2012 (7) TMI 562 - HC - Income Tax

Tribunal's stay extension beyond 365 days deemed unlawful under Income Tax Act

THE COMMISSIONER OF INCOME-TAX Versus M/s ECOM GILL COFFEE TRADING PVT. LTD.,

The court held that the Tribunal's extension of stay beyond 365 days was unlawful under Section 254(2A) of the Income Tax Act. It emphasized that stay ... Power of Tribunal to extend the stay beyond a period of 365 days - Revenue contested it to be order contrary to Section 254 - Held that:- Considering the provisions of Section 254(2A) the first proviso provides that the said Appellate Tribunal may, on merit, pass an order of stay in any proceedings relating to an appeal were period of stay cannot exceed 180 days from the date of such order and the said Appellate Tribunal shall dispose of the appeal within the specified period of stay - The second proviso to further extend the period of stay originally allowed. However the aggregate of period originally allowed and the period so extended should not exceed 365 days. The Appellate Tribunal is required to dispose of the appeal within the extended period - The third proviso provides that if such appeal is not decided within the period allowed originally or the period extende the order of stay shall stand vacated after the expiry of such period or periods. Appellate Tribunal has committed a positive error in consciously extending the interim order of stay granted in the pending appeal beyond the period of 365 days ignoring the language of Section as the language of the legislature being quite clear about the outer time limit stipulated for the duration of the operation of stay - in favour of revenue. Issues Involved1. Legality of the Tribunal extending a stay beyond 365 days under Section 254(2A) of the Income Tax Act, 1961.2. Interpretation of the third proviso to Section 254(2A) introduced by the Finance Act 2008.3. Impact of the statutory provisions on the Tribunal's power to extend stay orders.4. Examination of precedents and their applicability to the case.Detailed Analysis1. Legality of the Tribunal Extending a Stay Beyond 365 DaysThe primary issue is whether the Tribunal can legally extend a stay beyond 365 days, which is contrary to Section 254 of the Income Tax Act. The revenue contended that the Tribunal's orders extending the stay beyond 365 days were in violation of the statutory provisions, particularly the third proviso to Section 254(2A) introduced by the Finance Act 2008. The court noted that the Tribunal is mandated by statute not to extend an interim stay order beyond 365 days, irrespective of whether the delay in disposing of the appeal is attributable to the assessee or not.2. Interpretation of the Third Proviso to Section 254(2A)The court examined the third proviso to Section 254(2A), which states that any stay order shall stand vacated after 365 days, even if the delay is not attributable to the assessee. The court emphasized that the legislative intent was clear in limiting the duration of stay orders to an aggregate of 365 days. The court rejected the interpretation that the Tribunal could extend the stay beyond this period, stating that such an interpretation would defeat the legislative intent.3. Impact of Statutory Provisions on the Tribunal's PowerThe court underscored that the Tribunal, being a creature of statute, must function within the bounds of statutory provisions. The Tribunal does not have the power to pass orders contrary to the statutory limitations imposed by Section 254(2A). The court clarified that the statutory provisions explicitly restrict the Tribunal from extending stay orders beyond 365 days, and any such extension would be in contravention of the statute.4. Examination of PrecedentsThe court reviewed various precedents, including judgments from the Bombay High Court and the Supreme Court. It disagreed with the Bombay High Court's view that the Tribunal could extend a stay beyond the statutory limit, noting that these decisions did not consider the amendment introduced by the Finance Act 2008. The court also examined the Supreme Court's judgment in Kumar Cotton Mills Pvt. Ltd., which dealt with analogous provisions under the Central Excise Act, 1944. However, it concluded that the interpretation of provisions in different statutes cannot be directly applied to Section 254(2A) of the Income Tax Act due to differing legislative histories and contexts.ConclusionThe court concluded that the Tribunal erred in extending the interim stay order beyond 365 days, as this was in direct violation of the statutory provisions of Section 254(2A). The appeals were allowed, clarifying that the Tribunal must abide by the statutory limit of 365 days for stay orders. The judgment does not affect the main decision of the Tribunal, which remains subject to other statutory remedies.Final JudgmentThe appeals are allowed, and the question is answered in favor of the appellant-Revenue and against the assessee. No order as to costs.