2005 (9) TMI 250 - AT - Income Tax

Summary

Issues Involved:
1. Power of the Appellate Tribunal to grant stay of collection of outstanding demand.
2. Retrospective application of the amendment to section 254(2A) of the Income-tax Act.
3. Validity and continuity of stay orders beyond 180 days.
4. Doctrine of merger and its applicability to the Tribunal and High Court orders.
5. Impact of the second proviso to section 254(2A) on the substantive right of appeal.

Issue-wise Detailed Analysis:

1. Power of the Appellate Tribunal to Grant Stay of Collection of Outstanding Demand:
The assessee sought a stay of collection of outstanding demand pending the disposal of the appeal. The Tribunal has inherent power under section 254(1) of the Income-tax Act to grant stay. The Tribunal can grant ad interim stay, conditional stay, and absolute stay. However, the Tribunal's discretion in granting stay is influenced by the context and the terms mentioned in the stay order. The Tribunal emphasized that the power to grant stay is not absolute and is subject to review, especially after the expiry of 180 days as per the second proviso to section 254(2A).

2. Retrospective Application of the Amendment to Section 254(2A) of the Income-tax Act:
The amendment to section 254(2A) introduced by the Finance Act, 2001, effective from 1-6-2001, restricts the power to grant stay to a maximum period of 180 days. The assessee argued that this amendment should not apply retrospectively to assessment proceedings initiated before 1-6-2001. The Tribunal, however, held that the second proviso to section 254(2A) applies to all stay petitions considered after 1-6-2001, irrespective of the date of initiation of the assessment proceedings. The Tribunal distinguished the case from the Supreme Court's decision in Hoosein Kasam Dada (India) Ltd., which dealt with the right of appeal, not the power to grant stay.

3. Validity and Continuity of Stay Orders Beyond 180 Days:
The initial stay order granted by the Tribunal on 27-2-2004 was for a maximum period of six months. The Tribunal held that the stay order stood vacated after 180 days due to the operation of law under the second proviso to section 254(2A). The Tribunal reiterated that any further stay beyond 180 days requires a fresh petition and reconsideration. The Tribunal dismissed the assessee's argument that the initial stay order continued to be valid and operational beyond 180 days.

4. Doctrine of Merger and Its Applicability to the Tribunal and High Court Orders:
The Tribunal observed that the order passed by the Tribunal on 27-2-2004 got merged with the order of the Hon'ble High Court dated 28-12-2004, which modified the terms of the stay. Therefore, any further petition on the issue of stay could not be entertained by the Tribunal. The Tribunal dismissed the assessee's contention that the initial stay order did not get vacated and that subsequent orders were void.

5. Impact of the Second Proviso to Section 254(2A) on the Substantive Right of Appeal:
The Tribunal held that the second proviso to section 254(2A) does not affect the substantive right of appeal conferred on an assessee. The power to grant stay is an ancillary power to the main power of deciding the appeal and is not taken away by the statute. The Tribunal emphasized that the second proviso streamlines the procedure for granting stay by fixing a time frame for review after 180 days. The Tribunal distinguished the case from other judgments that dealt with conditions affecting the right of appeal, stating that the second proviso does not impair the right of appeal but only regulates the procedure for granting stay.

Conclusion:
The Tribunal dismissed the stay petition filed by the assessee, holding that the second proviso to section 254(2A) applies to all stay petitions considered after 1-6-2001, and the initial stay order stood vacated after 180 days. The Tribunal emphasized that the power to grant stay is subject to review and is not absolute. The Tribunal also held that the second proviso does not affect the substantive right of appeal and distinguished the case from other judgments that dealt with conditions affecting the right of appeal.