TaxTMI 
TaxTMI 
2021 (4) TMI 369
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....ISING OUT OF SLP (CIVIL) NO. OF 2021] CC NO.8215 OF 2017 CIVIL APPEAL NO. 1117 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.19322 OF 2017] CIVIL APPEAL NO. 1118 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] CC NO.8924 OF 2017 CIVIL APPEAL NO. 1119 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] DIARY NO.15229 OF 2017 CIVIL APPEAL NO. 1120 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.720 OF 2018] CIVIL APPEAL NO. 1121 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.27498 OF 2017] CIVIL APPEAL NO. 1122 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.30215 OF 2017] CIVIL APPEAL NO. 1123 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.722 OF 2018] CIVIL APPEAL NO. 1124 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31873 OF 2017] CIVIL APPEAL NO. 1126 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31720 OF 2017] CIVIL APPEAL NO. 1125 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.32236 OF 2017] CIVIL APPEAL NO. 1128 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.33218 OF 2017] CIVIL APPEAL NO. 1129 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12200 OF 2018] CIVIL APPEAL NO. 1130 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.4186 OF 2018] CIVIL APPEAL NO. 1131 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12202 OF 2018] CIVIL APPEAL NO. 1132 OF 2021 [ARISING OUT OF SLP (C....
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....30.09.2008, a return of income was filed for the assessment year 2008-2009 declaring a total income of INR 92,54,89,822. A final assessment order was passed on 19.10.2012 which was adverse to the assessee. Aggrieved by the aforesaid order, the assessee filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as "Tribunal") on 29.04.2013. On 31.05.2013, a stay of the operation of the order of the assessing officer was granted by the Tribunal for a period of six months. This stay was extended till 08.01.2014 and continued being extended until 28.05.2014. Since the period of 365 days as provided in Section 254(2A) of the Income Tax Act was to end on 30.05.2014 beyond which no further extension could be granted, the assessee, apprehending coercive action from the Revenue, filed a writ petition before the Delhi High Court on 21.05.2014 challenging the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act. By a judgment dated 19.05.2015, the Delhi High Court struck down that part of the third proviso to Section 254(2A) of the Income Tax Act which did not permit the extension of a stay order beyond 365 days even if the assessee was ....
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....y or object laid down in the statutory provision is itself arbitrary or discriminatory. They also cited judgments to show that even in interpreting a tax statute, though equitable considerations are not to be given effect, yet they are not wholly irrelevant when the constitutional validity of the provision is itself challenged. 6. The genesis of the stay provision contained in Section 254 of the Income Tax Act is in the celebrated judgment of this Court in Income Tax Officer v. M.K. Mohammed Kunhi (1969) 2 SCR 65. In this judgment, Section 254 of the Income Tax Act, as originally enacted, came up for consideration before this Court. After setting out Section 254(1), this Court referred to Sutherland, Statutory Construction (3rd Edn., Arts. 5401 and 5402), and then held that the power which has been conferred by the said Section on the Appellate Tribunal with the widest possible amplitude must carry with it, by necessary implication, all powers incidental and necessary to make the exercise of such power fully effective. The Court held: "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 sta....
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...., 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 where an order of stay is made in any proceedings relating to an appeal filed under subsection (1) of section 253, the Appellant 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." 8. Realising that a hard and fast provision which is directory so far as the disposal of appeal is concerned, but mandatory so far as vacation of the stay order is concerned, would lead to great hardship, the legislature stepped in again and amended Section 254(2A) vide Finance Act, 2007 (w.e.f. 01/06/2007) as follows: "254. Orders of Appellate Tribunal. xxx xxx xxx (2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from th....
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.... as it earlier stood, in a case when in an appeal interim relief was granted, if the appeal was not disposed off within 180 days provided that the stay shall stand vacated. The proviso as it stood could really have not have stood the test of non-arbitrariness as it would result in an appeal being defeated even if the assessee was not at fault, as in the meantime the revenue could proceed against the assets of the assessee. The proviso as introduced by the Finance Act, 2007 was to an extent to avoid the mischief of it being rendered unconstitutional. Once an appeal is provided, it cannot be rendered nugatory in cases were the assessee was not at fault. The amendment of 2007 conferred the power to extend the period of interim relief to 360 days. Parliament clearly intended that such appeals should be disposed of at the earliest. If that be the object the mischief which was sought to be avoided was the nondisposal of the appeal during the period the interim relief was in operation. By extending the period Parliament took note of laws delay. The object was not to defeat the vested right of Appeal in an assessee, whose appeal could not be disposed off not on account of any omis....
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....sessee 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." [at page 32] 10. Close on the heels of this judgment, Section 254(2A) of the Income Tax Act was again amended, this time by the Finance Act, 2008 (w.e.f. 01/10/2008). This amendment reads as follows: "254. Orders of Appellate Tribunal. xxx xxx xxx (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 pro....
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....r 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. We have not examined the constitutional validity of the provisos to Section 254(2A) of the Act and the issue is left open." [at page 231] 12.Close upon the heels of the judgment in Maruti Suzuki (supra), the Gujarat High Court in DCIT v. Vodafone Essar Gujarat Ltd. (2015) 376 ITR 23, while disagreeing with the view taken in Maruti Suzuki (supra), interpreted the third proviso to Section 254(2A) of the Income Tax Act as follows: " Applying the decision of the Division Bench of this court in the case of Small Industries Development Bank of India (supra) to....
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....trar of the Appellate Tribunal is required to maintain separate register of the appeals in which stay has been granted fully and/or partially and the appeals in which no stay has been granted. [at page 42-43] xxx xxx xxx With greatest respect to the Delhi High Court, if the aforesaid procedure is adopted, either it would lead to multiplicity of proceedings before the High Court and/or even granting the stay of demand by the Department itself. We are of the opinion that instead if the aforesaid procedure is followed, it would meet the ends of justice and it may not increase the litigation either before the High Court and/or appropriate forum and the purpose and object of section 254(2A) of the Act is achieved." [at page 45-46] 13.The impugned judgment in M/s Pepsi Foods Ltd. v. ACIT (2015) 376 ITR 87 dealt with the challenge to the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act, as amended by the Finance Act, 2008. A Division Bench of the Delhi High Court, after setting out the Bombay High Court judgment in Narang Overseas (supra), then referred to the previous judgment of the Delhi High Court in Maruti Su....
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.... 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 days only if the delay in disposing of the appeal was not attributable to the as....
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....t sought to be achieved. The said expression introduced by the Finance Act, 2008 is, therefore, struck down as being violative of Article 14 of the Constitution of India. This would revert us to the position of law as interpreted by the Bombay High Court in Narang Overseas (supra), with which we are in full agreement. Consequently, we hold that, where the delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to grant extension of stay beyond 365 days in deserving cases. The writ petitions are allowed as above." [at page 107-109] 14. It is settled law that challenges to tax statutes made under Article 14 of the Constitution of India can be on grounds relatable to discrimination as well as grounds relatable to manifest arbitrariness. These grounds may be procedural or substantive in nature. Thus, in Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri (1955) 1 SCR 448, this Court struck down Section 5(4) of the Taxation on Income (Investigation Commission) Act, 1947 on the ground that the procedure prescribed was substantially more prejudicial and more drastic to the assessee than the procedure contained in the Indian Income Tax Ac....
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.... contained in Article 14 of the Constitution." [at page 91-92] Likewise, in Union of India v. A. Sanyasi Rao (1996) 3 SCC 465, this Court struck down Section 44-AC of the Income Tax Act as being discriminatory when only particular trades were singled out for discriminatory treatment, reliefs under Sections 28 to 43-C of the Income Tax Act being denied only to such trades. This was done as the denial of such relief had no nexus to the object sought to be achieved by the legislation and resulted in unfairness, arbitrariness and denial of equality of treatment (see paragraph 22). 16.The other facet of Article 14 has been recently resurrected by a 5- Judge Bench judgment in Shayara Bano v. Union of India (2017) 9 SCC 1 as follows: "101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641 : 1985 SCC (Tax) 121] stated that it was settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. This being the case, there is no rational distinction....
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....on becomes mandatory so far as the assessee is concerned. The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee. But such object cannot itself be discriminatory or arbitrary, as has been felicitously held in Nagpur Improvement Trust v. Vithal Rao (1973) 3 SCR 39 as follows: "It is now well-settled that the State can make a reasonable classification for the purpose of legislation. It is equally well-settled that the classification in order to be reasonable must satisfy two tests: (i) the classification must be founded on intelligible differentia and (ii) the differentia must have a rational relation with the object sought to be achieved by the legislation in question. In this connection it must be borne in mind that the object itself should be lawful. The object itself cannot be discriminatory, for otherwise, for instance, if the object is to discriminate against one section of the minority the discrimination cannot be justified on the ground that there is a reasonable classification becaus....
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....thin that time and be disposed of finally. It is common knowledge that unless a suit is instituted soon after the date of letting it would never be disposed of within ten years and even then within that time it may not be disposed of. That will make the ten years holiday from the Rent Act illusory and provide no incentive to the landlords to build new houses to solve problem of shortages of houses. The purpose of legislation would thus be defeated. Purposive interpretation in a social amelioration legislation is an imperative irrespective of anything else." 126. Likewise, in Sarah Mathew v. Institute of Cardio Vascular Diseases [Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC 62 : (2014) 1 SCC (Cri) 721] , this Court held that for the purpose of computing limitation under Section 468 of the Code of Criminal Procedure, 1973 the relevant date is the date of filing of the complaint and not the date on which the Magistrate takes cognizance, applying the aforesaid maxim as follows: (SCC pp. 96-97, para 39) "39. As we have already noted in reaching this conclusion, light can be drawn from legal maxims. Legal maxims are referred to in Bharat Kale [Bha....
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....terference with a litigant's fundamental right to non-arbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant's fundamental right to carry on business under Article 19(1)(g) of the Constitution of India. This being the case, we would ordinarily have struck down the provision in its entirety. However, that would then throw the baby out with the bath water, inasmuch as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem [Madras Petrochem Ltd. v. BIFR, (2016) 4 SCC 1 : (2016) 2 SCC (Civ) 478] . Thus, while leaving the provision otherwise intact, we strike down the word "mandatorily" as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days....
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....ions of the Original Side Rules of the Bombay High Court the earlier appeal could be permitted to be filed without a certified copy of the decree or order, the appeal would not be valid and competent unless the further requirement of filing the certified copy had been complied with. At the time when the earlier Appeal No. 36 of 1981 had been withdrawn, the certified copy of the decree had not been filed. The said appeal without the certified copy of the decree remained an incompetent appeal. The withdrawal of an incompetent appeal which will indeed be no appeal in the eye of law cannot in any way prejudice the right of any appellant to file a proper appeal, if the right of appeal is not otherwise lost by lapse of time or for any other valid reason. We are, therefore, of the opinion that the provisions contained in Order 20 Rule 11 of the Code do not in the facts and circumstances of the present case deprive the appellant of his right to file an appeal against the decree." This judgment is distinguishable as it does not deal with the constitutional validity of an appeal provision. 20. Likewise, the judgment in Janardhana Rao (supra), which held that a right of appeal is neithe....
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....e exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory." [emphasis supplied] This Court ultimately struck down Section 17(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI Act") holding that in the circumstances mentioned, the deposit of 75% of the amount claimed as a pre-condition to the hearing of an "appeal" before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act was onerous, oppressive, unreasonable, arbitrary and hence violative of Article 14 of the Constitution of India. 21.The learned ASG then relied upon judgments which indicate that when Article 14 of the Constitution of India is applied to tax legislation, greater freedom in the joints must be allowed by the Court in adjudging the constitutional validity of the same. For this purpose, he relied upon State of M.P. v. Bhopal Sugar Industries Ltd. (1964) 6 SCR 846. In this case, the judgment of this Court held that if the statute discloses a permissible policy of taxation, the Courts will uphold it. If, how....
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.... discover the intention of the Legislature from the language used. It is necessary to remember that language is at best an imperfect instrument for the expression of human intention. It is well to remember the warning administered by Judge Learned Hand that one should not make a fortress out of dictionary but remember that statutes always have some purpose or object to accomplish and sympathetic and imaginative discovery is the surest guide to their meaning. 47. We have noted the object of Section 16(3) of the Act which has to be read in conjunction with Section 24(2) in this case for the present purpose. If the purpose of a particular provision is easily discernible from the whole scheme of the Act which in this case is, to counteract the effect of the transfer of assets so far as computation of income of the assessee is concerned then bearing that purpose in mind, we should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result i.e. result not intended to be subserved by the object of the legislation found in the manner indicated before, and if another construction is possible apart from strict litera....