TMI Blog2013 (12) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has the power to grant stay as incidental to its jurisdiction - Decided against Revenue. - - - - - Dated:- 18-7-2013 - SHAH M. R., SONIA GOKANI MS., JJ. JUDGMENT M. R. Shah J.- Rule. Mrs. Swati Soparkar, learned advocate waives service of notice of rule on behalf of the respondent. In the facts and circumstances of the case and with the consent of learned counsel appearing on behalf of the respective parties, the present petition is taken up for final hearing today. By way of this petition under article 226 of the Constitution of India, the Revenue has raised the following short but interesting question of law : "Whether the Income-tax Appellate Tribunal ("the ITAT" for short) has any power to stay the penalty proceedings pending the tax appeal filed by the assessee, either express or implied?" 1.1 By way of this petition under article 226 of the Constitution of India, the petitioner-Revenue has questioned the impugned order passed by the Income-tax Appellate Tribunal dated January 4, 2013, by which on a stay application preferred by the assessee-appellant in quantum appeal against the order passed by the Commissioner of Income-tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Commissioner requesting not to proceed further with the penalty proceedings and/or to keep the penalty proceedings in abeyance till their quantum appeal is decided by the Income-tax Appellate Tribunal. On the said application, there was no further order passed by the Commissioner and as the assessee was apprehending that the Commissioner would proceed further with the penalty proceedings, in quantum appeal preferred against the order of the Commissioner of Income-tax (Appeals) dated July 17, 2012, the assessee _" original appellant submitted the stay application before the Income-tax Appellate Tribunal requesting to grant stay of further proceedings of the penalty proceedings till its quantum appeal against the decision of the Commissioner of Income-tax (Appeals) is finally decided and disposed of. By the impugned order and observing that the penalty proceedings have been initiated by the Commissioner pursuant to the enhancement of income made by Commissioner of Income-tax (Appeals) by its order dated July 17, 2012, against which the appeal has been preferred by the assessee before the Income-tax Appellate Tribunal, which is in fact the first appeal of the assessee against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in section 271(1)(c) of the Income-tax Act. 3.2 Shri Parikh, learned counsel appearing on behalf of the petitionerRevenue, has vehemently submitted that the Income-tax Appellate Tribunal is the creature of a statute and is bound to act as per the provisions of the Act/statute and cannot exercise the powers not vested in it. It is submitted that the Income-tax Appellate Tribunal is required to exercise powers as mentioned in section 254 of the Income-tax Act only and has no jurisdiction to exercise the powers beyond what is provided under section 254 of the Income-tax Act as, neither there are express or even implied powers to stay the penalty proceedings under section 254 of the Act more particularly when the penalty proceedings are not under challenge before it and the appeal before it is only a quantum appeal preferred by the assessee. 3.3 It is further submitted by Shri Parikh, learned counsel for the Revenue, that once the Income-tax Appellate Tribunal lacks jurisdiction to stay the penalty proceedings, there shall not be any further requirement of prima facie case, balance of convenience, etc., to be considered while considering the stay application. 3.4 It is fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred by the statute under section 254 of the Income-tax Act, which deserves to be quashed and set aside. 3.5 Shri Parikh, learned counsel appearing on behalf of the petitionerRevenue, has further submitted that the Income-tax Appellate Tribunal has materially erred in relying upon the decision of the hon'ble Supreme Court in the case of M. K. Mohammed Kunhi (supra). It is submitted that on the facts the said decision shall not be applicable and the Tribunal has misapplied the said decision. Making above submissions and relying upon the above decision, it is requested to allow the present special civil application. The present petition is opposed by Shri Soparkar, learned counsel appearing on behalf of the respondent-assessee. It is submitted that under section 254 of the Income-tax Act, the Appellate Tribunal can pass such orders as it thinks fit, inclusive of the stay of penalty proceedings. It is submitted that as such the decision in the quantum appeal has a direct bearing on the penalty proceedings and, therefore, during the pendency of quantum appeal, when an application was submitted to stay the penalty proceedings and the same has been granted by the Tribunal, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal could have considered the same and on making out a case could have granted the stay of entire order passed by the Commissioner of Income-tax (Appeals). It is submitted that instead of that the assessee prayed for limited stay of the penalty proceedings directing the Commissioner of Income-tax (Appeals) to keep in abeyance the penalty proceedings till the quantum appeal is decided by the Tribunal and considering the decision of the hon'ble Supreme Court in the case of M. K. Mohammed Kunhi (supra), the Tribunal has rightly allowed the said application directing the Commissioner to keep the penalty proceedings in abeyance. It is submitted that as such by issuing such an interim direction, further multiplicity of proceedings can be avoided. 4.5 It is further submitted by Shri Soparkar, learned counsel appearing on behalf of the assessee, that in such a situation and considering section 275 of the Income-tax Act, which provides that the penalty can be imposed within a period of six months, to protect the interests of the Revenue, there is a further provision made under section 275(1)(a) of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed by the Commissioner of Income-tax (Appeals) by which the Commissioner of Income-tax (Appeals) has quashed and set aside the order of assessment passed by the Assessing Officer and has passed an order to enhance the assessment by an amount of Rs. 5,50,73,555, by observing that the Transfer Pricing Officer, Ahmedabad, has followed the correct method in his order under section 92CA(3) for the assessment year 2005-06 by computing the raw material adjustment by comparing the raw material adjustment to operating cost ratio of the tested party vis-a-vis the raw material to operating cost ratio of each of the comparable company and, accordingly, by making adjustment to the raw material expenses of the comparable expenses. Simultaneously, the Commissioner of Income-tax (Appeals) also passed an order for initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act on the ground that the assessee has filed inaccurate particulars of income by adopting wrong and incorrect method in respect of transfer pricing adjustment with regard to the international transactions entered into with the associated enterprise and the said penalty proceedings are initiated on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Appellate Tribunal has passed an order to stay the penalty proceedings during the appeal before it, as such it cannot be said that the Tribunal has committed any error and/or illegality. At this stage it is required to be noted that in an appeal against the order passed by the Commissioner of Income-tax (Appeals), it was open for the assesseeappellant to submit the stay application requesting to stay the entire order passed by the Commissioner of Income-tax (Appeals). Instead of that, the assessee prayed a limited interim relief staying the penalty proceedings during the pendency of the appeal. 5.2 Now, so far as the powers of the Appellate Tribunal to pass such an interim order in an appeal under section 254 of the Income-tax Act is concerned, identical question came to be considered by the hon'ble Supreme Court in the case of M. K. Mohammed Kunhi (supra). It is true that in the said decision, the hon'ble Supreme Court was considering power of the Tribunal to grant stay of recovery proceedings pending the appeal. However, in the said decision, the hon'ble Supreme Court has considered in detail the scope and powers of the Tribunal under section 254 of the Income-tax Act. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass such orders as it thinks fit after giving full hearing to both the parties to the appeal. If the Income-tax Officer and the Appellate Assistant Commissioner have made assessments or imposed penalties raising very large demands and if the Appellate Tribunal is entirely helpless in the matter of stay of recovery the entire purpose of the appeal can be defeated if ultimately the orders of the departmental authorities are set aside. It is difficult to conceive that the Legislature should have left the entire matter to the administrative authorities to make such orders as they choose to pass in exercise of unfettered discretion. The assessee, as has been pointed out before, has no right to even move an application when an appeal is pending before the Appellate Tribunal under section 220(6) and it is only at the earlier stage of appeal before the Appellate Assistant Commissioner that the statute provides for such a matter being dealt with by the Income-tax Officer. It is a firmly established rule that an express grant of statutory power carries with it by necessary implication the authority to use all reasonable means to make such grant effective (Southland Statutory Construction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated under section 271(1)(c), and by exercising the inherent powers of the court under section 151 of the Code of Civil Procedure, 1908, the High Court in exercise of its appellate jurisdiction can stay the penalty proceedings. 5.3 The issue raised in the present special civil application with respect to staying of penalty proceedings by the Income-tax Appellate Tribunal during the pendency of the appeal is also required to be considered from another angle. Even section 275(1)(a) of the Income-tax Act provides that in a case where the relevant assessment order or the other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 or under section 246A or an appeal to the Appellate Tribunal under section 253 of the Income-tax Act, no order of imposing penalty can be passed after the expiry of the financial year in which the proceeding, in course of which action for imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals), or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or the Commissioner, whichever period expires later. Meani ..... X X X X Extracts X X X X X X X X Extracts X X X X
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