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TMI Blog2010 (9) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... the Applicant. Soli E. Dastur for the Respondent ORDER R.V. Easwar, President This is a miscellaneous application filed by the revenue purporting to be under section 254(2) of the IT Act against the order passed by the Tribunal on 26-2-2010 granting stay of the demand of the interest charged under section 201(1A) of the Act. 2. The brief facts giving rise to the application are as follow. The assessee s appeals in ITA Nos. 6058-6060/M/2009 and 155-157/M/2010 were posted for hearing on 26-2-2010 before the Tribunal. The revenue moved an application dated 25-2-2010 for adjournment on the ground that some further time is needed for preparation and that the DR had to argue another search and seizure matter. The assessee did not object to the application but pointed out that the Assessing Officer was taking steps to recover the interest amount of about Rs. 8.9 crores charged under section 201(1A) and has asked the assessee to pay up within 3 days, that such action was also approved by the CIT and that the demand of the shortfall of the tax raised by the order passed under section 201(1) has already been stayed by the Tribunal and that the interest being consequenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification can be filed only against the order under sub-section (1) of section 254. In our view the preliminary objection is not maintainable for two reasons. Firstly, though it is styled as an application for rectification under section 254(2), what has been filed by the revenue is in substance only an application for vacating the stay. Such an application, either for vacating the stay or modifying the terms thereof, can always be filed against an order of stay granted by the Tribunal, if the circumstances under which the stay was granted have undergone some material change or if the stay has been granted under a mistaken view of the matter. It may not be referable to any particular statutory provision but it should be treated as an application invoking the inherent power of the Tribunal. Secondly, the power to grant stay is incidental or ancillary to the power to dispose of the appeal and is thus, in our humble understanding, referable only to sub-section (1) of section 254. The proviso to sub-section (2A) does not confer any power on the Tribunal to grant stay. Such a power is embedded in sub-section (1) itself, having regard to the observations of the Supreme Court in ITO v. M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot pass an order of stay where it has no jurisdiction over the proceedings by way of a pending appeal is sound, having regard to the observations made by the Supreme Court in M.K. Mohammed Kunhi s case (supra) it seems to us that where circumstances so justify, and if the language of the proviso warrants it, the power can also be exercised over proceedings which are strictly not in appeal before the Tribunal but are related to the appeal. As we have already noted, the language of the proviso is in broad terms and takes in even proceedings relating to an appeal filed under sub-section (1) of section 253 . In the case before us, the order that is pending in appeal before the Tribunal is the one passed under sub-section (1) of section 201 holding the assessee to be in default. But then, sub-section (1A) declares that in case of default in deducting the tax or paying it to the Government after deduction, the person liable to deduct the tax shall be liable to pay interest. It appears to us that sub-section (1A) is an adjunct to sub-section (1) and is in that sense closely related. One cannot conceive of a situation where the assessee is deemed to be in default by an order under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2A) of section 254. 10. Mr. Dastur drew our attention to the judgment of the Andhra Pradesh High Court in ITO v. Khalid Mehdi Khan [1977] 110 ITR 79. In this case the Tribunal was hearing an appeal against the order passed by the CIT under section 263 of the Income-tax Act. On an application by the assessee who was in appeal, the Tribunal granted stay of the fresh assessment proceedings which were to be completed pursuant to the order of the CIT. The Department questioned the order of stay before the High Court in the writ filed against the order of stay granted by the Tribunal on the ground that in view of the period of limitation prescribed by section 153(2A) for completion of the fresh assessment proceedings the power of the Tribunal must be deemed to have been curtailed. This contention was rejected by the High Court. In this case, there was no appeal pending against the assessment before the Tribunal. However, the Tribunal felt, on hearing the appeal against the order of the CIT under section 263, that in order to ensure that the success of the assessee in the appeal was not rendered nugatory it was necessary and in the interest of justice to stay the fresh assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and cannot be overlooked merely because in the ultimate event of the assessee succeeding, which may take considerable time, the monies would be paid back to him with interest in appropriate cases. 12. The learned Senior DR cited a few judgments to show that the orders under sub-sections (1) and (1A) of section 201 are independent of each other. In Eli Lilly Co. (India) (P.) Ltd. s case (supra), it was observed in this case by the Supreme Court that the levy of interest under sub-section (1A) is compensatory measure for withholding the tax which ought to have gone to the exchequer. The levy of interest is mandatory and the absence of liability for tax will not dilute the default . So long as the default subsists, the assessee is also liable to pay interest. The sub-sections were no doubt to be considered independently without affecting the rights mentioned in either of them. They were thus independent in the sense that the duty to deduct tax is on the person (deductor) who is vicariously liable to pay the same, the real liability being that of the deductee who is the person who is chargeable to tax. The person who is liable to deduct the tax is not the person on whom t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putes raised are common. Secondly, the analogy is inappropriate because what we are dealing with is a case of recovery of interest which is related to the main default in three ways as noted earlier. In the case of the assessment proceedings for two different years there can be no such connection. In the analogy given by the learned Sr. DR, there is no question of the success of the assessee in the appeal pending before the Tribunal being rendered nugatory because of recovery of tax relating to another year which is not pending in appeal before the Tribunal. We do not understand the power to grant stay in this manner, certainly not in the manner apprehended by the learned Sr. DR. We are respectfully bound by the observations of the Supreme Court in M.K. Mohammed Kunhi s case (supra) that stay is not to be granted in a routine way or as a matter of course in view of the special nature of taxation laws and that it will be granted only on the existence of a prima facie case and only in most deserving and appropriate cases where the Tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue durin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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