1997 (11) TMI 86 - HC - Income Tax

Summary

Issues:
- Direction sought to prevent coercive steps for interest recovery under Income-tax Act.
- Jurisdiction of reference court to grant stay of tax or other dues.
- Applicability of Supreme Court ruling on stay of recovery pending disposal of reference.
- Power of Income-tax Appellate Tribunal to grant stay of interest recovery.
- Interpretation of Supreme Court's use of "tax" in relation to interest recovery.

Analysis:
The writ petition was filed to prevent coercive steps for the recovery of interest under the Income-tax Act for specific assessment years pending the disposal of a reference application. The petitioner contended that the reference court lacked the inherent power to grant a stay of tax or other dues, leading to the petition under Article 226 of the Constitution. Reference to a Supreme Court ruling highlighted that the appellate authority retains jurisdiction to grant stay, emphasizing the need for the petitioner to approach the Income-tax Appellate Tribunal for such relief.

The High Court analyzed the Supreme Court's pronouncement and concluded that the Tribunal's power to grant stay should extend to interest recovery linked with tax demands. The Court reasoned that if the tax demand is set aside in favor of the assessee, the interest levied under section 220(2) would be nullified. Therefore, the power to stay recovery of interest is considered incidental and ancillary to the appellate jurisdiction, aligning with the Supreme Court's stance on the issue.

Ultimately, the High Court dismissed the writ petition, advising the petitioner to seek relief by filing an application before the Income-tax Appellate Tribunal for the stay of interest recovery. The Court expressed confidence that the Tribunal would promptly address such an application. The decision emphasized the contextual interpretation of the Supreme Court's ruling and the broader scope of the Tribunal's power to grant stay, encompassing both tax and consequential interest recovery.

This judgment underscores the procedural route for seeking relief in matters of interest recovery under the Income-tax Act, emphasizing the role of the Income-tax Appellate Tribunal in granting stays pending the disposal of references. The Court's analysis provides clarity on the Tribunal's authority to address interest recovery issues linked with tax demands, ensuring a comprehensive understanding of the legal framework governing such matters.