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M/s. SAP Labs India Pvt. Ltd. Versus Addl. Commissioner of Income-tax, Range 12, Bangalore.

2016 (2) TMI 398 - ITAT BANGALORE

Extension stay beyond a period of 365 days - Held that:- As rightly submitted by the learned counsel for the Assessee, the existence of all conditions for grant of stay has already been considered by this Tribunal and at this stage, new conditions cannot be imposed. As rightly submitted by the learned counsel for the Assessee, the non-existence of financial hardship cannot be conclusive in the matter. In any event these parameters have already been tested by the Tribunal when it originally grant .....

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Ravi Shankar, CAs. For The Respondent : Shri G.R.Reddy, CIT(DR) ORDER Per N.V.VASUDEVAN, JM: This is an application filed by the Assessee praying for an order extending the order dated 23.8.2013 of stay of recovery of outstanding demand already granted by this Tribunal in SP No.72/BNG/2013 till disposal of the appeal of the Assessee by this Tribunal. 2. The Assessee has filed appeal IT (TP)A.No.1006/Bang/2011 against order dated 7.9.2011 of the ACIT, Range-12, Bangalore u/s.143(3) r.w.s.144C(13) .....

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t in the said order. The order of stay was granted only for a period of 180 days or till disposal of the appeal by the Tribunal, whichever was earlier. There is no dispute that the Assessee had complied with the aforesaid order of the Tribunal. The Appeal was fixed out of turn for hearing by the aforesaid order on 27.11.2012. The appeal could not be heard within the period of 180 days for which the order of stay was to remain in force. Since the period of operation of order of stay of recovery o .....

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rder fixed by this order would come to an end on 19.1.2013. 3. The appeal of the Assessee could not be heard by this tribunal on the various dates fixed for hearing thereafter. The details in this regard are as follows: 18-Feb-13 The Departmental Representative sought an adjournment and the matter was fixed for hearing on 20 May, 2013 20-May-13 The Hon'ble Tribunal adjourned the matter since a Special Bench was constituted in Delhi Tribunal on the issue of turnover filter and the matter was .....

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le Tribunal adjourned the matter due to uncertainty on dissolution of the Special Bench and the matter was fixed for hearing on 19 February 2014. 17-Feb-14 Assessee filed Stay Application (2nd extension) before the ITAT (S.A.No.58/Bang/2014). 19-Feb-14 The mater was suo moto adjourned by the Registry in the Cause List and was fixed on 8 April, 2014. 08-Apr-14 The matter was suo moto adjourned by the Registry in the Cause List and was fixed on 16 May, 2014. 16-May-14 The matter was adjourned due .....

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th the Hon'ble Accountant Member and the matter was fixed for hearing on 14 January, 2015. 14-Jan-15 The Bench was not functioning on account of Makarsankranti and the matter was fixed for hearing on 3 March, 2015. 03-Mar-15 The Hon'ble Tribunal adjourned the matter since the issue of application of turnover filter was pending before the High Court and the matter was fixed for hearing on 1 July, 2015. 01-Jul-15 The matter was adjourned due to conflict of interest with the Hon'ble Acc .....

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x Act, 1961 (Act) for stay of proceedings by the Assessing Officer relating to recovery of penalty and tax when a first appeal or appeal before Tribunal was pending. Despite the absence of such express provision for grant of stay, the implied power of the Tribunal to grant stay has been recognised on the principle that where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution. 6. In ITO V .....

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recovery of tax during the pendency of the appeal before it. It was said that the power to grant stay is incidental or ancillary to the appellate power. The Supreme Court observed: "If the ITO and the AAC have made assessments or imposed penalties raising very large demands and if the Tribunal is 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 tha .....

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ower to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when Section 220(6) deals expressly with a situation when an appeal is pending before the AAC but the Act is silent in that behalf when the appeal is pending before the Tribunal. It could 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 statut .....

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, in section 254, in sub-section (2A), the following provisos were inserted with effect from the 1st day of June, 2001, namely:- "Provided that where an order of stay is made in any proceedings relating to an appeal filed under subsection (1) of section 253, the Appellate 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, .....

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ovided 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 stay specified in that order: Provided further that where such appeal is not so disposed of within the said period of s .....

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ays and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed: Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, the order of stay shall stand vacated after the expiry of such period or periods.". 11. By the Finance Act, 2008 in sub-section (2A), for the third proviso, the following proviso was substituted wit .....

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ction 254 of the Income-tax Act, in sub-section (2A), after the words, brackets and figures "under sub-section (1) or sub-section (2)", the words, brackets, figure and letter "or sub-section (2A)" shall be inserted with effect from the 1st day of July, 2012. 13. After the aforesaid statutory Amendments, the provisions of Sec.254(2A) now stands thus: SECTION 254-ORDERS OF APPELLATE TRIBUNAL (2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide .....

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late Tribunal shall dispose of the appeal within the said period of stay specified in that order: Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it .....

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in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee. 14. The Hon ble Karnataka High Court in the case of CIT Vs. Ecom Gill Coffee Trading (P) Ltd. 362 ITR 235 (Kar.) held that as per the third proviso to Sec.254(2A) of the Act, the total duration of the stay of demand granted by the Tribunal cannot exceeded 365 days. The Hon ble Ka .....

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e third proviso to Finance Act 2008 makes it abundantly clear that the purpose of putting the outer limits is only for curtailing the period an order of stay can operate and to ensure that it has no effect after the period of 365 days from the date of initial order. The Hon ble Court further held that the interpretation of provision of this nature particularly to interpret in a manner so as to enable or confer power on the Tribunal to extend a stay order beyond 365 days, would be to understand c .....

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s. 15. The learned counsel for the Assessee pointed out to us the legal position as laid down by the Hon ble Karnataka High Court in the aforesaid decision in the case of Ecom Gill Coffee (supra) and submitted that in a later decision rendered by the Hon ble Delhi High Court in the case of Pepsi Foods (P) Ltd. Vs. ACIT 376 ITR 87 (Del) the Hon ble Delhi High Court has held the insertion of the expression - 'even if the delay in disposing of the appeal is not attributable to the assessee' .....

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e Constitution and has no nexus or connection with the object sought to be achieved. The said expression introduced by the Finance Act, 2008 is, therefore, struck down as being violative of Article 14 of the Constitution of India. This would revert us to the position of law as interpreted by the Bombay High Court in Narang Overseas (supra), with which 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 .....

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nullify this reading of the third proviso to Section 254(2A) of the said Act by introducing the words - 'even if the delay in disposing of the appeal is not attributable to the assessee'. 17. The learned counsel for the Assessee next submitted that the decision rendered by the Hon ble Karnataka High Court did not deal with the constitutional validity of Sec.254(2A) of the Act and was a decision rendered on the question of Tribunal s powers to extend stay beyond a period of 365 days afte .....

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d that an order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final, in the light of Article 226(2) of the Constitutiona of India, will have effect throughout the territory of India. Further reference was also made to a decision of the Hon ble Karnataka High Court in the case of Mr.Shiv Kumar Vs. Union of India and others W.P.No.13112/2012 (GM-RES-PIL) wherein the Hon ble Karnataka High Court following the ruling in the case of Kusum Ingots ( .....

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ry and violative of Articles 14 and 21 of the Constitution. An alternative prayer was also sought by requesting the Court to read down the expression 'two years' in Section 10-A of the Act as 'one year'. The Hon ble Kerala High Court in Saumya Ann Thomas vs. The Union of India & others [2010 (1) KLT 869] ; ILR 2010 (1) Kerala 805, had already held that Section 10A(1) of the Act has been read down and the expression 'two years' is to be read as 'one year'. The .....

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Apex Court in Kusum Ingots and Alloys Ltd., what follows is that Section 10A(1) of the Act has been held to be unconstitutional being violative of Articles 14 and 21 of the Constitution. However, to save it from the vice of unconstitutionality, the expression of 'two years' has been read down to 'one year' in sub-section (1) of Section 10A of the Act. The Kerala High Court's pronouncement on the constitutionality of a provision of a Central Act would be applicable throughout .....

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y specific orders with regard to holding constitutionality or otherwise of sub-section(1) of Section 10A of the Act. Keeping in mind the pronouncement of the Division Bench of the Kerala High Court and reading the same in the context of Kusum Ingots and Alloys Ltd, the position of law with regard to sub-section (1) of Section 10A of the Act is now been made clear, particularly, insofar as State of Karnataka is concerned. (emphasis supplied) 18. Further reference was made to the decision of the H .....

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did not pay the said tax till the ITO made assessment for the asst. yr. 1968- 69 by his order dated August 31, 1971. As no tax was paid by way of self-assessment, an opportunity to show cause why a penalty should not be imposed under s. 140A(3) was given to the assessee. She, however, did not offer any explanation. By his order dated October 22, 1973, passed under s. 140A(3), the ITO levied a penalty of ₹ 800. In a second appeal before the Tribunal, the attention of the Tribunal was drawn .....

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cision of the Madras High Court and cancelled the order of penalty. On further appeal by the revenue, the Hon ble Bombay High Court had to consider the following substantial question of law: "Whether, on the facts and in the circumstances of the case and in view of the decision in the case of A. M. Sali Maricar (1973) 90 ITR 116 (Mad), the penalty imposed on the assessee under s. 140A(3) was legal?" 19. The Hon ble Bombay High Court held as follows: It is the settled position in law, i .....

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eTribunal in Bombay had no jurisdiction to go into the question of constitutionality of s. 140A(3) of the Act. Question then arises what is going to be the effect of a decision of the Madras High Court holding that s. 140A(3) is unconstitutional as violative of Art. 19(1)(f) of the Constitution, A similar question came up for consideration before the Supreme Court in the case of East India Commercial Co. Ltd. vs. Collector of Customs, Calcutta, AIR 1962 SC 1893, wherein it was held that an admin .....

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he Supreme Court making the law declared by the High Court binding on subordinate Courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working ; otherwise, there would be confusion in the administration of law and respect for law would irretrievably suffer. 6. In view of this clear pronouncement of the Supreme Court, it .....

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hat statute. It should not be overlooked that the IT Act is an All-India statute and if an Tribunal in Madras, in view of the decision of the Madras High Court, has to proceed on the footing that s. 140A(3) was non-existent, the order of penalty thereunder cannot be imposed by the authority under the Act. Until a contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High C .....

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trary decision of any other High Court on that question. It is admitted before us that at the time when the Tribunal decided the question, no other High Court in the country had taken a contrary view on the question of constitutionality of s. 140A(3). That being the position, it is not possible for us to take the view that the Tribunal in Bombay, when it set aside the order of penalty, went into the question of the constitutionality of that section and gave a finding that it is ultra vires follo .....

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e part of the Assessee and in the light of the fact that the tribunal has already found existence of a prima facie case, balance of convenience and relative hardship and has thought it fit to grant an order of stay, the same should be continued in the interest of justice. 21. The learned DR pointed out that Hon ble Karnataka High Court in the case of Ecom Gill Coffee Tradomg (P) Ltd. (supra) has not followed the decision in the case of Narang Overseas (P) Ltd. (supra) whereas the Hon ble Delhi H .....

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he case of Narang Overseas (supra) was prior to insertion of 3rd proviso and Hon ble Delhi High Court only referred to the said decision to emphasis the point that extension of stay should not be refused if the delay in the appeal not being heard is owing to delay on the part of the Assessee. With regard to financial hardship, the learned counsel for the Assessee pointed out that the Hon ble Bombay High Court in the case of MMRDA Vs. DDIT (2015) 55 Taxmann.com 307 (Bom) has held that non- existe .....

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f the Act. The Hon ble Court only held that Tribunal has no power to extend stay beyond a period of 365 days in view of the clear language of 3rd proviso to Sec.254(2A) of the Act and that statutory tribunals have to follow the statutory provisions as it is. As rightly contended on behalf of the Assessee when once the 3rd proviso has been held to be unconstitutional by the Hon ble Delhi High Court (the decision of Delhi High Court is later in point of time to that of the Hon ble Karnataka High C .....

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