TaxTMI 
TaxTMI 
2015 (5) TMI 655
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....d 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 decision of the Bombay High Court in the case....
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....ers 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 decision of the Bombay High Court in the case of Jethmal Faujimal So....
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....ay 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 appeal was not disposed of within the specified period of 180 days, the stay order would stand vacat....
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.... 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 of the Tribunal to continue interim relief in a case where the hearing of the appeal has been delayed for....
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....ax 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 Appellate Tribunal is required to dispose of the appeal within the extended period. The third proviso to this sub-sect....
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....ot 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 from the date of the first order of stay but that an assessee could file a writ petition in the High Court asking for stay even beyond the said pe....
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....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 tribunal. Merits and justification of additions is examined by the appellate forums and demands raised have relevance when they are sustained by the tribunal/High Court and the Supreme Court." 14. From the above data, it is evident that the number of stay orde....
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.... 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 ITR 96, had occasion to deal with a similar situation and entertained the writ petition. In the said case constitutional validity of the third proviso inserted in Section 254(2A) of the Act by Finance Act, 2008, w.e.f. 1st October, 2008 was challenged It was ob....
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.... 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 Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It could well be said that when Section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary....
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....d. 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 depositing the amount or reducing it, the Tribunal is required to record reasons for the same. It is submitted for the respondents that in an appropriate case, DRT which is presided over by a Member of a Higher Judicial Service, would exercise its discretion and may waive or reduce the....
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....ration 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 jurisdiction to pass any stay/interim order subject to the condition as it may deem fit and proper to impose. 4. In view of the discussion already held in this behalf, we find that the requirement of deposit of 75% of amount claimed before entertaining an appeal (petition) under Section 17 of the Act ....
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....sessee 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 Revenue has a right to seek vacation of stay on proof of the fact that the assessee is the one, who is defaulted or taken steps to delay the ultimate decision." The said Court read down the provision in question in much the same manner as did the Bombay High Court in the case of Narang Overseas (supra). The object being....
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....tion 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 accorded to the legislative process. Where the legislation is sought to be challenged as being unconstitutional and violative of Article 14 of the Constitution, the Court must remind itself to the principles relating to the applicability of Article 14 in relation to invalidation of legislation. The two dimensions of Article 14 in its applica....
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....o 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 proviso, as it stands today, stipulates that if the appeal is not disposed of within the period of 365 days, then the order of stay shall stand vacated, even if the delay in disposing of the appeal is not attributable to the assessee. While it could be argued that the condition that the stay order could be extended beyond a period of 180 day....