Facts of the Case

The petitioner, XL India Business Services Private Limited, filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the order passed by the Dispute Resolution Panel dated 20.12.2013. During the pendency of the appeal, the Tribunal granted stay on the recovery of tax demand on 21.03.2014, subject to deposit of Rs.70,00,000/-.

The petitioner complied with the condition and deposited the amount. Thereafter, the Tribunal extended the interim stay by order dated 26.09.2014. However, owing to the legal restriction laid down in CIT v. Maruti Suzuki (India) Ltd., the Tribunal could not extend the stay beyond 365 days from the initial date of stay.

Since the appeal could not be heard for reasons not attributable to the petitioner, and recovery proceedings were likely to continue, the petitioner approached the Delhi High Court under Article 226 seeking continuation of stay till disposal of the appeal.

Issues Involved

  1. Whether the ITAT can extend the stay of tax demand beyond 365 days?
  2. Whether the High Court can exercise writ jurisdiction under Article 226 to continue the stay where the delay in disposal of appeal is not attributable to the assessee?
  3. Whether justice requires protection of the assessee from coercive recovery during pendency of appeal?

Petitioner’s Arguments

  • The petitioner argued that it had complied with the Tribunal’s conditional stay order by depositing Rs.70,00,000/-.
  • The appeal remained pending not due to any fault or delay attributable to the petitioner.
  • Recovery during pendency of appeal would cause irreparable prejudice.
  • The High Court has ample power under Article 226 to extend the stay in appropriate cases to protect the ends of justice.

Respondent’s Arguments

  • The respondents relied upon the statutory limitation under Section 254(2A), under which the Tribunal lacks jurisdiction to extend stay beyond 365 days.
  • It was submitted that the statutory framework restricts further continuation of stay by the Tribunal after expiry of the prescribed period.

Court Order

The Delhi High Court observed that while the Tribunal indeed has no authority to extend stay beyond 365 days in view of the ruling in CIT v. Maruti Suzuki (India) Ltd., there is no prohibition on the High Court exercising its writ jurisdiction under Article 226 to grant such relief where justice demands.

The Court held that:

  • The petitioner had complied with the earlier conditional stay order.
  • The appeal was pending and could not be heard for reasons beyond the petitioner’s control.
  • In the interest of justice, the stay already granted by the Tribunal should continue till final disposal of the appeal by the Tribunal.

Accordingly, the High Court continued the stay and disposed of the writ petition.

Important Clarification

This judgment clarifies that although the ITAT’s statutory power to grant stay is restricted to 365 days under Section 254(2A), the constitutional powers of the High Court under Article 226 remain unaffected.

Where delay in disposal of appeal is not attributable to the assessee, the High Court can intervene and protect the assessee from recovery proceedings.

Sections Involved

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

Link to Download the Order https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:2803-DB/SAS23032015CW29562015.pdf

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