2012 (6) TMI 511 - HC - Income Tax

Application for Interim stay of the order of Assessing officer, during the pendency of the appeal - rejection by Appellate Authority expressing reservation about his powers to grant the interim order - Held that - In present case, Appellate Authority has not proceeded to appreciate the points raised by the petitioners in support of his prayer for grant of interim order based on materials available before him. Instead, he has ventured into discussions which are irrelevant and impermissible having regard to the binding precedent in the form of a direction issued by the Division Bench. Appellate authority shall consider the application for stay filed by the assessee on merits and in accordance with law. It is made clear that he has inherent power to grant or not to grant stay though such power is expressly conferred on him u/s 246-A. Impugned orders are quashed. Writ petitions allowed.

Summary

Issues: Challenge to order rejecting interim stay during appeal.

Analysis:
1. The petitioners challenged the assessment order under Section 14-3(3) read with Section 147 of the Income Tax Act and filed applications seeking interim stay of the demand. The Appellate Authority rejected the application, stating no prima facie case was made out. The Authority referred to a Division Bench decision and observed that the appellants did not provide necessary documents.

2. The Appellate Authority passed the impugned order before the Assessing Officer disposed of the stay petition, which was rejected later. The Senior Counsel argued that the Authority's approach of denying interim order powers was based on incomplete legal understanding, leading to illegality. The Authority did not examine the case's merits and hastily concluded no prima facie case existed without proper reasons.

3. The Authority erred in assuming the Assessing Officer had rejected the stay petition when, in reality, it was pending. The Division Bench's direction in a previous case clearly stated the Appellate Authority's inherent power to grant interim stay. The Authority's doubt on its powers was unwarranted, and its decision lacked proper consideration of the relevant legal principles and facts of the case.

4. The judgment emphasized that the Appellate Authority should adhere to established legal precedents and focus on the case's facts and applicable laws while deciding on interim stay applications. The impugned order was deemed unsustainable due to various legal flaws highlighted in the judgment.

5. Consequently, the writ petitions were allowed, the impugned orders were quashed, and the Appellate Authority was directed to rehear the matter and make appropriate decisions in line with the law. The judgment emphasized that coercive measures should not be initiated by the Assessing Officer until the applications are heard and decided upon.