2007 (7) TMI 5 - HC - Income Tax

Issues Involved:
1. Interpretation of the third proviso to Section 254(2A) of the Income Tax Act.
2. The incidental power of the Tribunal to grant interim reliefs during the pendency of proceedings.
3. The constitutionality of the third proviso if interpreted to denude the Tribunal of its power to grant interim relief.
4. The retrospective or prospective effect of the amendment introduced by the Finance Act, 2007.

Detailed Analysis:

1. Interpretation of the third proviso to Section 254(2A) of the Income Tax Act:
The core question addressed was whether the third proviso to Section 254(2A) of the Income Tax Act denudes the Tribunal of its incidental power to grant interim reliefs. The petitioner argued that despite the third proviso introduced by the Finance Act, 2007, the Tribunal's incidental power to grant interim relief subsists. The Tribunal's contrary view was deemed an error of law apparent on the face of the record. The respondents contended that the Tribunal's interpretation was consistent with legislative intent and should not be interfered with by the Court.

2. The incidental power of the Tribunal to grant interim reliefs during the pendency of proceedings:
The judgment emphasized that the power to grant interim relief is inherent and essential to ensure that the final relief is not rendered nugatory. The Supreme Court in Income Tax Officer, Cannanore vs. M.K. Mohammed Kunhi recognized this power, stating that statutory power carries with it the authority to use all reasonable means to make such power effective. The Tribunal's power to grant stay or interim relief is co-extensive with its power to grant final relief, ensuring that the successful party can reap the fruits of litigation.

3. The constitutionality of the third proviso if interpreted to denude the Tribunal of its power to grant interim relief:
The judgment highlighted that interpreting the third proviso to completely remove the Tribunal's power to grant interim relief, even when the delay is not attributable to the assessee, would render the provision unreasonable and violative of Article 14 of the Constitution. The Court must avoid interpretations that lead to unconstitutionality. The decision in Commissioner of Customs & Central Excise vs. Kumar Cotton Mills Pvt. Ltd. was referenced, where similar language in the Central Excise Act was interpreted to allow the continuation of interim relief when delays were not due to the assessee's fault.

4. The retrospective or prospective effect of the amendment introduced by the Finance Act, 2007:
Given the conclusion that the Tribunal retains the power to continue interim relief, it was deemed unnecessary to decide on the retrospective or prospective effect of the amendment. The Court focused on ensuring that the Tribunal's incidental powers were preserved to avoid rendering the appeal process ineffective.

Conclusion:
The Court concluded that the Tribunal retains the power to continue interim relief beyond the period specified in the third proviso to Section 254(2A), provided the delay in disposing of the appeal is not attributable to the assessee. The impugned order of the Tribunal was set aside, and the interim relief was directed to continue for a further period of four months, with instructions for the Tribunal to dispose of the appeal within this period. The petition was allowed, and no order as to costs was made.