Power of ITAT to grant Stay - Effect of amendment made by Finance Act, 2007 in Section 254 (2A) "

The question: ""Does the third proviso to Section 254 (2A) of Income Tax Act, have the effect of denuding the Tribunal of its incidental power to grant interim reliefs? 

Finance Act 2007 substituted sub-section (2A) to Section 254 of the Income Tax Act, 1961 with effect from 1st June, 2007. The said sub-section as amended reads as under:- 

""(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of Section 253:

Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order. 

Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so

extended or allowed shall not, in any case, exceed three hundred and sixty days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed. 

Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, the order of stay shall stand vacated after the expiry of such period or periods."" 

With respect to above amended section and power of ITAT to grant interim relief in while deciding a writ petition (Reported in 2007 -TMI - 1644 - HIGH COURT, BOMBAY) honorable Bombay High Court, after considering various aspects, has held that: 

"The power to grant stay or interim relief being inherent or incidental is not defeated by the provisos to the sub-section. The third proviso has to be read as a limitation on the power of the Tribunal to continue interim relief in case where the hearing of the Appeal has been delayed for acts attributable to the assessee. It cannot mean that a construction be given that the power to grant interim relief is denuded even if the acts attributable are not of the assessee but of the revenue or of the Tribunal itself. The power of the Tribunal, therefore, to continue interim relief is not overridden by the language of the third proviso to Section 254(2A). This would be in consonance with the view taken in Kumar Cotton Mills Pvt. Ltd. (supra). There would be power in the Tribunal to extend the period of stay on good cause being shown and on the Tribunal being satisfied that the matter could not be heard and disposed of for reasons not attributable to the assessee."

Power to grant stay preserved where delay not attributable to assessee; tribunal may extend interim relief on good cause. The provisos to amended Section 254(2A) impose procedural limits on the duration and extension of stays and require disposal within specified periods, but do not eliminate the Tribunal's inherent power to grant or continue interim relief; the third proviso should be read as permitting vacation of stay only when delay is attributable to the assessee, while the Tribunal may extend or continue interim relief where delay is not attributable to the assessee.