2001 (2) TMI 279 - AT - Income Tax

Summary

Issues:
Stay of recovery of demand arising from Assessing Officer's order under section 143(3), read with section 263 of the Income-tax Act, 1961 for the assessment year 1995-96.

Analysis:
1. Facts of the Case: The assessee, a Public Sector Undertaking, filed its return for the assessment year 1995-96 declaring a total income. The assessment completed by the Dy. CIT allowed deductions for "licence fee" and cancellation of bills accounted for as income. The ld. CIT later found these deductions erroneous and prejudicial to revenue, setting aside the assessment order under section 263.

2. Creation of Demand: The fresh assessment made after setting aside the original order disallowed the deductions, resulting in a demand of Rs. 1,60,35,67,210. The assessee appealed against the orders under section 263 and 143(3) before the Tribunal, seeking a stay of the demand pending the appeal.

3. Arguments for Stay: The assessee's counsel argued for the stay of demand, citing a precedent where a similar stay was granted in another case. The counsel emphasized the substantial injustice to the PSU if the demand is recovered, highlighting the balance of convenience in favor of the assessee.

4. Opposition by Department: The Standing Counsel for the Department opposed the stay petition, arguing that the demand arose from a fresh assessment order, not the order under section 263. The Department contended that the petition was not maintainable in law and on facts, citing differences in the facts of the case relied upon by the assessee.

5. Decision on Stay Petition: The Tribunal considered the legal maintainability of the assessee's petition for stay of demand. It noted that the pending appeal before the Tribunal should be in relation to the order giving rise to the disputed demand. As the appeal against the assessment was pending before the First Appellate Authority, not the Tribunal, the petition for stay of demand was deemed not maintainable. The Tribunal rejected the stay petition based on this legal analysis.

In conclusion, the Tribunal held that the assessee's petition for the stay of demand was not legally maintainable as the appeal related to the order under section 263, not the assessment order creating the demand. The decision was based on the legal principle that the Tribunal's power to grant a stay of demand is ancillary to the appeal pending before it, which should be directly linked to the disputed demand.