Taxpayer granted conditional stay on income tax demands, must comply with security, appeal process, and timelines.

The Tribunal partially allowed the taxpayer's stay application on the collection/recovery of income tax and interest demands, granting a conditional stay subject to specific requirements. The taxpayer was directed to provide security of Rs. 35 crores within two weeks, cooperate in the appeal process, and adhere to timelines. The stay was limited to 180 days or until the appeal's disposal. The Tribunal emphasized statutory compliance and balanced the taxpayer's rights with the need for orderly proceedings. The case was set for a hearing on 29th September 2022, with further instructions for document submissions.

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Issues Involved:
1. Request for a stay on the collection/recovery of income tax and interest demands.
2. Tribunal's power to grant a stay under Section 254(1) and its limitations under Section 254(2A).
3. Conditions required for granting a stay on disputed tax demands.

Detailed Analysis:

1. Request for a stay on the collection/recovery of income tax and interest demands:
The taxpayer sought a stay on the collection/recovery of income tax and interest demands totaling Rs 172,47,58,360 for the assessment year 2018-19. The taxpayer argued that the majority of the issues in the appeal were covered by binding judicial precedents in their favor, thereby establishing a strong prima facie case. The taxpayer's counsel requested a blanket stay, asserting that no part of the disputed demands should be paid given the balance of convenience.

2. Tribunal's power to grant a stay under Section 254(1) and its limitations under Section 254(2A):
The Tribunal examined the scope of its powers under Section 254(1) of the Income Tax Act, 1961, which allows it to pass orders as it deems fit after hearing both parties. The Tribunal referred to the Supreme Court's judgment in ITO Vs M K Mohd Kunhi, which recognized the Tribunal's inherent powers to grant a stay on the collection/recovery of disputed demands as ancillary to its appellate jurisdiction. However, the Tribunal noted that the first proviso to Section 254(2A) imposes a condition that a stay can only be granted if the taxpayer deposits at least 20% of the disputed amount or provides security of an equivalent amount. The Tribunal emphasized that it cannot grant a stay in violation of these statutory provisions, as doing so would render the proviso to Section 254(2A) redundant.

3. Conditions required for granting a stay on disputed tax demands:
The Tribunal acknowledged the taxpayer's argument that the issues in the appeal were largely covered by judicial precedents in their favor. However, the Tribunal stressed the need for a harmonious construction of statutory provisions, ensuring that the requirements under the first proviso to Section 254(2A) are respected. Consequently, the Tribunal granted a conditional stay on the collection/recovery of the disputed demands, subject to the following conditions:
- The taxpayer must provide reasonable security for an amount of Rs. 35 crores or more within two weeks from the date of receipt of the order.
- If the Assessing Officer is not satisfied with the security offered, they must pass a detailed speaking order and provide a two-week notice to the taxpayer before initiating any coercive recovery proceedings.
- The taxpayer must fully cooperate in the expeditious disposal of the appeal and not seek unnecessary adjournments. If the Tribunal finds that the taxpayer is resorting to dilatory tactics, the stay will be vacated.
- The stay will be in operation for 180 days from the date of the order or until the related appeal is disposed of, whichever is earlier.

Conclusion:
The Tribunal partially allowed the stay application, imposing specific conditions to ensure compliance with statutory provisions while safeguarding the taxpayer's rights. The appeal was scheduled for hearing on 29th September 2022, with instructions for the parties to complete the filing of paper books in the meantime. The stay application was pronounced in the open court on 26th September 2022.

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