TaxTMI 
TaxTMI 
2015 (5) TMI 655
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....lternative prayer has also been made to read down the provisions of the said proviso to Section 254 (2A) of the said Act to mean that the power of the Income Tax Appellate Tribunal to grant interim relief is co-terminus with the main power of disposal of the appeal, as stipulated in Section 254(1) of the said Act. In each of these petitions, initially stay was granted by the Income Tax Appellate Tribunal. But, the period of 365 days from the grant of initial stay has elapsed and in view of the provisions of Section 254(2A), as it stands now, the Tribunal cannot grant any further extension of the stay even though the appeals filed by the petitioners before the Tribunal are pending. The delay in the disposal of the appeals is also not on account of any conduct attributable to the petitioners. 2. The Constitutional validity of the third proviso to Section 254(2A) and, particularly, to the amendment introduced therein by virtue of the Finance Act, 2008, with effect from 01.08.2008, which added the words - 'even if the delay in disposing of the appeal is not attributable to the assessee'- is in question before us. The case of the petitioners is that prior to the said amendment, in a ....
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....(Delhi) (DB); (iii) Mardia Chemicals Limited & Others v. Union of India and Another: (2004) 4 SCC 311; (iv) Narang Overseas Private Limited v. Income Tax Appellate Tribunal: (2007) 295 ITR 22 (Bombay) (DB) ; (v) PML Industries Limited v. CCE & Another: 2013 (30) STR 113 (Punjab and Haryana High Court) (DB); (vi) CIT v. Maruti Suzuki (India) Limited: (2014) 362 ITR 215 (Delhi) (DB); and (vii) Dr Subramanian Swamy v. Director, CBI: (2014) 8 SCC 682(SC) 4. On the other hand, the learned counsel for the revenue submitted that there was nothing wrong with the amendment brought about in 2008 inasmuch as all it did was to clarify the legislative intent and make it explicit. What was already provided under the said Act in the third proviso to Section 254(2A) has merely been clarified. It was contended that there has been no class treatment given by the legislature and that the said provision is not discriminatory. The intention behind the amendment was to clarify that the period of stay cannot be extended beyond 365 days under any circumstances. A reference was also made to this Court's decision in Maruti Suzuki (India) Limited (supra). Reliance was also placed on a decis....
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....ded) 6. Section 254 (2A) stipulates that the Appellate Tribunal, where it is possible, may hear and decide the appeal within a period of four years from the end of the financial year in which such appeal is filed under Section 253(1), (2) or (2A). Initially, there was no proviso to Section 254(2A). The provisos were added, for the first time, by virtue of the Finance Act, 2001. At that point of time, the provisos inserted by the Finance Act, 2001 read as under:- "Provided that where an order of stay is made in any proceedings relating to an appeal filed under sub-section (1) of section 253, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order: Provided further that if such appeal is not so disposed of within the period specified in the first proviso, the stay order shall stand vacated after the expiry of the said period." 7. It is clear from the above that with effect from 01.06.2001, it was stipulated that where an order of stay had been granted, the Appellate Tribunal was required to dispose of the appeal within a period of 180 days from the date of said order. It was further provided that if app....
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....ribunal of its incidental power to grant interim relief. A Division Bench of the Bombay High Court, after considering various provisions and decisions, observed as under:- "20. It would not be possible on the one hand to hold that there is a vested right of appeal and on the other hand to hold that there is no power to continue the grant of interim relief for no fault of the assessee by divesting the incidental power of the Tribunal to continue the interim relief. Such a reading would result in such an exercise being rendered unreasonable and vilative of Article 14 of the Constitution. Courts must, therefore, construe and / or give a construction consistent with the constitutional mandate and principle to avoid a provision being rendered unconstitutional." xxxx xxxx xxxx xxxx "23. We are of the respectful view that the law as enunciated in Kumar Cotton Mills (P) Ltd. (supra) should also apply to the construction of the third proviso as introduced in Section 254(2A) by the Finance Act, 2007. 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 ....
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....ce Bill, 2008, to the extent relevant, read as under:- "Clause 46 seeks to amend section 254 of the Income-tax Act, relating to orders of the Appellate Tribunal. Sub-section (2A) of the said section provides that the Income-tax Appellate Tribunal, where it is possible, may hear and decide an 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. The first proviso to this sub-section provides that the said Appellate Tribunal may, on merit, pass an order of stay in any proceedings relating to an appeal. However, such period of stay cannot exceed 180 days from the date of such order and the said Appellate Tribunal shall dispose of the appeal within the specified period of stay. The second proviso to this sub-section provides that where the appeal has not been disposed of within the said specified period and the delay in disposing of the appeal is not attributable to the assessee, the Appellate Tribunal can further extend the period of stay originally allowed. However, the aggregate of period originally allowed and the period so extended should not exceed 365 days. The Ap....
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....proviso to Section 254 (2A) does not bar or prohibit the Revenue or departmental representative from making a statement that they would not take coercive steps to recover the impugned demand and on such statement being made, it will be open to the tribunal to adjourn the matter at the request of the Revenue. (iv) An assessee can file a writ petition in the High Court pleading and asking for stay and the High Court has power and jurisdiction to grant stay and issue directions to the tribunal as may be required. Section 254(2A) does not prohibit/bar the High Court from issuing appropriate directions, including granting stay of recovery. 27. We have not examined the constitutional validity of the provisos to Section 254 (2A) of the Act and the issue is left open." (underlining added) 12. From the above extract, it is evident that the Division Bench was not called upon and did not examine the constitutional validity of the provisos to Section 254(2A) of the said Act and left the issue open. It is only on a plain reading of the provisos, as they existed, that the Division Bench came to the conclusion that the Tribunal had no power to extend stay beyond a period of 365 days f....
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....e than 365 days 2011 90 Appeals 2012 131 Appeals 2013 36 Appeals e) The year-wise details of the number of appeals disposed of within 365 days from the date of grant of stay are as under:- Year Number of appeals disposed-off within 365 days or pending within 365 days 2011 83 Appeals 2012 147 Appeals 2013 285 Appeals" 22. The aforesaid data does not mention the quantum of demand, which was subject matter of stay, but the position is certainly not bleak and unpalatable. Most of the appeals in which stay had/has been granted, were/are being disposed of within 365 days. Number of appeals, which were not disposed of within 365 days of grant of stay, have come down sharply in the year 2013. Grant of stay by the tribunal is not a matter of right, but is decided by a speaking order, recording prima facie view on merits. In case there is an error or the tribunal has erred in granting stay, Revenue is not without remedy and can approach the High Court in accordance with law. 23. We do not have figures or data on whether the demands raised, which was subject matter of stay, was sustained/upheld or were deleted by the tribu....
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....t has power to grant and extend stay where the appeal is pending before the tribunal. The constitutional power and right is available and has not and cannot be curtailed. The powers of the High Court under Articles 226 and 227 form a part and parcel of the basic structure of the Constitution and cannot be over written and nullified as held by the Constitutional Bench in L. Chandra Kumar versus Union of India, (1997) 3 SCC 261. Thus, the High Court in appropriate matters can grant or extend stay even when the tribunal has not been able to dispose of an appeal within 365 days from the date of grant of initial stay. This perhaps appears to be and apparently is the intention of the Parliament. High Court while granting or rejecting the writ petition will examine the factual matrix, record reasons as to who is to be blamed and is responsible for the default and can also issue appropriate directions or orders for expeditious and early disposal of the appeal. The provision will propel and ensure that the tribunal will try and dispose of and decide appeals within 365 days of the grant of stay order. The Bombay High Court in Jethmal Faujimal Soni vs. Income Tax Appellate Tribunal [2011] 333....
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....In the absence of any specific provision, permitting the Tribunal to grant stay, the question arose as to whether the Tribunal had the power to stay the proceedings as also the collection of penalties pending the appeal. The High Court of Kerala held that the Tribunal had such power and that the power was incidental and ancillary to its appellate jurisdiction. The Supreme Court observed that the powers, which had been conferred by Section 254 on the Appellate Tribunal, were of the widest possible amplitude and, therefore, must carry with them, by necessary implication, all powers and duties incidental and necessary to make the exercise of those fully effective. Finally, the Supreme Court concluded by holding:- "13. Section 255(5) of the Act does empower the Appellate Tribunal to regulate its own procedure, but it is very doubtful if the power of stay can be spelt out from that provision. In our opinion the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when Section 220(6) deals expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the....
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....i Suzuki (India) Limited (supra), which shows that in less than 10% of the appeals filed by assessees, the Tribunal has granted stay orders and in a very few of such cases, the appeals are pending beyond the period of 365 days stipulated under the provisions, as they now stand. 19. A reference has been made to Mardia Chemicals Limited (supra). The passages referred to were paragraphs 55, 61 and 80, which read as under: "55. We may then turn to the arguments raised on behalf of the petitioners that the remedy before the Debts Recovery Tribunal under Section 17 of the Act is illusory, burdened with onerous and oppressive condition of deposit of 75% of the amount of the demand notice before an appeal can be entertained by the Tribunal. We feel that it would be difficult to brush aside the challenge made to the condition of such a deposit. Sub-section (2) of Section 17 itself says that no appeal shall be entertainable unless the borrower has deposited the aforesaid sum of amount claimed. Much stress has been given in reply to the proviso to sub-section (2) of Section 17, according to which the Tribunal has power to waive or reduce the amount. While waiving the condition of deposi....
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....nder sub-section (2) of Section 13 it is incumbent upon the secured creditor to serve 60 days notice before proceeding to take any of the measures as provided under sub-section (4) of Section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. In connection with this conclusion we have already held a discussion in the earlier part of the judgment. The reasons so communicated shall only be for the purposes of the information/knowledge of the borrower without giving rise to any right to approach the Debts Recovery Tribunal under Section 17 of the Act, at that stage. 2. As already discussed earlier, on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debts Recovery Tribunal. 3. That the Tribunal in exercise of its ancillary powers shall have jur....
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....members of the Tribunal and the workload. Therefore, for the reason that the Tribunal is not able to decide appeal within 180 days, the vacation of stay is a harsh and onerous and unreasonable condition. The condition of vacation of stay for the inability of the Tribunal to decide the appeal is burdening the assessee for no fault of his. Such a condition is onerous and renders the right of appeal as illusory. An order passed by a judicial forum is sought to be annulled for no fault of assessee. Therefore, in terms of judgments in Anant Mills Ltd. and Seth Nandlal cases (supra), such condition of automatic vacation of stay on the expiry of 180 days, has to be read down to mean that after 180 days the Revenue has a right to bring to the notice of the Tribunal the conduct of the assessee in delay or avoiding the decision of appeal, so as to warrant an order of vacation of stay. If the provision is not read down in the manner mentioned above, such condition suffers from illegality rendering the right of appeal as redundant. xxxx xxxx xxxx xxxx 54. Consequently, the second proviso in sub-section (2A) of Section 35C is ordered to be read down to mean that after 180 days, the Revenu....
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....ara and Ors. v. Union of India: (1983) 1 SCC 305, the Constitution Bench of this Court had an occasion to consider the scope, content and meaning of Article 14. The Court referred to earlier decisions of this Court and in para 15, the Court observed: "15. Thus the fundamental principle is that Article 14 forbids class legislation but permits reasonable classification for the purpose of legislation which classification must satisfy the twin tests of classification being founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group and that differentia must have a rational nexus to the object sought to be achieved by the statute in question."" xxxx xxxx xxxx xxxx "Court's approach 49. Where there is challenge to the constitutional validity of a law enacted by the legislature, the Court must keep in view that there is always a presumption of constitutionality of an enactment, and a clear transgression of constitutional principles must be shown. The fundamental nature and importance of the legislative process needs to be recognized by the Court and due regard and deference must be accorde....
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.... This is not a case of excessive delegation of powers and, therefore, we need not bother about the second dimension of Article 14 in its application to legislation. We are here concerned with the question of discrimination, based on an impermissible or invalid classification. It is abundantly clear that the power granted to the Tribunal to hear and entertain an appeal and to pass orders would include the ancillary power of the Tribunal to grant a stay. Of course, the exercise of that power can be subjected to certain conditions. In the present case, we find that there are several conditions which have been stipulated. First of all, as per the first proviso to Section 254(2A), a stay order could be passed for a period not exceeding 180 days and the Tribunal should dispose of the appeal within that period. The second proviso stipulates that in case the appeal is not disposed of within the period of 180 days, if the delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to extend the stay for a period not exceeding 365 days in aggregate. Once again, the Tribunal is directed to dispose of the appeal within the said period of stay. The third pro....