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2015 (11) TMI 1286 - PUNJAB & HARYANA HIGH COURT

2015 (11) TMI 1286 - PUNJAB & HARYANA HIGH COURT - [2016] 382 ITR 321 - Powers of tribunal - power to grant stay - Whether Section 254 empowers the Income Tax Appellate Tribunal to interfere in prosecution proceedings either at the stage of show cause notice or at any other stage? - Tribunal power to stay a show cause notice calling upon the assessee to show cause why prosecution be not launched - Held that:- A key to the understanding of the power to grant stay lies in the expressions “pass suc .....

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lly in issue or matters that flow directly and substantially from the order impugned before the Tribunal but cannot be extended to matters in which the Tribunal has no jurisdiction even, though, these matters may be incidentally affected by the outcome of the appeal.

We cannot read into Section 254 of the Act, any power in the Income Tax Appellate Tribunal to interfere in a prosecution under the Act, either at the stage of a show cause notice or at any other stage. The pendency of app .....

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in, Advocate ORDER Rajive Bhalla, J. The revenue is before us, praying for issuance of a writ in the nature of certiorari, quashing, orders dated 23.01.2015 (Annexure P-12) and 25.03.2015 (Annexure P-16), passed by the Income Tax Appellate Tribunal, Delhi Bench, New Delhi, directing that consideration of the show cause notice for prosecution shall be kept in abeyance. Counsel for the revenue submits that proceedings for prosecution, under Section 276C(1) are independent of assessment/penalty pro .....

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elating 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 qua .....

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ndent consequence. The pendency of the quantum and other appeals cannot be said to be so intrinsically linked to the prosecution as to empower the Tribunal to stay prosecution. Counsel for the revenue also points out that orders against which appeals may be filed are set out in Section 253 of the Act. A perusal of Section 253 reveals that it does not confer any right to file an appeal against prosecution much less against a show cause to initiate prosecution. As an alternative argument, counsel .....

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g that prosecution may be kept in abeyance renders the orders meaningless. Counsel for the revenue relies upon the following judgments to support his arguments that the Tribunal is not empowered to stay prosecution:- Gulab Chand Sharma v. H.P.Sharma etc., (1974) ILR 1 (Delhi), 190; P.Jayappan v. S.K.Perumal, First Income Tax Officer, Tuticorin, 1984 (149) ITR, 692(Mad); P.Jayappan v. S.K.Perumal, First Income Tax Officer, Tuticorin,, 1984 (149) ITR, 696(SC); Ashok Buscuit Works and Ors v. Income .....

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pending before the Tribunal, namely, an appeal challenging the order passed under Section 263, the second against the assessment order and the third against an order imposing penalty. The show cause notice proposing to initiate prosecution, is based in its entirety upon the order passed under Section 263 of 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 whethe .....

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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, .....

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llate Tribunal, must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. The Supreme Court has also held that appellate power, in the absence of any specific provision for grant of stay inhers the power to do all such acts or employ all such means as are essentially necessary for the exercise of this power which carries with it the duty in proper cases to pass such orders for staying proceedings as will prevent the appeal from being rendered nugatory .....

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tice shall be kept in abeyance the order may be affirmed. Counsel for the assessee also relies upon a Division Bench judgment of the High Court of Delhi in The Commissioner of Income Tax (Central-II) v. Income Tax Appellate Tribunal and others, to contend that in a similar situation, the High Court of Delhi has held, while considering stay of proceedings, consequent to directions by the Commissioner of Income Tax, under Section 263 of the Act, that such an order is relatable to the appellate pow .....

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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 .....

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ng that a deduction of ₹ 81.59 crore on account of sales tax subsidy/capital reserve, entry tax subsidy and electricity duty subsidy have been wrongly claimed, variation in the statutory liability regarding provision for gratuity and as a consequence in the claim for deduction under Section 43B of the Act and additional depreciation of ₹ 5,91,106/- has been wrongly claimed on computers, initiated proceedings under Section 263 of the Act and vide order dated 25.03.2013, partly set asi .....

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al against the fresh assessment before the Commissioner of Income Tax, Rohtak, which was dismissed on 10.03.2014. The Assessing Officer had also initiated penalty proceedings under Section 271(1)(c) of the Act and eventually passed an order dated 28.11.2013, imposing penalty. The assessee challenged the order imposing penalty before the Commissioner of Income Tax(Appeals), Rohtak, which was also dismissed. The assessee, thereafter, filed two appeals, one being the quantum appeal and the other ag .....

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penalty, before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') for stay of prosecution. The revenue urged before the Tribunal, lack of jurisdiction to stay prosecution, as well as raised other pleas. The Tribunal, vide order dated 23.01.2015, ordered that launching of prosecution shall remain in abeyance upto the next date of hearing i.e. 02.02.2015. A relevant extract from the order reads as follows:- 4. Regarding application for staying the prosecution un .....

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urned 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. .....

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nd appeals challenging orders passed consequent to an order passed under Section 263 of the Income Tax Act, would confer power/jurisdiction upon the Tribunal to stay a show cause notice calling upon the assessee to show cause why prosecution be not launched? We have heard counsel for the parties, perused the impugned orders but before proceeding to answer the questions posed, would once again recapitulate that proceedings pending before the Appellate Tribunal are an appeal challenging an order p .....

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ons posed would require consideration as to the nature of the power conferred by Section 254 of the Act. Section 254 of the Act as originally enacted did not confer power upon the Income Tax Appellate Tribunal to grant stay. A debate, therefore, raged whether Section 254 of the Act inhered the power, to grant, stay. After considering the countors of Section 254 of the Act as well as various precedents, the Supreme Court in Income Tax Officer, Cannanore (supra) held as follows:- According to the .....

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but that principle applied only to the taxing part of the statute and not to the procedural part. It has further 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 spe .....

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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 of the aforesaid judgment reveals that the power to grant stay was held to be inherent in Section 254, (as it existed before the power to grant stay was conferred),i.e., inhers a power to do all .....

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parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit 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 subsection (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 stay specified in that .....

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he revenue urging that power conferred by Section 254(1) to grant stay cannot be extended to any matter, which is not subject matter of an appeal before the Tribunal, whether incidental or collateral but with counsel for the assessee urging to the contrary, namely, that these expressions inhere a plenary power, in the Appellate Tribunal, to stay proceedings which though independent are intrinsically linked to the outcome of an appeal. A due consideration of the arguments, the statutory provision .....

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ower 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 ord .....

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utcome of the appeal. This apart once it is accepted that proceedings for prosecution are independent of assessment and penalty, and the Tribunal is neither the appellate nor the revisional authority in a case where prosecution is launched, the mere fact that the decision in the appeal may have an impact on the prosecution, in our considered opinion, cannot be used to read into the expressions pass such orders thereon as it thinks fit or any proceedings relating to an appeal , a power in the Tri .....

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ection 254, the power to stay independent proceedings merely because they may be affected by the decision of a pending appeal. The legislature having conferred power to grant stay in terms, used in Section 254 (1) and the first proviso, we cannot add to or subtract from the words and expressions used in Section 254(1) or by a process of interpretation confer jurisdiction which legislature, in our considered opinion, did not intend to confer. A prosecution being a consequence of infractions by an .....

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e Tribunal, stayed assessment proceedings. The order was upheld, by the Delhi High Court as assessment proceedings were intrinsically linked to and not severable from the legality of the order passed, under Section 263, namely, jurisdiction to re-open an assessment. The situation 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 rev .....

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e 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 1 (Delhi), 190; P.Jayappan .....

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