Facts of the Case

The petitioner, United Health Group Information Services Private Limited, had filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the order passed by the Dispute Resolution Panel dated 31.10.2013. During the pendency of the appeal, the Tribunal initially granted stay of the tax demand on 31.03.2014, subject to the petitioner depositing a sum of Rs. 3 crore, which was duly complied with by the petitioner.

Subsequently, the Tribunal extended the interim stay by order dated 26.09.2014. However, in view of the judgment in CIT v. Maruti Suzuki (India) Ltd., the Tribunal was held to have no authority to extend the stay beyond 365 days from the date of the initial stay order. As the statutory period of 365 days expired on 30.03.2015, and the appeal could not be heard for reasons not attributable to the petitioner, the petitioner approached the High Court seeking continuation of the stay till disposal of the appeal.

 

Issues Involved

  1. Whether the High Court can exercise writ jurisdiction under Article 226 to extend a stay of tax demand after expiry of the statutory period of 365 days under Section 254(2A) of the Income-tax Act?
  2. Whether continuation of stay can be granted where delay in disposal of appeal is not attributable to the assessee?

 

Petitioner’s Arguments

  • The petitioner argued that the Tribunal had already granted conditional stay after considering the merits of the case.
  • The petitioner had complied with the condition by depositing Rs. 3 crore.
  • The delay in disposal of the appeal was not attributable to the petitioner.
  • Since the appeal was still pending before the Tribunal and listed for hearing, coercive recovery during pendency would cause undue hardship.
  • The petitioner relied upon various orders where the High Court had exercised writ jurisdiction to continue stay till disposal of appeal.

 

Respondent’s Arguments

  • The Revenue relied on the statutory restriction and judicial precedent holding that the Tribunal cannot extend stay beyond 365 days.
  • It was contended that once the statutory period expired, the Tribunal became functus officio in relation to further extension of stay.

 

Court Findings / Order

The Delhi High Court observed that while the Tribunal lacked authority to extend the stay beyond 365 days, there was no prohibition upon the High Court exercising its extraordinary writ jurisdiction under Article 226 in appropriate circumstances.

The Court held that where the assessee had complied with the conditions of stay and the delay in hearing was not attributable to the assessee, the ends of justice warranted continuation of protection against coercive recovery.

Accordingly, the Court directed that the stay granted by the Tribunal shall continue till disposal of the appeal by the Tribunal. The writ petition was disposed of accordingly.

 

Important Clarification

This judgment clarifies that although the Income Tax Appellate Tribunal cannot extend a stay of demand beyond the statutory cap of 365 days under Section 254(2A), the High Court retains constitutional powers under Article 226 to grant or continue such protection where justice demands and the assessee is not responsible for delay.

This decision reinforces the principle that statutory limitations on tribunal powers do not curtail the constitutional jurisdiction of the High Court.

Sections / Legal Provisions Involved

  • Article 226 of the Constitution of India (Writ Jurisdiction)
  • Section 254(2A) of the Income-tax Act, 1961 (Power of ITAT to grant stay)
  • Assessment Year: 2009–10

 

 Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:3291-DB/BDA10042015CW34782015.pdf

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