1968 (9) TMI 5 - SC - Income Tax

Power of tribunal to stay the recovery of the realization of the penalty - Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction - Revenue appeal dismissed

Summary

Issues Involved:
1. Power of the Income-tax Appellate Tribunal to stay recovery of penalties during the pendency of an appeal.
2. Relevant provisions of the Income-tax Act, 1961, and their interpretation.
3. Judicial precedents and principles regarding incidental and ancillary powers of appellate bodies.

Issue-wise Detailed Analysis:

1. Power of the Income-tax Appellate Tribunal to Stay Recovery of Penalties:
The primary issue in this appeal is whether the Income-tax Appellate Tribunal has the authority to stay the recovery of penalties imposed on an assessee during the pendency of an appeal. The Tribunal initially declined to grant a stay, asserting it lacked such power. However, the High Court held that the Tribunal possessed this power as it was incidental and ancillary to its appellate jurisdiction. The Supreme Court affirmed this view, emphasizing that the Tribunal's wide powers under section 254(1) of the Income-tax Act inherently include the authority to stay recovery proceedings to ensure the effectiveness of its appellate jurisdiction.

2. Relevant Provisions of the Income-tax Act, 1961:
The judgment delves into several sections of the Income-tax Act, 1961, to interpret the Tribunal's powers:
- Section 156: Mandates the Income-tax Officer to serve a notice of demand when any tax, interest, penalty, or other sum is payable.
- Section 220(1): Specifies the payment timeline for amounts in the notice of demand and the consequences of default.
- Section 220(6): Grants the Income-tax Officer discretion to treat the assessee as not in default during the pendency of an appeal before the Appellate Assistant Commissioner.
- Section 254(1): Empowers the Tribunal to pass such orders on appeals as it thinks fit after hearing both parties.
- Section 255(5) and (6): Allows the Tribunal to regulate its own procedure and grants it powers similar to those of income-tax authorities under section 131.

The Supreme Court noted the absence of explicit provisions in the Act granting the Tribunal the power to stay recovery but emphasized that the wide appellate powers under section 254(1) implicitly include such authority.

3. Judicial Precedents and Principles:
The judgment references various judicial principles and precedents to support the Tribunal's implied powers:
- Sutherland's Statutory Construction: Asserts that a statutory grant of power includes the authority to use all reasonable means to make it effective.
- Maxwell on Interpretation of Statutes: States that granting jurisdiction implies the power to do all acts necessary for its execution.
- Relevant Case Law: The judgment cites cases under the Motor Vehicles Act and other statutes where appellate bodies were held to have incidental powers to grant stays or remands, even in the absence of explicit statutory provisions.

The Supreme Court also referred to the principle that appellate bodies must have the power to stay proceedings to prevent the appeal from being rendered nugatory. It highlighted that the Tribunal's power to stay recovery would not be exercised routinely but only in deserving cases where continuing recovery proceedings would frustrate the appeal's purpose.

Conclusion:
The Supreme Court concluded that the Income-tax Appellate Tribunal has the power to stay recovery proceedings as an incidental or ancillary aspect of its appellate jurisdiction under section 254(1) of the Income-tax Act, 1961. This authority ensures that the Tribunal's appellate powers are effective and that the purpose of the appeal is not defeated. The appeal was dismissed, with each party bearing its own costs.