| COURT: | P&H High Court |
| CORAM: | Rajive Bhalla J, Rekha Mittal J |
| SECTION(S): | 254(1) |
| GENRE: | Domestic Tax |
| CATCH WORDS: | prosecution, stay of prosection proceedings, Writ jurisdiction |
| COUNSEL: | Ajay Vohra, Rohit Jain |
| DATE: | October 31, 2015 (Date of pronouncement) |
| DATE: | November 29, 2015 (Date of publication) |
| AY: | - |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| S. 254(1): The ITAT has no jurisdiction to grant a stay of prosecution proceedings as such proceedings are not directly & substantially flowing from the orders impugned before it | |
The High Court had to consider the following two questions:
(a) Whether Section 254 of the Income Tax Act, 1961 empowers the Income Tax Appellate Tribunal to interfere in prosecution proceedings either at the stage of show cause notice or at any other stage?
(b) Whether pendency of quantum appeals by the assessee and the revenue, appeals against penalty and 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?”
HELD by the High Court:
(i) Section 254(1) confers the power to decide an appeal and “pass such orders thereon as it thinks fit” and when read along with the proviso 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 aforesaid expressions 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 to matters in which the Tribunal has no jurisdiction even, though, these matters may be incidentally affected by the outcome of the appeal.
(ii) 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 Tribunal to direct that prosecution or a show cause notice shall be kept in abeyance. There is another aspect of the case, namely, if such a power, as has been canvassed by the assessee, were available to the Tribunal, prosecution would have to await the final outcome of proceedings up to the Supreme Court.
(iii) We are unable to discern any legislative intent or power as would confer upon the Tribunal power to stay consideration of a show cause notice proposing to initiate prosecution, by reading into Section 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 did not intend to confer. A prosecution being a consequence of infractions by an assessee cannot be said to be act of harassment or mischief so as to confer power upon the Tribunal, to order that prosecution shall be kept in abeyance.
(The Commissioner of Income Tax (Central-II) v. Income Tax
Appellate Tribunal and others, 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 Tax Officer, Hyderabad, 1988 (171) ITR 300 (AP): Rinkoo Steels and others v. K.P.Ganguli, Income Tax Officer and another, 1989 (179) ITR 482 (Delhi); Sant Parkash and Ors. V. Commissioner of Income tax and Ors., 1991 (188) ITR 732 (P&H): Universal Supply Corporation and Ors. v. State of Rajasthan and another, 1994 (206) ITR 222; Commissioner of Income Tax v. Bhupen Champak Lal Dalal and Anr. Etc., 2001 (248) ITR, 830 (SC), The Assistant
Commissioner, Assessment-II, Bangalore and ors v. Velliappa
Textiles Ltd. and Ors., 2003(263) ITR, 550 (SC) Madras Bar Association v. Union of India, 2014 (10) SCC 1 referred)
A careful reading of the judgment reveals the following points.
1. The points were well explained by the Sr. Standing Counsel before High Court.
2. The CIT (DR) did not avail the services of the same Sr. Standing Counsel while the issues were before the ITAT. Of course I could not see the full order of the ITAT. What I feel is that the matter was not well presented before the ITAT.
3. Let us hope the present CIT (Judicial) – a new post created in certain parts of tax India will take the assistance of such Sr. Standing Counsels even at the stage of Tribunal so that the time, energy and all can be saved.