2018 (4) TMI 195 - HC - Income Tax

Court sets aside order on stay application, directs no recovery pending appeal. Misconduct allegations prompt CBDT investigation.

The Shri Saibaba Sansthan Trust (Shirdi) Versus The Union of India & Others

The court set aside the CIT(A)'s order on the petitioner's stay application, directing no recovery proceedings until appeal disposal. Allegations of ... Stay application - CIT-A instead of disposing of the appeal, seeks to set the clock back and pass an order on the petitioner’s stay application - Held that:- There is no power bestowed upon the CIT(A) under the Act to stay the demand arising consequent to the order in appeal before him. In fact the power to stay such a demand has been bestowed upon the Assessing officer under Section 220(6) of the Act by not treating the Assessee in default where an appeal is awaiting final disposal before the CIT(A) on such conditions as the facts and circumstances of the case may warrant. Nevertheless, the CIT(A) as an appellate authority, has inherent powers of an Appellate Authority to do all things necessary to make the appellate powers effective. Entire exercise of taking up stay application, even after the appeal was heard, was only done so as to collect some revenue before 31st March, 2018. Therefore, this appears to be a blatant attempt to retrace his steps by the CIT(A) only to collect revenue before 31st March, 2018. In fact, even if an order is passed on the appeal by the CIT(A) finding the submission of the Petitioner not acceptable, either wholly or partly, it would result in the demand being sustained wholly or in part, which could then be collected in accordance with law. But the entire exercise, here, appears to be only to assist the Revenue to collect some amount of taxes prior to 31st. March 2018. This is certainly not expected of an Appellate Authority such as the CIT(A) who adjudicates disputes between the Revenue and the Assessee on a regular basis. The CIT(A) must not only be fair but appear to be so, in a country governed by Rule of law. In the absence of the above, the alternative remedy provided under the Act would be illusory leading to our entertaining writ petitions, even if an alternative remedy is provided under the Act. We set aside the order dated 23rd March, 2018 passed by the CIT(A) on the Petitioner's stay application. We direct the Respondent-Revenue not to initiate any recovery proceedings against the Petitioner till such time as the CIT(A) – Respondent No.3 disposes of the Petitioner's appeal from the order dated 31st December, 2017 of the Assessing Officer Respondent No.2 and for a period of two weeks after the communication of the order of the CIT(A) to the Petitioner. Issues Involved:1. Legitimacy of the CIT(A)'s procedure in handling the petitioner’s appeal and stay application.2. Allegations of misconduct by the CIT(A) and the office of the CIT(E).3. The inherent powers of the CIT(A) to stay the demand.4. The necessity of the CBDT's intervention.Detailed Analysis:1. Legitimacy of the CIT(A)'s Procedure:The petitioner challenged the method and procedure adopted by the CIT(A) in dealing with the appeal filed under Section 246A of the Income Tax Act, 1961. The primary grievance was that the CIT(A), after hearing the appeal on its merits, did not dispose of the appeal but instead passed an order on the stay application. The petitioner argued that there is no statutory requirement under the Act for the tax demanded to be paid before the appeal can be entertained or considered on merits. The court noted that once the appeal hearing is concluded, the stay application becomes infructuous as the appeal itself should be disposed of by an appropriate order. The court found the CIT(A)'s action of hearing the stay application after the appeal hearing concluded to be without merit and appeared to be an attempt to collect revenue before the financial year-end.2. Allegations of Misconduct:The petitioner alleged serious misconduct by the CIT(A) and the office of the CIT(E), including incorrect dates in the order sheet and threats of attachment of bank accounts and reopening assessments if a certain amount was not deposited. These allegations were not denied by the CIT(A) or CIT(E) through any affidavit. The court found these allegations serious and indicative of potential misconduct, suggesting that if true, corrective action should be taken by the CBDT to prevent such behavior from becoming the norm.3. Inherent Powers of the CIT(A):The court noted that while the CIT(A) does not have explicit statutory power to stay the demand arising from the order under appeal, it possesses inherent powers as an appellate authority to make its appellate powers effective. This includes the power to stay the effect of the order under appeal until the disposal of the appeal. However, this power should only be exercised to aid the hearing and disposal of the appeal. Once the appeal is heard on merits, the necessity of exercising this inherent power ceases.4. Necessity of CBDT's Intervention:The court directed the CBDT to investigate the allegations made by the petitioner and take corrective measures if the allegations were found to be true. The court emphasized that the officers of the Revenue should administer the Act with fairness and loyalty to the law. The CBDT was tasked with ensuring that its officers do not engage in overzealous revenue collection practices that disregard the law.Conclusion:The court set aside the order dated 23rd March 2018 passed by the CIT(A) on the petitioner’s stay application and directed the Revenue not to initiate any recovery proceedings against the petitioner until the CIT(A) disposes of the appeal and for two weeks thereafter. The court also directed the registry to serve a copy of the order to the CBDT and mandated an enquiry into the allegations made by the petitioner. The appeal was dismissed with no order as to costs.