Facts of the Case

The petitioner, Sony India Private Limited, had filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the order passed by the Dispute Resolution Panel dated 19.12.2013. During the pendency of the appeal, the Tribunal initially granted an unconditional stay of demand on 03.03.2014.

Subsequently, the Tribunal extended the interim stay by order dated 05.09.2014. However, as per the judicial precedent in CIT v. Maruti Suzuki (India) Limited, the Tribunal’s authority to extend stay could not exceed 365 days from the initial date of grant of stay.

Since the period of 365 days expired on 02.03.2015, and the appeal before the Tribunal was still pending (for reasons not attributable to the petitioner), Sony India approached the Delhi High Court seeking continuation of stay on recovery proceedings until disposal of the appeal.

The appeal was already fixed for hearing before the Tribunal on 26.03.2015.

Issues Involved

Whether the ITAT can extend stay of tax demand beyond 365 days?

Whether the High Court can exercise jurisdiction under Article 226 to continue the stay after expiry of 365 days?

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 Tribunal had already granted an unconditional stay in the appeal.

The appeal remained pending for reasons beyond the control of the petitioner.

The petitioner relied upon several orders of the Delhi High Court where stay was extended by the High Court after expiry of the Tribunal’s statutory power.

Since the appeal was already fixed for hearing shortly, coercive recovery would cause irreparable prejudice.

Respondent’s Arguments

The Revenue relied upon the statutory limitation under Section 254(2A), under which the Tribunal could not extend stay beyond 365 days.

After expiry of the statutory period, the Tribunal became functus officio regarding stay extension.

Court Findings / Order

The Delhi High Court held that:

The Tribunal has no authority to extend the stay beyond 365 days from the initial grant of stay.

However, the High Court, in exercise of its constitutional jurisdiction under Article 226, can grant continuation of stay where justice so demands.

Where delay in disposal of appeal is not attributable to the assessee, the assessee should not be prejudiced.

Since the petitioner had already been granted unconditional stay and the Tribunal was in the process of hearing the appeal, continuation of stay was justified.

Accordingly, the High 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.

Important Clarification

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

Thus, in deserving cases, the High Court can protect the assessee against recovery proceedings even after expiry of the statutory stay period.

Sections Involved

Section 254(2A), Income Tax Act, 1961 – Power of ITAT to grant stay and limitation for extension of stay

Article 226, Constitution of India – Writ jurisdiction of High Court

Assessment Year Involved: AY 2009-10

Link to Download the Order https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:2532-DB/BDA17032015CW25922015.pdf

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