Shri Jethmal Faujimal Soni vs. ITAT (Bombay High Court)

ITAT should dispose off stay granted appeals within s. 254(2A) period

S. 254 (2A) empowers the Tribunal to grant stay of recovery of demand for a period not exceeding 365 days. The 3rd Proviso to s. 254(2A) inserted by the Finance Act 2008 provides that if there is a delay in disposing of the appeal within the said period, the order of stay shall stand vacated even if the delay in disposing of the appeal is not attributable to the assessee. The assessee’s appeal was adjourned by the Tribunal from time to time for no fault of the assessee and in view of the fact that an identical issue was pending before a Special Bench of the Tribunal. The Tribunal initially granted stay but on the expiry of 365 days dismissed the stay application on the ground that it had no power to extend stay in view of the said 3rd Proviso to s. 254 (2A). The assessee filed a Writ Petition to challenge the constitutional validity of the said 3rd proviso to s. 254(2A). HELD:

(i) The 3rd Proviso to s. 254 (2A) is a stringent provision as a result of which even if the delay in disposing of the appeal is not attributable to the assessee, the stay has to stand vacated in any event upon the lapse of a period of 365 days. Having regard to the nature of the provision which has been enacted by Parliament, the Tribunal is under a bounden duty and obligation to ensure that the appeal is disposed off, so as to not result in prejudice to the assessee, particularly in a situation where no fault can be found with the conduct of the assessee. The fact that an issue was pending before the Special Bench was not a reason for the Tribunal not to dispose of the appeal, particularly since the consequence of the inability of the Tribunal to do so would result in the vacating of the order of stay. It is unfortunate that the Tribunal simply adjourned the appeal merely on the ground of the pendency of an identical issue before the Special Bench. The state of affairs which has come to pass could well have been avoided by the appeal being taken up for final disposal.

(ii) The Tribunal was directed to dispose of the pending appeal within four months. The department’s statement that no coercive steps for enforcing the demand would be taken was recorded. The question of constitutional validity of the 3rd proviso to s. 254(2A) was left open.