Interim stay in tax appeal granted where prima facie case, hardship, and balance of convenience justified preserving status quo

The ITAT noted that its appellate powers under section 254 of the Income-tax Act include authority to grant interim stay in appropriate cases. That discretion is exercised where the assessee shows a strong prima facie case and continuation of assessment or recovery would risk making the appeal ineffective. On the facts, the assessee had offered substantial security, the firm had been closed, and immediate assessment and recovery would cause serious hardship. The Tribunal found the balance of convenience in favour of preserving the status quo and granted stay of the proposed proceedings, subject to conditions.

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Issues: Whether interim stay should be granted against assessment proceedings proposed pursuant to the revisional order under section 263 of the Income-tax Act, 1961, pending disposal of the appeal.

Analysis: The Tribunal recognised that its powers under section 254 of the Income-tax Act, 1961 include the power to grant stay in appropriate cases. It applied the settled principle that such power is discretionary and should be exercised where a strong prima facie case is shown and where continuation of proceedings would render the appeal ineffective. On the facts, the assessee had offered substantial security, the firm had been closed, and immediate completion of assessment and recovery would create a heavy demand and serious hardship. The balance of convenience was found to be in favour of preserving the status quo until the appeal was heard.

Conclusion: Interim stay was warranted, and the assessee succeeded to the extent that demand was restrained pending disposal of the appeal, subject to the conditions imposed by the Tribunal.

Ratio Decidendi: The Tribunal may, in exercise of its appellate powers under section 254 of the Income-tax Act, 1961, grant stay of assessment or recovery proceedings where a strong prima facie case and balance of convenience justify protection of the appeal from being rendered nugatory.

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