2003 (3) TMI 260 - AT - Income Tax

Summary

Issues Involved:
1. Tribunal's power to stay assessment proceedings.
2. Impact of denial of registration under section 12A on assessment proceedings.
3. Balance of convenience in staying assessment proceedings.

Issue-wise Detailed Analysis:

1. Tribunal's Power to Stay Assessment Proceedings:
The petitioner, a society registered under the Mysore Societies Registration Act, 1960, sought the stay of assessment proceedings for the assessment year 2002-03 by the Deputy Director of Income-tax (Exemption), Bangalore. The petitioner argued that the Tribunal had inherent power to grant such a stay, citing various case laws including ITO v. M.K. Mohammed Kunhi, ITO v. Khalid Mehdi Khan, Puran Mal Kauntia v. ITO, and Ritz Ltd. v. D.D. Vyas. The Tribunal acknowledged these precedents and concluded that it indeed had the implied power to stay assessment proceedings in appropriate cases. However, it emphasized that such power should not be exercised routinely but only when a prima facie case is made that the continuation of assessment proceedings would render the appeal nugatory.

2. Impact of Denial of Registration under Section 12A on Assessment Proceedings:
The petitioner had filed for registration under section 12A, which was denied by the DIT (Ex) on 17-12-2002. This denial was under appeal before the Tribunal. The petitioner argued that the denial of registration would adversely affect its claim for exemption under sections 11 and 12, and completing the assessment without awaiting the Tribunal's decision would lead to unnecessary demands and multiplicity of proceedings. The Tribunal agreed that the appeal's outcome would significantly impact the assessment proceedings. If the appeal resulted in granting registration, the petitioner would be eligible for exemptions under sections 11 and 12, which the Assessing Officer would need to consider.

3. Balance of Convenience in Staying Assessment Proceedings:
The Department opposed the stay, arguing that the Tribunal lacked the jurisdiction to stay assessment proceedings and that such a stay would prejudice the revenue. They cited section 153(3) and the Kerala High Court's decision in Travancore Electro Chemical Industries Ltd. v. Dy. CIT. The Tribunal, however, found that the balance of convenience did not favor staying the assessment proceedings. Instead, it proposed a solution ensuring that any tax demand arising from the assessment would not be enforced until the Tribunal decided on the appeal regarding the denial of registration under section 12A.

Conclusion:
The Tribunal decided not to stay the assessment proceedings but provided safeguards for the petitioner. It ruled that any tax demand resulting from the assessment would not be enforced until the pending appeal was resolved. The Tribunal also directed both parties to expedite the appeal process and scheduled an out-of-turn hearing for 7-4-2003 to ensure a timely resolution.

Disposition:
1. The assessment proceedings for the year 2002-03 would not be stayed.
2. Any tax demand arising from the assessment would not be enforced until the appeal was resolved.
3. Both parties were directed to cooperate for an early disposal of the appeal.
4. The appeal was scheduled for an out-of-turn hearing on 7-4-2003.

The petition was disposed of in the aforementioned manner.