CIT vs. ITAT (Delhi High Court)

DATE: (Date of pronouncement)
DATE: August 5, 2012 (Date of publication)

Click here to download the judgement (CIT_ITAT_stay_order_estoppel.pdf)

Tribunal has the power to stay proceedings to give effect to s. 263 revision order. Plea as to jurisdiction of AO/CIT, even if given up, can always be raised

The CIT passed an order u/s 263 by which he set-aside the assessment order and directed the AO to frame a fresh assessment. The assessee challenged the s. 263 order in a Writ Petition. The Court directed the CIT to pass a fresh order u/s 263. The assessee challenged the High Court’s verdict in the Supreme Court. In the meanwhile, the CIT passed the s. 263 order and so the assessee withdrew the SLP before the Supreme Court and filed an appeal before the Tribunal. The assessee also filed a stay application that a stay may be granted to prevent the AO from giving effect to the revision order as there would be multiplicity of proceedings if the AO passed a fresh assessment order which would be futile if the appeal was allowed. The Tribunal granted stay of the assessment proceedings pending before the AO and also directed production of papers relating to initiation of the s. 263 proceedings. The department filed a Writ Petition to challenge the order of the Tribunal on the ground that (a) as the assessee had challenged the initiation of the s. 263 proceedings before the High Court & Supreme Court and then withdrawn the challenge (SLP), it was estopped from arguing the point before the Tribunal and (b) the Tribunal has no power to stay the assessment proceedings. HELD dismissing the Petition:

(i) Where the jurisdiction of an authority is challenged, neither the question of res judicata nor the rule of estoppel can be invoked so as to restrain the challenge. Neither consent nor waiver can confer jurisdiction upon the AO/ CIT where it does not exist and so no importance can be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the erroneous assumption of jurisdiction by the authority. Consequently, even assuming that there was a consent/ waiver by the assessee to the assumption of jurisdiction by the Tribunal, he was still entitled to challenge it before the Tribunal (P. V. Doshi 113 ITR 22 (Guj) & other decisions followed);

(ii) It is well settled by the judgment in ITO v. Mohd. Kunhi 71 ITR 815 (SC) that the Tribunal has the power to ensure that the fruits of success are not rendered futile or nugatory and can pass appropriate orders of stay. The assessment orders pending before the AO pursuant to a s. 263 order can also be stayed (Khalid Mehdi Khan 110 ITR 79 (AP) followed).

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