2020 (6) TMI 472 - AT - Income Tax

Procedure of Appellate Tribunal - recovery proceedings - stay petition - HELD THAT - All the stakeholders all over the country, and in our considered understanding, on such important pan India issues of far reaching consequence, it is desirable to have the benefit of arguments from stakeholders in different part of the country. We are also mindful of the fact, as learned Departmental Representative so thoughtfully suggests, the issues coming up for consideration in these stay applications involve larger questions on which well considered call is required to be taken by the bench. Considering all these factors, we deem it fit and proper to refer the instant Stay Applications to the Hon ble President of Income Tax Appellate Tribunal for consideration of constitution of a larger bench and to frame the questions for the consideration by such a larger bench, under section 255(3) of the Income Tax Act, 1961. The matter is tentatively posted for hearing on 6th July 2020 or on such other date as may be directed by Hon ble President and to be heard by this or such a larger bench as the Hon ble President may be pleased to constitute under section 255(3) of the Income Tax Act, 1961. We must take suitable steps to maintain the status quo, so far as collection of disputed impugned demands are concerned, and, at the same time, to protect legitimate interests of the revenue to recover the disputed impugned demands in the event of the assessee not being successful in the present stay applications, or, the assessee not being successful eventually in the appeals. Given the overall situation- as also the fact that the stay petitions have been referred for consideration of constitution of a larger bench, we deem it fit and proper to grant an interim stay on collection/ recovery of the aggregate amounts of tax and interest etc, for the assessment yea₹ 2011-12 and 2012-13 respectively, impugned in these appeals, This interim stay will remain in operation till the related stay applications are disposed of, till the appeals are disposed of or till further orders whichever is earlier.

Issues Involved:
1. Stay on collection/recovery of tax and interest.
2. Validity and impact of CBDT approval under Section 11(1)(c).
3. Powers of the Tribunal under Section 254(2A) as amended by Finance Act, 2020.
4. Nature and implications of security to be furnished by the assessee.

Detailed Analysis:

1. Stay on Collection/Recovery of Tax and Interest:
The assessee, a public charitable trust, sought a stay on the recovery of tax and interest aggregating to ?88,84,40,520 for AY 2011-12 and ?10,91,19,880 for AY 2012-13. The stay applications were made in respect of assessment orders under Section 143(3) read with Section 250 of the Income Tax Act, 1961. The Tribunal decided to deal with both applications together due to common facts and legal issues.

2. Validity and Impact of CBDT Approval under Section 11(1)(c):
The assessee claimed amounts remitted to educational universities outside India as application of income under Section 11(1)(c). Initially, the Assessing Officer included these amounts in the income due to the lack of CBDT approval. However, the CBDT granted approval on 10th November 2015, effective for AYs 2009-10 to 2016-17. The Assessing Officer rectified the assessment orders, deleting the additions. Despite this, the CIT(A) disregarded the rectification, arguing the approval was not retrospective and the necessary verifications were not done in the original assessments. The Tribunal noted the strong prima facie case of the assessee, emphasizing the CBDT’s approval should have been considered.

3. Powers of the Tribunal under Section 254(2A) as Amended by Finance Act, 2020:
The Tribunal examined whether the amendment to Section 254(2A) by the Finance Act, 2020, which mandates a deposit of not less than 20% of the disputed tax, interest, fee, or penalty, affects its powers to grant a stay. The Tribunal considered arguments that the amendment should be directory, not mandatory, to avoid practical difficulties and unconstitutional outcomes. The Tribunal referred to judicial precedents, including the Hon’ble jurisdictional High Court’s judgment in Narang Overseas Pvt Ltd Vs ITAT, which held similar provisions as directory.

4. Nature and Implications of Security to be Furnished by the Assessee:
The Tribunal deliberated on the nature of security required under the amended Section 254(2A). It was argued that security could include bank guarantees, mortgages, liens, or personal bonds, ensuring the revenue’s interests are protected. The Tribunal acknowledged the need for flexibility in determining reasonable security.

Interim Order and Directions:
Pending final decision, the Tribunal granted an interim stay on the recovery of the disputed amounts, subject to conditions:
- The assessee must furnish an undertaking detailing investments of not less than ?99,75,60,400 within one week.
- The assessee must cooperate in the expeditious disposal of the stay applications and appeals, including participating in virtual hearings if necessary.
- The interim stay will remain until the stay applications or appeals are disposed of, or until further orders.

The Tribunal referred the matter to the Hon’ble President of ITAT for consideration of constituting a larger bench to address the significant legal questions involved. The case was tentatively scheduled for hearing on 6th July 2020.

Conclusion:
The Tribunal’s interim order emphasized maintaining the status quo on the collection of disputed demands while protecting the revenue’s interests. The larger bench's decision will address the broader implications of the amendment to Section 254(2A) and the nature of security required, ensuring a comprehensive resolution of the issues.

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