Facts of the Case

The Income Tax Appellate Tribunal had earlier adjudicated cross-appeals filed by both the Revenue and the assessee through its order dated 22 November 2016.

Both parties challenged the Tribunal’s order before the Delhi High Court in separate appeals. By order dated 19 July 2017, the High Court remanded the matter back to the Tribunal for fresh adjudication.

Subsequent to remand, the assessee filed an application seeking stay of the tax demand during pendency of the rehearing before the Tribunal. The Tribunal granted the stay by order dated 6 March 2018.

Aggrieved by the stay order, the Revenue preferred the present appeal before the Delhi High Court challenging the Tribunal’s authority and exercise of discretion in granting the stay.

Issues Involved

  1. Whether the ITAT was justified in granting stay of demand after remand of the appeal for fresh adjudication?
  2. Whether the Revenue’s appeal against the first stay order of the Tribunal was maintainable?
  3. Whether the stay order fell within the restrictions contemplated under Section 254(2A) of the Income Tax Act?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the Tribunal’s order granting stay was erroneous and unsustainable.
  • It argued that the Tribunal should not have granted interim protection in favour of the assessee.
  • The Revenue sought interference by the High Court against the stay order granted by the Tribunal.

Respondent’s Arguments (Assessee)

  • The assessee argued that the stay was justified as the substantive appeals were pending fresh adjudication after remand by the High Court.
  • It contended that the Tribunal acted within its jurisdiction in granting interim protection.
  • The assessee relied upon settled law regarding the Tribunal’s power to grant stay.

Court Findings / Court Order

The Delhi High Court declined to entertain the Revenue’s appeal.

The Court relied upon the precedent laid down in Pepsi Foods Pvt. Ltd. v. Assistant Commissioner of Income Tax & Anr. (2015) 376 ITR 87 (Delhi) and held that the present appeal was not maintainable.

The Court further observed that the Revenue’s challenge was misconceived because:

  • The earlier Tribunal order had already been remanded for fresh adjudication;
  • The impugned stay order was the first stay order;
  • It was not a case involving extension of stay beyond 360 days.

Accordingly, the appeal filed by the Revenue was dismissed.

 

Important Clarification

The Court clarified that a first stay order granted by the ITAT after remand cannot be equated with an order extending stay beyond the statutory period of 360 days under Section 254(2A).

This distinction is crucial because statutory limitations on extension of stay do not automatically invalidate an original stay order passed within jurisdiction.

Sections Involved

  • Section 254(2A), Income Tax Act, 1961 – Power of ITAT to grant stay
  • Section 260A, Income Tax Act, 1961 – Appeal to High Court
  • Appellate jurisdiction under Income Tax Act

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8331-DB/SKN20082018ITA8972018_163243.pdf

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