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TMI Blog2013 (12) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... tay application preferred by the assessee-appellant in quantum appeal against the order passed by the Commissioner of Income-tax (Appeals), the Income-tax Appellate Tribunal has granted stay of further proceedings of the penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as "the IT Act") initiated pursuant to the order passed by the Commissioner of Income-tax (Appeals) against which the assessee has preferred the quantum appeal. The facts leading to the present petition in a nut-shell are as under : 2.1 That the respondent-assessee filed the return of the income before the Assessing Officer for the assessment year 2004-05. That the Assessing Officer completed the assessment and passed an assessment order under section 143(3) of the Income-tax Act by order dated December 29, 2006. Feeling aggrieved and dissatisfied with the assessment order, the assessee preferred appeal before the Commissioner of Income-tax (Appeals) and by order dated July 17, 2012, the Commissioner of Incometax (Appeals) partly allowed the appeal of the assessee and directed the Assessing Officer to make transfer pricing adjustment on account of the arm's length pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has been preferred by the assessee before the Income-tax Appellate Tribunal, which is in fact the first appeal of the assessee against the enhancement of income by the Commissioner of Income-tax (Appeals) and by observing that as per the provisions of section 275(1)(a) of the Income-tax Act, the Commissioner will get further six months time to dispose of the penalty proceedings from the end of the month in which the order of the Tribunal is received by the Commissioner/ Chief Commissioner and observing that during the quantum appeal if the Commissioner is allowed to proceed with the penalty proceedings, prejudice will be caused to the assessee as it will have to face multiplicity of proceedings and relying upon the decision of the hon'ble Supreme Court in the case of ITO v. M. K. Mohammed Kunhi reported in [1969] 71 ITR 815 (SC), the Income-tax Appellate Tribunal has allowed the stay application submitted by the assessee and has directed the Commissioner to keep the penalty proceedings in abeyance till disposal of quantum appeal before the Income-tax Appellate Tribunal. Feeling aggrieved and dissatisfied with the impugned order dated January 4, 2013, passed by the Income-tax App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceedings, there shall not be any further requirement of prima facie case, balance of convenience, etc., to be considered while considering the stay application. 3.4 It is further submitted by Shri Parikh, learned counsel appearing on behalf of the petitioner-Revenue, that while passing the impugned order of stay of penalty proceedings, the Income-tax Appellate Tribunal has misinterpreted section 275(1)(a) of the Income-tax Act. It is submitted that from the plain reading of section 275(1)(a) of the Income-tax Act, it becomes crystal clear that the time limit is given for imposition of the penalty under Chapter XXI and the penalty can be levied by the concerned authorities within such time limit. But in noway the Assessing Officer/ Commissioner or the Chief Commissioner can be restrained from imposing the penalty under section 271(1)(c) of the Income-tax Act till relevant assessment or other order is a subject matter of appeal before the Commissioner of Income-tax (Appeals). It is submitted that thus section 275(1)(a) of the Income-tax Act has laid down bar of limitation for imposing the penalties, i.e., no order imposing the penalty shall be passed in a case where the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings and, therefore, during the pendency of quantum appeal, when an application was submitted to stay the penalty proceedings and the same has been granted by the Tribunal, it cannot be said that the Tribunal has committed any error and/or illegality. 4.1 It is further submitted by Shri Soparkar, learned counsel for the assessee, that as observed by the hon'ble Supreme Court in the case of M.K. Mohammed Kunhi (supra), the Appellate Tribunal has all incidental and ancillary powers by implication. It is submitted that, therefore, as such the controversy raised in the present special civil application is as such squarely covered by the decision of the hon'ble Supreme Court in the case of M. K. Mohammed Kunhi (supra). 4.2 It is further submitted by Shri Soparkar, learned counsel for the assessee, that as such in the present case the Commissioner of Income-tax (Appeals) has made the enhancement and directed to initiate the penalty proceedings under section 271(1)(c) of the Income-tax Act on the said enhancement and, therefore, as such the quantum appeal preferred by the assessee before the Income-tax Appellate Tribunal would be the first appeal. It is submitted that in case the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty can be imposed within a period of six months, to protect the interests of the Revenue, there is a further provision made under section 275(1)(a) of the Income-tax Act by which in such a situation of appeal either before the Commissioner of Income-tax (Appeals) and/or the Tribunal, time to impose the penalty has been extended for a further period of six months from the receipt of the order passed by the Commissioner of Income-tax (Appeals) and/or the Tribunal. It is submitted that while making the provision under section 275(1)(a) of the Income-tax Act, the Legislature visualized such a situation and, therefore, a further period of six months from the date of receipt of the order passed by the appellate authority is provided. It is submitted that, therefore, if during the pendency of the quantum appeal, the penalty proceedings are not stayed, which are initiated pursuant to the order, which is under challenge before the Income-tax Appellate Tribunal, in that case, even the object and purpose of section 275(1)(a) of the Income-tax Act would be frustrated. 4.6 Shri Soparkar, learned counsel appearing on behalf of the respondent assessee, has relied upon the following decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pricing adjustment with regard to the international transactions entered into with the associated enterprise and the said penalty proceedings are initiated on the enhanced income of Rs. 5,50,73,555. Thus, as such the appeal before the Income-tax Appellate Tribunal can be said to be the first appeal. During the said appeal, as the Commissioner was initiating the penalty proceedings in the light of the order passed by the Commissioner of Income-tax (Appeals), which is under challenge before the Income-tax Appellate Tribunal, the assessee-original appellant submitted the stay application requesting to stay further proceedings of penalty proceedings during the pendency of the appeal before the Income-tax Appellate Tribunal. By the impugned order the Income-tax Appellate Tribunal has allowed the stay application by directing to stay the penalty proceedings till the decision in appeal before it. Being aggrieved and dissatisfied with the impugned stay order, the Revenue has preferred the present special civil application submitting that in exercise of the powers under section 254 of the Income-tax Act, the Income-tax Appellate Tribunal has no such powers to stay the penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, in the said decision, the hon'ble Supreme Court has considered in detail the scope and powers of the Tribunal under section 254 of the Income-tax Act. In the said decision, the hon'ble Supreme Court has observed and held as under (page 818 of 71 ITR) : "There can be no manner of doubt that by the provisions of the Act or the Income-tax Appellate Tribunal Rules, 1963, powers have not been expressly conferred upon the Appellate Tribunal to stay proceedings relating to the recovery of penalty or tax due from an assessee. At the same time, it is significant that under section 220(6) the power of stay by treating the assessee as not being in default during the pendency of an appeal has been given to the Income-tax Officer only when an appeal has been presented under section 246 which will be to the Appellate Assistant Commissioner and not to the Appellate Tribunal. There is no provision in section 220 under which the Income-tax officer or any of his superior departmental officers can be moved for granting stay in the recovery of penalty or tax. It may be that under section 225 notwithstanding that a certificate has been issued to the Tax Recovery Officer for the recovery of any ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory power carries with it by necessary implication the authority to use all reasonable means to make such grant effective (Southland Statutory Construction, third edition, articles 5401 and 5402). The powers which have been conferred by section 254 on the Appellate Tribunal with widest possible amplitude must carry with them by necessary implication all powers and duties incidental and necessary to make the exercise of those powers fully effective." After analyzing various decisions of the High Court and the English judgments, finally it is held that the Appellate Tribunal must be held to have power to grant stay as incidental or ancillary to its appellate jurisdiction. It is further held that when section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory. However, while holding so, the hon'ble Supreme Court has also observed that the power of stay by the Tribunal is not to be exercised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (Appeals), or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or the Commissioner, whichever period expires later. Meaning thereby, after the order passed by the appellate Tribunal, there will be a further period of six months available for imposing the penalty from the end of the month in which the order of the Appellate Tribunal is received. Meaning thereby, it can be said that even the Legislature has also visualized such a situation of preferring an appeal and the direct effect of the appellate proceeding vis-a-vis penalty proceedings. 5.4 In the present case, as stated hereinabove, and with a view to avoid multiplicity of proceedings and harassment to the assessee and considering section 275(1)(a) of the Income-tax Act, when the Commissioner of Income-tax (Appeals) will get further six months time to dispose of the penalty proceedings from the end of the month in which the order of Tribunal is received by the Commissioner/Chief Commissioner, when the Tribunal has stayed the penalty proceedings during the pendency of the appeal before it, it cannot be said that the Tribunal has exceeded in its jurisdiction and/or the said order is illegal an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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