TMI Blog2021 (4) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... liar in that the legislature itself has made the aforesaid differentiation in the second proviso to Section 254(2A) of the Income Tax Act, making it clear that a stay order may be extended upto a period of 365 days upon satisfaction that the delay in disposing of the appeal is not attributable to the assessee. It is only when a stay of the impugned order before the Appellate Tribunal is granted, that the appeal is required to be disposed of within 365 days. So far as the disposal of an appeal by the Appellate Tribunal is concerned, this is a directory provision. However, so far as vacation of stay on expiry of the said period is concerned, this condition becomes mandatory so far as the assessee is concerned. The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee. Since the object of the third proviso to Section 254(2A) of the Income Tax Act is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the delay caused in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SING OUT OF SLP (CIVIL) NO. OF 2021] CC NO.8924 OF 2017 CIVIL APPEAL NO. 1119 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] DIARY NO.15229 OF 2017 CIVIL APPEAL NO. 1120 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.720 OF 2018] CIVIL APPEAL NO. 1121 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.27498 OF 2017] CIVIL APPEAL NO. 1122 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.30215 OF 2017] CIVIL APPEAL NO. 1123 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.722 OF 2018] CIVIL APPEAL NO. 1124 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31873 OF 2017] CIVIL APPEAL NO. 1126 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31720 OF 2017] CIVIL APPEAL NO. 1125 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.32236 OF 2017] CIVIL APPEAL NO. 1128 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.33218 OF 2017] CIVIL APPEAL NO. 1129 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12200 OF 2018] CIVIL APPEAL NO. 1130 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.4186 OF 2018] CIVIL APPEAL NO. 1131 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12202 OF 2018] CIVIL APPEAL NO. 1132 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12204 OF 2018] CIVIL APPEAL NO. 1133 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] DIARY NO.4363 OF 2018 CIVIL APPEAL NO. 1134 OF 2021 [ARISING OUT OF SLP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2012 which was adverse to the assessee. Aggrieved by the aforesaid order, the assessee filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as Tribunal ) on 29.04.2013. On 31.05.2013, a stay of the operation of the order of the assessing officer was granted by the Tribunal for a period of six months. This stay was extended till 08.01.2014 and continued being extended until 28.05.2014. Since the period of 365 days as provided in Section 254(2A) of the Income Tax Act was to end on 30.05.2014 beyond which no further extension could be granted, the assessee, apprehending coercive action from the Revenue, filed a writ petition before the Delhi High Court on 21.05.2014 challenging the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act. By a judgment dated 19.05.2015, the Delhi High Court struck down that part of the third proviso to Section 254(2A) of the Income Tax Act which did not permit the extension of a stay order beyond 365 days even if the assessee was not responsible for delay in hearing the appeal. It is this judgment and several other judgments from various High Courts that have been challenged by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though equitable considerations are not to be given effect, yet they are not wholly irrelevant when the constitutional validity of the provision is itself challenged. 6. The genesis of the stay provision contained in Section 254 of the Income Tax Act is in the celebrated judgment of this Court in Income Tax Officer v. M.K. Mohammed Kunhi (1969) 2 SCR 65. In this judgment, Section 254 of the Income Tax Act, as originally enacted, came up for consideration before this Court. After setting out Section 254(1), this Court referred to Sutherland, Statutory Construction (3rd Edn., Arts. 5401 and 5402), and then held that the power which has been conferred by the said Section on the Appellate Tribunal with the widest possible amplitude must carry with it, by necessary implication, all powers incidental and necessary to make the exercise of such power fully effective. The Court held: Section 255(5) of the Act does empower the Appellate Tribunal to regulate its own procedure, but it is very doubtful if the power of stay can be spelt out from that provision. In our opinion the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (2) of section 253: Provided that where an order of stay is made in any proceedings relating to an appeal filed under subsection (1) of section 253, the Appellant Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order: Provided further that if such appeal is not so disposed of within the period specified in the first proviso, the stay order shall stand vacated after the expiry of the said period. 8. Realising that a hard and fast provision which is directory so far as the disposal of appeal is concerned, but mandatory so far as vacation of the stay order is concerned, would lead to great hardship, the legislature stepped in again and amended Section 254(2A) vide Finance Act, 2007 (w.e.f. 01/06/2007) as follows: 254. Orders of Appellate Tribunal. xxx xxx xxx (2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253: Provided that the Appellate Tribunal may, after considering the merits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not have stood the test of non-arbitrariness as it would result in an appeal being defeated even if the assessee was not at fault, as in the meantime the revenue could proceed against the assets of the assessee. The proviso as introduced by the Finance Act, 2007 was to an extent to avoid the mischief of it being rendered unconstitutional. Once an appeal is provided, it cannot be rendered nugatory in cases were the assessee was not at fault. The amendment of 2007 conferred the power to extend the period of interim relief to 360 days. Parliament clearly intended that such appeals should be disposed of at the earliest. If that be the object the mischief which was sought to be avoided was the nondisposal of the appeal during the period the interim relief was in operation. By extending the period Parliament took note of laws delay. The object was not to defeat the vested right of Appeal in an assessee, whose appeal could not be disposed off not on account of any omission or failure on his part, but either the failure of the Tribunal or acts of revenue resulting in non-disposal of the appeal within the extended period as provided. Can it then be said that the intention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view taken in Kumar Cotton Mills Pvt. Ltd. (supra). There would be power in the Tribunal to extend the period of stay on good cause being shown and on the Tribunal being satisfied that the matter could not be heard and disposed of for reasons not attributable to the assessee. [at page 32] 10. Close on the heels of this judgment, Section 254(2A) of the Income Tax Act was again amended, this time by the Finance Act, 2008 (w.e.f. 01/10/2008). This amendment reads as follows: 254. Orders of Appellate Tribunal. xxx xxx xxx (2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253: Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. (iv) An assessee can file a writ petition in the High Court pleading and asking for stay and the High Court has power and jurisdiction to grant stay and issue directions to the tribunal as may be required. Section 254(2A) does not prohibit/bar the High Court from issuing appropriate directions, including granting stay of recovery. We have not examined the constitutional validity of the provisos to Section 254(2A) of the Act and the issue is left open. [at page 231] 12.Close upon the heels of the judgment in Maruti Suzuki (supra), the Gujarat High Court in DCIT v. Vodafone Essar Gujarat Ltd. (2015) 376 ITR 23, while disagreeing with the view taken in Maruti Suzuki (supra), interpreted the third proviso to Section 254(2A) of the Income Tax Act as follows: Applying the decision of the Division Bench of this court in the case of Small Industries Development Bank of India (supra) to the facts of the case on hand, more particularly while considering the powers of the Tribunal under section 254(2A) of the Act, it is observed and held that by section 254(2A) of the Act, it cannot be inferred a legislative intent to curtail/withdraw the powers of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court, if the aforesaid procedure is adopted, either it would lead to multiplicity of proceedings before the High Court and/or even granting the stay of demand by the Department itself. We are of the opinion that instead if the aforesaid procedure is followed, it would meet the ends of justice and it may not increase the litigation either before the High Court and/or appropriate forum and the purpose and object of section 254(2A) of the Act is achieved. [at page 45-46] 13.The impugned judgment in M/s Pepsi Foods Ltd. v. ACIT (2015) 376 ITR 87 dealt with the challenge to the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act, as amended by the Finance Act, 2008. A Division Bench of the Delhi High Court, after setting out the Bombay High Court judgment in Narang Overseas (supra), then referred to the previous judgment of the Delhi High Court in Maruti Suzuki (supra) and held: 12. From the above extract, it is evident that the Division Bench was not called upon and did not examine the constitutional validity of the provisos to Section 254(2A) of the said Act and left the issue open. It is only on a plain reading of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed for a period not exceeding 180 days and the Tribunal should dispose of the appeal within that period. The second proviso stipulates that in case the appeal is not disposed of within the period of 180 days, if the delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to extend the stay for a period not exceeding 365 days in aggregate. Once again, the Tribunal is directed to dispose of the appeal within the said period of stay. The third proviso, as it stands today, stipulates that if the appeal is not disposed of within the period of 365 days, then the order of stay shall stand vacated, even if the delay in disposing of the appeal is not attributable to the assessee. While it could be argued that the condition that the stay order could be extended beyond a period of 180 days only if the delay in disposing of the appeal was not attributable to the assessee was a reasonable condition on the power of the Tribunal to the grant an order of stay, it can, by no stretch of imagination, be argued that where the assessee is not responsible for the delay in the disposal of the appeal, yet the Tribunal has no power to extend the stay beyond the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are in full agreement. Consequently, we hold that, where the delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to grant extension of stay beyond 365 days in deserving cases. The writ petitions are allowed as above. [at page 107-109] 14. It is settled law that challenges to tax statutes made under Article 14 of the Constitution of India can be on grounds relatable to discrimination as well as grounds relatable to manifest arbitrariness. These grounds may be procedural or substantive in nature. Thus, in Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri (1955) 1 SCR 448, this Court struck down Section 5(4) of the Taxation on Income (Investigation Commission) Act, 1947 on the ground that the procedure prescribed was substantially more prejudicial and more drastic to the assessee than the procedure contained in the Indian Income Tax Act, 1922. Section 5(4) of the aforesaid Act was thus struck down as a piece of discriminatory legislation offending against the provisions of Article 14 of the Constitution of India. 15. Instances of taxation statutes being struck down on substantive grounds which had alleged discrimination c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efs under Sections 28 to 43-C of the Income Tax Act being denied only to such trades. This was done as the denial of such relief had no nexus to the object sought to be achieved by the legislation and resulted in unfairness, arbitrariness and denial of equality of treatment (see paragraph 22). 16.The other facet of Article 14 has been recently resurrected by a 5- Judge Bench judgment in Shayara Bano v. Union of India (2017) 9 SCC 1 as follows: 101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641 : 1985 SCC (Tax) 121] stated that it was settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. This being the case, there is no rational distinction between the two types of legislation when it comes to this ground of challenge under Article 14. The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such object cannot itself be discriminatory or arbitrary, as has been felicitously held in Nagpur Improvement Trust v. Vithal Rao (1973) 3 SCR 39 as follows: It is now well-settled that the State can make a reasonable classification for the purpose of legislation. It is equally well-settled that the classification in order to be reasonable must satisfy two tests: (i) the classification must be founded on intelligible differentia and (ii) the differentia must have a rational relation with the object sought to be achieved by the legislation in question. In this connection it must be borne in mind that the object itself should be lawful. The object itself cannot be discriminatory, for otherwise, for instance, if the object is to discriminate against one section of the minority the discrimination cannot be justified on the ground that there is a reasonable classification because it has rational relation to the object sought to be achieved. [at page 47] Since the object of the third proviso to Section 254(2A) of the Income Tax Act is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to the landlords to build new houses to solve problem of shortages of houses. The purpose of legislation would thus be defeated. Purposive interpretation in a social amelioration legislation is an imperative irrespective of anything else. 126. Likewise, in Sarah Mathew v. Institute of Cardio Vascular Diseases [Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC 62 : (2014) 1 SCC (Cri) 721] , this Court held that for the purpose of computing limitation under Section 468 of the Code of Criminal Procedure, 1973 the relevant date is the date of filing of the complaint and not the date on which the Magistrate takes cognizance, applying the aforesaid maxim as follows: (SCC pp. 96-97, para 39) 39. As we have already noted in reaching this conclusion, light can be drawn from legal maxims. Legal maxims are referred to in Bharat Kale [Bharat Damodar Kale v. State of A.P., (2003) 8 SCC 559 : 2004 SCC (Cri) 39] , Japani Sahoo [Japani Sahoo v. Chandra Sekhar Mohanty, (2007) 7 SCC 394 : (2007) 3 SCC (Cri) 388] and Vanka Radhamanohari [Vanka Radhamanohari v. Vanka Venkata Reddy, (1993) 3 SCC 4 : 1993 SCC (Cri) 571] . The object of the criminal law is to punish per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the provision in its entirety. However, that would then throw the baby out with the bath water, inasmuch as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem [Madras Petrochem Ltd. v. BIFR, (2016) 4 SCC 1 : (2016) 2 SCC (Civ) 478] . Thus, while leaving the provision otherwise intact, we strike down the word mandatorily as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 had been withdrawn, the certified copy of the decree had not been filed. The said appeal without the certified copy of the decree remained an incompetent appeal. The withdrawal of an incompetent appeal which will indeed be no appeal in the eye of law cannot in any way prejudice the right of any appellant to file a proper appeal, if the right of appeal is not otherwise lost by lapse of time or for any other valid reason. We are, therefore, of the opinion that the provisions contained in Order 20 Rule 11 of the Code do not in the facts and circumstances of the present case deprive the appellant of his right to file an appeal against the decree. This judgment is distinguishable as it does not deal with the constitutional validity of an appeal provision. 20. Likewise, the judgment in Janardhana Rao (supra), which held that a right of appeal is neither a natural nor inherent right but has to be regulated in accordance with the law in force at the relevant time, the conditions of the appellate provision having to be strictly fulfilled, is also a judgment which has no reference to the constitutional validity of an appeal provision being assailed. In point of fact, this Court s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter referred to as SARFAESI Act ) holding that in the circumstances mentioned, the deposit of 75% of the amount claimed as a pre-condition to the hearing of an appeal before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act was onerous, oppressive, unreasonable, arbitrary and hence violative of Article 14 of the Constitution of India. 21.The learned ASG then relied upon judgments which indicate that when Article 14 of the Constitution of India is applied to tax legislation, greater freedom in the joints must be allowed by the Court in adjudging the constitutional validity of the same. For this purpose, he relied upon State of M.P. v. Bhopal Sugar Industries Ltd. (1964) 6 SCR 846. In this case, the judgment of this Court held that if the statute discloses a permissible policy of taxation, the Courts will uphold it. If, however, the tax was imposed deliberately with the object of differentiating between persons similarly circumstanced, such tax would be liable to be struck down. 22.We have already seen how unequals have been treated equally so far as assessees who are responsible for delaying appellate proceedings and those who are not so responsible, resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me purpose or object to accomplish and sympathetic and imaginative discovery is the surest guide to their meaning. 47. We have noted the object of Section 16(3) of the Act which has to be read in conjunction with Section 24(2) in this case for the present purpose. If the purpose of a particular provision is easily discernible from the whole scheme of the Act which in this case is, to counteract the effect of the transfer of assets so far as computation of income of the assessee is concerned then bearing that purpose in mind, we should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result i.e. result not intended to be subserved by the object of the legislation found in the manner indicated before, and if another construction is possible apart from strict literal construction then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. Furthermore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
