2010 (4) TMI 747 - HC - Income Tax

Stay application - Extension of stay - power of tribunal to extend stay - The fact that an issue was pending before the Special Bench was not a reason for the Tribunal not to dispose of the appeal, particularly since the consequence of the inability of the Tribunal to do so would result in the vacating of the order of stay, which was passed originally in favour of the assessee. It is unfortunate that the Tribunal simply adjourned the appeal merely on the ground of the pendency of an identical issue before the Special Bench. The state of affairs which has come to pass could well have been avoided by the appeal being taken up for final disposal. - Revenue shall not take any coercive steps for enforcing the demand which forms the subject-matter of the appeal - The Tribunal is directed to dispose of the pending appeal within a period of four months from today.

Summary

Issues:
Challenge to constitutional validity of third proviso in section 254(2A) of Income-tax Act, 1961. Extension of stay period by Income-tax Appellate Tribunal. Duty of Tribunal to ensure timely disposal of appeal. Assurance by Revenue for no coercive steps if appeal disposed within four months.

Analysis:
1. The case involved a challenge to the constitutional validity of the third proviso inserted in section 254(2A) of the Income-tax Act, 1961 by the Finance Act of 2008. The main contention was regarding the provision that mandated the vacation of stay after 365 days, even if the delay in disposing of the appeal was not attributable to the assessee. The Tribunal had dismissed an application for stay extension based on this provision, leading to the pending appeal.

2. The Tribunal had granted stay initially for six months, followed by an extension for another six months. However, due to the third proviso, the Tribunal was unable to further extend the stay beyond 365 days. Despite the delay in disposing of the appeal not being the fault of the assessee, the Tribunal was bound by the provision to vacate the stay. The Tribunal's failure to dispose of the appeal promptly was noted, especially considering no fault on the part of the assessee.

3. The court emphasized the duty of the Tribunal to ensure timely disposal of appeals to prevent prejudice to the assessee. The court criticized the Tribunal for adjourning the appeal due to a similar issue pending before a Special Bench, highlighting that such delays could have been avoided. The Tribunal was directed to dispose of the pending appeal within four months, with an assurance from the Revenue not to take coercive steps during this period.

4. The court, based on the Revenue's assurance, did not delve into the constitutional validity of the third proviso. Instead, it focused on expediting the appeal's disposal within the stipulated four-month period. The parties were instructed to present the court's order to the Tribunal for necessary action. Ultimately, the petition was disposed of with no order as to costs.