Facts of the Case

The petitioner, Canon India Private Limited, had filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the assessment order passed by the Income Tax Department for Assessment Year 2009–10.

At the initial stage, the ITAT granted a stay on the recovery of tax demand on 31.03.2014. Thereafter, the Tribunal extended the interim stay on 19.09.2014.

However, as per the law laid down by the Delhi High Court in CIT v. Maruti Suzuki (India) Ltd., the ITAT had no authority to extend the stay beyond 365 days from the original date of grant of stay.

Since the petitioner’s appeal could not be heard for reasons not attributable to the petitioner and the statutory stay period was expiring, the petitioner approached the Delhi High Court under Article 226 seeking continuation of the stay till disposal of the appeal.

 

Issues Involved

  1. Whether the High Court can extend the stay on recovery of tax demand after expiry of 365 days when the ITAT lacks jurisdiction to do so?
  2. Whether the taxpayer can be protected when delay in disposal of appeal is not attributable to the taxpayer?
  3. Whether Article 226 can be invoked for continuation of stay in tax matters?

 

Petitioner’s Arguments

  • The petitioner argued that the appeal was already pending before the ITAT.
  • Stay had already been granted by the Tribunal.
  • The hearing of the appeal could not conclude for reasons beyond the petitioner’s control.
  • If stay expired, coercive recovery proceedings would cause irreparable harm.
  • The High Court has jurisdiction under Article 226 to continue the protection granted by the Tribunal in the interest of justice.

 

Respondent’s Arguments

  • The Revenue relied on the statutory limitation that the ITAT cannot extend stay beyond 365 days.
  • The respondent maintained that the Tribunal’s jurisdiction had ended after the statutory period.
  • However, the legal position regarding the High Court’s powers under Article 226 remained open.

 

Court Order / Findings

The Delhi High Court held that:

  • It is settled law that the High Court, in exercise of powers under Article 226, can grant continuation of stay where circumstances justify such relief.
  • The Tribunal had already granted conditional stay.
  • The delay in hearing the appeal was not attributable to the petitioner.
  • The Tribunal was already in the midst of hearing the appeal.
  • In the interest of justice, the stay deserved continuation till final disposal of the appeal.

Accordingly, the High Court extended the stay on tax recovery till disposal of the appeal before the ITAT. The writ petition was disposed of.

 

Important Clarification

This judgment clarifies that although the ITAT is statutorily barred from extending stay beyond 365 days under Section 254(2A), the High Court retains constitutional powers under Article 226 to grant such protection in appropriate cases.

The Court emphasized that genuine taxpayers should not suffer due to institutional delay when the appeal remains pending for reasons not attributable to them.

Sections

  • Article 226 of the Constitution of India – Writ Jurisdiction of High Courts
  • Section 254(2A) of the Income-tax Act, 1961 – Power of ITAT to grant and extend stay
  • Principles laid down in CIT v. Maruti Suzuki (India) Limited

 

Legal Principle Evolved

Where delay in disposal of tax appeal is not attributable to the assessee, and statutory stay expires, the High Court can exercise constitutional jurisdiction to protect the assessee against coercive tax recovery till disposal of the appeal.

Link to Download the Order

https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:2994-DB/BDA27032015CW32382015.pdf

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