guide to income tax appeals. For the notice that starts the 30 days, see notice of demand.

For a CA firm, the hard part is tracking dates across many clients: when each demand was served, which no-default request is pending, when a stay ends, and when the 120-day High Court window closes. Finexo's practice management software keeps these deadlines in one client-wise tracker with reminders. It does not file appeals or advise on stay applications.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.