1985 (12) TMI 2 - SC - Income Tax

High Court lacks power to grant stay on tax recovery pending tax reference disposal. Stay orders set aside.

Commissioner of Income-Tax, Delhi Versus Bansi Dhar And Sons

The Supreme Court held that the High Court does not have inherent or ancillary powers to grant stay of recovery of taxes pending disposal of references ... Jurisdiction of the High Court to grant stay or pass interim orders in pending references under section 66 and section 256 - it cannot be said that the HC has inherent power or incidental power in the matter of a reference pending before it to grant stay of realisation or to grant injunction - therefore, the HC was in error in exercising its jurisdiction by passing an order for stay of realisation under section 151 of the Code of Civil Procedure in a pending reference Issues Involved:1. Jurisdiction of the High Court to grant stay or pass interim orders in pending references under section 66 of the Indian Income-tax Act, 1922, and section 256 of the Income-tax Act, 1961.2. Whether the High Court has inherent or ancillary powers to grant stay of recovery of taxes pending disposal of references.Detailed Analysis:1. Jurisdiction of the High Court to Grant Stay or Pass Interim Orders:The main question in these appeals was whether the High Court has the jurisdiction to grant stay or pass interim orders in pending references under section 66 of the Indian Income-tax Act, 1922, and section 256 of the Income-tax Act, 1961. The High Courts had granted stay of the realization of taxes pending disposal of the references, which was challenged by the Revenue.The High Court of Delhi, in its judgment, noted that neither the 1922 Act nor the 1961 Act contained any express provision empowering the High Court or the Supreme Court to grant stay of recovery of tax pending disposal of the reference before it. The High Court, however, invoked its inherent jurisdiction to grant such stay.The Supreme Court examined the scheme of section 66 of the 1922 Act and section 256 of the 1961 Act, noting that the High Court exercises purely advisory or consultative jurisdiction in such references, not original, appellate, or revisional jurisdiction. The High Court's role is to provide an opinion on questions of law referred to it, while the appeal remains pending before the Tribunal.2. Inherent or Ancillary Powers of the High Court:The High Court had relied on several decisions, including the Andhra Pradesh High Court's decision in Polisetti Narayana Rao v. CIT, which suggested that the High Court had inherent jurisdiction to grant stay under section 151 of the Code of Civil Procedure and article 227 of the Constitution.However, the Supreme Court emphasized that the High Court's jurisdiction in income-tax references is special and limited, conferred by the specific provisions of the Income-tax Acts of 1922 and 1961. The High Court's role is to give advisory opinions on questions of law, not to exercise powers of stay which are incidental to appellate jurisdiction.The Supreme Court referred to its earlier decisions, including ITO v. M. K. Mohammed Kunhi, which dealt with the appellate powers of the Tribunal under section 254 of the 1961 Act, and concluded that the appellate authority must have incidental power to grant stay. However, this power does not extend to the High Court in its advisory capacity under sections 66 and 256.The Supreme Court also cited decisions such as Tata Iron & Steel Co. Ltd. v. Chief Revenue Authority, New Jehangir Vakil Mills Ltd. v. CIT, and CIT v. Scindia Steam Navigation Co. Ltd., which underscored that the High Court's jurisdiction under sections 66 and 256 is advisory, not appellate or revisional.The Supreme Court concluded that the High Court does not have inherent or ancillary powers to grant stay of recovery of taxes pending disposal of references. Such powers lie within the jurisdiction of the appellate authority, and the High Court can only intervene if the appellate authority acts without jurisdiction or improperly exercises its jurisdiction, through writs under articles 226 and 227 of the Constitution.Conclusion:The Supreme Court allowed the appeals, setting aside the judgments and orders of the High Courts that had granted stay of realization of taxes. The Court held that the High Court, in answering a reference under section 66 of the 1922 Act or section 256 of the 1961 Act, does not have the jurisdiction to grant stay of recovery of taxes. The High Court's jurisdiction in such references is advisory and does not include powers incidental to appellate jurisdiction, such as granting stay of recovery. The appeals were allowed, and the parties were directed to bear their own costs.