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TMI Blog2015 (11) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... fers power to file an appeal against an order directing prosecution much less against a show cause notice proposing to initiate prosecution. The power conferred by Section 254(1) of the Act to "pass such orders thereon as it thinks fit", is circumscribed by the expression "any proceedings relating to an appeal" used in the first proviso to Section 254(1). The expressions "any proceedings relating to an appeal" and "pass such orders thereon as it thinks fit" have to be read as conferring power in the context of the appeal pending before the Tribunal. The Tribunal was, therefore, required to exercise power within the limits of the powers conferred by Section 254 of the Act but has arrogated to itself the power to stay prosecution. Admittedly, matters pending before the Tribunal are a quantum appeal, an appeal against penalty, and correctness of an order passed under Section 263 of the Act. The mere fact that the prosecution arises as a result of an order passed during assessment does not confer jurisdiction upon the Tribunal to interpret the expression used in Section 254(1) or the first proviso to stay prosecution. Counsel for the revenue further submits that a willful attempt to ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, the assessment order and the order passed in penalty proceeding. The question, therefore, is not whether prosecution proceedings are independent of assessments and penalty but whether the show cause notice proposing to initiate prosecution is so intrinsically linked to the out come of the appeals as would require the revenue to keep consideration of the show cause notice in abeyance. Counsel for the assessee also submits that decision in the pending appeals would have a direct bearing on the consideration of the show cause notice and in case the appeals are allowed or the impugned orders are modified, the show cause notice would either be rendered infructuous or the matter would have to be reconsidered. Counsel for the assessee further submits that the words "relating to an appeal", used in Section 254 of the Act and the words, "pass such orders thereon as it thinks fit" used in the proviso empower the Tribunal to stay consideration of the show cause notice. The consideration of the notice is so intrinsically linked to the out come of the appeals, as to be inseparable. Counsel for the assessee further submits that as there is no limitation for launching prosecution, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le-II, Hyderabad v. Khalid Mehdi Khan (Minor), 1977(110), ITR, 80; Puran Mal Kauntia v. Income Tax Officer and othres, 1975(80), ITR, 39; Commissioner of Income Tax v. Wander Pvt. Ltd., 2013 (358) ITR 408(Bom); Assistant Commissioner of Income Tax v. GE India Industrial Pvt. Ltd., 2013(358), ITR, 410(Guj.); in support of his arguments relating to the power of the Tribunal to stay collateral proceedings, namely, the show cause notice issued to the assessee why prosecution be not initiated. Before we record our opinion, it would be appropriate to delimit the facts. M/s Jindal Steel & Power Ltd., respondent no.2, filed a return of income for assessment year 2008-09, declaring an income of Rs. 7,66, 99,04,200/-. A revised return was filed on 29.03.2010, reducing the earlier return of income by Rs. 26,24,296/-. The return was selected for scrutiny vide order dated 27.12.2010, passed under Section 143 (3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The total income was assessed at Rs. 10,33,26,17,030/-. The Commissioner of Income Tax noticing that a deduction of Rs. 81.59 crore on account of sales tax subsidy/capital reserve, entry tax subsidy and electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct that so far as filing of reply to show-cause notice and rejoinder, if any, are concerned, the Department will be at liberty to proceed but will keep in abeyance the launching of prosecution before the Court concerned till the next date of hearing i.e. 02.02.2015. We also direct that on 02.02.2015, the priority of hearing will be given to the appeal questioning the penalty. Copy of this order be supplied to both the parties." The application for stay was adjourned to 10.02.2015, 17.02.2015 and 18.05.2015. In between, the stay application was taken up for hearing on 13.02.2015 and while adjourning the matter to 27.02.2015, interim order dated 23.01.2015 was ordered to continue. The application for stay, finally came up for hearing on 23.03.2015, when the Tribunal granted a stay against initiation of prosecution. A perusal of this order reveals that the Tribunal has recorded a finding that it is empowered by Section 254 of the Act to stay prosecution. The said finding is the bone of contention between the parties. After appraising submissions by counsel for the parties, the findings recorded in the impugned order, the following questions were framed:- "a) Whether Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been observed that "where the legislature invests an Appellate Tribunal with powers to prevent an injustice, it impliedly empowers it to stay the proceedings which may result in causing further mischief." and, thereafter, held as follows:- 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 jurisdiction. This is particularly so when section 220(6) deal expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It would well be said that when section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory." A perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso includes the power to pass interim orders, "in any proceeding relating to an appeal", thereby indicating that the stay order so passed must relate to proceedings in the appeal pending before the Tribunal. The question that, however, requires an answer is whether these words and expressions would include the power to stay proceedings or orders, which are not appealable or appealed against during pendency of an appeal but are likely to be affected by the outcome of the appeal. A key to the understanding of the power to grant stay lies in the expressions "pass such orders thereon as it thinks fit" and "any proceedings relating to an appeal", used in Section 254(1) and the proviso appended thereto. The aforesaid expressions, in our considered opinion, confine the power of a Tribunal, to pass an interim order in relation to matters pending before the Tribunal and at best to matters that are so intrinsically linked to the lis pending before the Tribunal, as to be inseparable. The exercise of power must be confined to matters that are directly and substantially in issue or matters that flow directly and substantially from the order impugned before the Tribunal but cannot be extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation in the present case, as already noticed, is entirely different. All that the revenue has initiated is a notice to show cause why prosecution be not launched. Admittedly, the Tribunal is neither the appellate nor the revisional forum against a prosecution. A prayer for stay of prosecution or stay of the show cause would, therefore, have to be made by resort to other remedies provided under law and not by praying for a stay before the Tribunal. It would also be appropriate to point out that the notice to show cause why prosecution be not initiated is a purely administrative act and it is only after consideration upon the notice and the reply reaches fruition, may the assessee seek his legal remedies in accordance with law. As already recorded, the appeal may have a bearing on the consideration of the show cause notice and the reply filed thereto, but we are not inclined to read into Section 254(1) or the proviso thereto, power in a Tribunal to stay consideration of the show cause notice or the power to direct that the show cause notice be kept in abeyance. The judgments pressed into service by counsel for the revenue, namely, Gulab Chand Sharma v. H.P.Sharma etc., (1974) ILR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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