Facts of the Case

The Petitioner had filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the assessment order dated 07.01.2014. During the pendency of the appeal, the Tribunal granted an unconditional stay of the tax demand on 28.03.2014 for three months, which was subsequently extended f     rom time to time.

The last extension of stay was granted on 14.01.2015 for a further period of three months. However, due to the legal position settled in CIT v. Maruti Suzuki (India) Limited, the Tribunal was restrained from extending the stay beyond a total period of 365 days from the initial grant of stay.

Since the appeal could not be heard for reasons not attributable to the Petitioner and was listed for hearing on 06.04.2015, the Petitioner approached the Delhi High Court seeking continuation of the stay on recovery proceedings till disposal of the appeal.

Issues Involved

  1. Whether the Income Tax Appellate Tribunal can extend stay beyond 365 days under Section 254(2A) of the Income Tax Act?
  2. Whether the High Court can exercise jurisdiction under Article 226 of the Constitution to continue the stay granted by the Tribunal?
  3. Whether recovery proceedings should continue when delay in disposal of appeal is not attributable to the assessee?

Petitioner’s Arguments

  • The Petitioner contended that the appeal was pending before the Tribunal and the delay in hearing was not attributable to the Petitioner.
  • It was argued that coercive recovery during pendency of appeal would cause serious prejudice.
  • The Petitioner relied upon earlier orders of the High Court where stay was extended under writ jurisdiction after expiry of 365 days.
  • It was submitted that the ends of justice required continuation of the protection already granted by the Tribunal.

Respondent’s Arguments

  • The Revenue relied upon the statutory limitation under Section 254(2A), which restricts the Tribunal’s power to extend stay beyond 365 days.
  • It was contended that after expiry of the statutory period, the Tribunal becomes functus officio in respect of stay extension.
  • The Respondent opposed continuation of stay beyond the permissible statutory period.

Court Order / Findings

The Delhi High Court held that although the Tribunal cannot extend stay beyond 365 days as per Section 254(2A), the High Court, in exercise of its extraordinary jurisdiction under Article 226 of the Constitution, can grant continuation of stay in appropriate cases.

The Court observed that there is no legal bar on the High Court granting such relief when justice demands, particularly where the delay in disposal of the appeal is not attributable to the assessee.

Considering that the Tribunal was already in the midst of hearing the appeal and the Petitioner had earlier been granted stay, the Court directed continuation of the stay till disposal of the appeal by the Tribunal.

Important Clarification

  • ITAT cannot extend stay beyond 365 days under Section 254(2A).
  • High Court retains constitutional power under Article 226 to protect the assessee against coercive recovery.
  • Delay not attributable to the assessee is a significant factor for grant of equitable relief.
  • The ruling reinforces judicial protection where statutory limitations create hardship despite pending appeals.

Sections Involved

  • Section 254(2A), Income Tax Act, 1961 – Stay of demand during pendency of appeal before ITAT
  • Article 226, Constitution of India – Writ jurisdiction of High Court

Link to Download the Order

https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:2895-DB/SAS25032015CW30702015.pdf

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