2014 (5) TMI 197 - HC - Income Tax

Power to extend the stay beyond 365 days Effect of insertion of the proviso to section 254(2A) of the Act - Held that - The Tribunal has failed to take note of the aspect and erroneously held that the Tribunal has power to extend stay of demand beyond the period of 365 days even after insertion of third proviso to sub-section (2A) of Section 254 of the Act - as such, there is no pronouncement in Commissioner of Income Tax versus Ronuk industries Limited 2010 (11) TMI 461 - Bombay High Court and a statutory authority, which has been granted statutory power, can exercise such power within the four corners of the statute granting such power the order of the Tribunal is set aside Decided in favour of Revenue.

Summary

Issues: Interpretation of statutory provisions regarding extension of stay of demand beyond 365 days under Section 254(2A) of the Income Tax Act, 1961.

Analysis:
The High Court examined the issue of extending the stay of demand beyond 365 days under Section 254(2A) of the Income Tax Act, 1961. The Court noted that the Tribunal had erroneously relied on a judgment without considering the relevant statutory provision. The Court highlighted that the third proviso to sub-section (2A) of Section 254 was inserted only from 1st October, 2008, and was not in existence when the earlier judgment was delivered. The Court emphasized that a statutory authority can only exercise power within the boundaries set by the statute granting such power. In this case, the Tribunal had extended the stay of demand beyond 365 days after the power to do so had been withdrawn by the insertion of the proviso in question.

The Court clarified that the Tribunal's decision to extend the stay of demand beyond 365 days was not in line with the statutory provisions. The Court observed that the Tribunal had failed to consider the relevant timeline and legal framework when making its decision. Consequently, the Court set aside the orders of the Tribunal under appeal, emphasizing that the Tribunal had overstepped its authority by extending the stay beyond the prescribed period.

The Court acknowledged that the Tribunal's inability to hear the appeal of the respondent assessee within the 365-day timeframe had led to the extension of the stay of demand. The Court, while allowing the appeals and setting aside the Tribunal's orders, granted the assessee the opportunity to pursue legal remedies available to address the situation arising from the Tribunal's delay in hearing the appeal within the stipulated time frame. The Court's decision aimed to uphold the statutory provisions and ensure that the exercise of power by authorities remains within the confines of the law.