2017 (5) TMI 1353 - AT - Income Tax

Extension of stay for the recovery of demand - Held that - We extend the stay for a period of 90 days or till the disposal of the appeal by Third Member whichever is earlier with the condition that the assessee shall give undertaking to the effect that assessee shall not transfer dispose off alienate or create any kind of third party interest in the fixed and immovable assets of the assessee-company in order to secure the amount within 30 days from the date of the order.

Summary

Issues Involved:
1. Extension of stay on outstanding demand.
2. Applicability of the third proviso to section 254(2A) of the Income Tax Act.
3. Financial hardship and constraints of the assessee.
4. Compliance with judicial precedents and directions from higher courts.
5. Imposition of conditions for granting stay.

Issue-wise Detailed Analysis:

1. Extension of Stay on Outstanding Demand:
The assessee sought an extension of the stay on the outstanding demand originally granted by the Tribunal. The Tribunal had previously granted and extended the stay multiple times, with the last extension expiring on 01.11.2016. The counsel for the assessee argued that the delay in the disposal of the appeals was not attributable to the assessee, and thus, an extension should be granted until the final disposal of the appeals. The Tribunal acknowledged that the delay was due to the non-functioning of the Bench and not the fault of the assessee, making it a deserving case for the extension of the stay.

2. Applicability of the Third Proviso to Section 254(2A) of the Income Tax Act:
The Revenue opposed the extension, citing the third proviso to section 254(2A) of the Act, which restricts the Tribunal's power to extend the stay beyond 365 days. The Revenue argued that the Tribunal should not extend the stay beyond this statutory period, even if the delay in disposing of the appeals was not attributable to the assessee. However, the Tribunal referred to the judgment of the Hon'ble Punjab & Haryana High Court in the case of Pr. CIT Vs. Carrier Air Conditioning & Refrigeration Ltd., which allowed the extension of stay beyond 365 days in deserving cases where the delay was not attributable to the assessee.

3. Financial Hardship and Constraints of the Assessee:
The assessee argued that it was operating on overdraft limits and that payment or part payment of the disputed amount would result in financial hardship, as it would have to pay interest on bank borrowings. The Tribunal had previously considered the issue of financial constraints and hardships in the original stay order. The Tribunal found that the financial condition of the assessee was not so good to make any payment of 25% through bank guarantee, as directed by the Judicial Member.

4. Compliance with Judicial Precedents and Directions from Higher Courts:
The Tribunal considered the directions of the Hon'ble Punjab & Haryana High Court, which stated that in the event of the stay being extended by the Tribunal, the respondents shall refund the amount recovered, subject to any conditions imposed by the Tribunal. The Tribunal noted that the judgment of the Hon'ble High Court should be followed as a precedent. The Tribunal also considered the fact that the appeals had been admitted by the Hon'ble High Court, making the issue in dispute debatable.

5. Imposition of Conditions for Granting Stay:
The Judicial Member proposed extending the stay with two conditions: (i) the assessee shall provide a bank guarantee of 25% of the amount, and (ii) the assessee shall give an undertaking not to transfer or alienate its fixed and immovable assets. The Accountant Member, however, extended the stay without any conditions. The Third Member resolved the difference by agreeing to extend the stay for 90 days with the condition that the assessee shall give an undertaking not to transfer, dispose of, alienate, or create any third-party interest in its fixed and immovable assets.

Conclusion:
The Tribunal extended the stay for a further period of 90 days or until the disposal of the appeal by the Third Member, whichever is earlier, with the condition that the assessee shall give an undertaking not to transfer, dispose of, alienate, or create any third-party interest in its fixed and immovable assets within 30 days from the date of the order. The Tribunal's decision was guided by the principles laid down by the Hon'ble Punjab & Haryana High Court and the financial constraints faced by the assessee.