2016 (5) TMI 47 - AT - Income Tax

Extension of stay of outstanding demand - Held that - In the facts of the present case, stay for 365 days has already been granted by the ITAT and a further stay of six months beyond the said period is requested by the assessee. In order to decide the issue arising in the present stay petition, the specific provision invoked by the assessee and required to be considered by us in the present proceedings is section 254(2A). In detail in the earlier part of this order, we extend stay for a period of six months or upto disposal of appeal whichever is earlier. While so directing the assessee is put to notice that no adjournment except under exceptional and bonafide circumstances shall be sought lest the assessee runs the risk of stay being vacated. The said order was pronounced on the date of hearing itself.

Issues Involved:
1. Extension of stay of outstanding demand.
2. Applicability and interpretation of Section 254(2A) of the Income Tax Act.
3. Jurisdictional High Court's stance on the third proviso to Section 254(2A).

Issue-wise Detailed Analysis:

1. Extension of Stay of Outstanding Demand:
The assessee filed a stay petition requesting an extension of stay for an outstanding demand of ?4,07,87,088/-. Initially, the ITAT granted a stay for six months, during which the assessee deposited ?60 Lacs. The stay was further extended for another six months as the appeal was not decided within the initial period. The assessee argued that the delay in the appeal's disposal was due to adjournments requested by the Department. The Revenue suggested extending the stay only until the next hearing date. However, the Tribunal noted that the delay was not attributable to the assessee and extended the stay for another six months or until the appeal's disposal, whichever is earlier.

2. Applicability and Interpretation of Section 254(2A) of the Income Tax Act:
Section 254(2A) allows the Tribunal to grant a stay for up to 180 days initially and extend it further if the delay is not attributable to the assessee. The Tribunal is empowered to extend the stay beyond 365 days in deserving cases. The Tribunal referred to the jurisdictional High Court's ruling in Pepsi Foods Pvt. Ltd., which struck down the third proviso to Section 254(2A) as unconstitutional. This proviso created "hostile discrimination" against law-abiding assessees by treating them the same as those who delayed hearings after obtaining a stay.

3. Jurisdictional High Court's Stance on the Third Proviso to Section 254(2A):
The third proviso to Section 254(2A), introduced by the Finance Act, 2008, was struck down by the jurisdictional High Court in Pepsi Foods Pvt. Ltd. The High Court held that the proviso violated Article 14 of the Constitution by creating unequal treatment between assessees who delayed proceedings and those who did not. The High Court ruled that the Tribunal has the power to extend the stay beyond 365 days if the delay is not attributable to the assessee. The Tribunal, in the present case, followed this precedent and extended the stay, emphasizing that the delay was due to the Department's requests for adjournments.

Conclusion:
The Tribunal extended the stay of the outstanding demand for another six months or until the disposal of the appeal, whichever is earlier. The decision was guided by the jurisdictional High Court's ruling, which struck down the third proviso to Section 254(2A) as unconstitutional, allowing the Tribunal to extend the stay beyond 365 days in deserving cases where the delay is not attributable to the assessee. The Tribunal emphasized that the assessee should not seek unnecessary adjournments to avoid the risk of the stay being vacated.

← Previous Next →