|(Date of pronouncement)
|March 30, 2011 (Date of publication)
|Click here to download the judgement (tata_comm_special_bench_stay_365_days.pdf)
Despite Third Proviso to s. 254(2A), Tribunal has power to extend stay beyond 365 days if delay not attributable to assessee
The Third Proviso to s. 254(2A), as amended w.e.f. 1.10.2008, provides that if the appeal filed by the assessee is not disposed off within the period of stay granted by the Tribunal (which cannot exceed 365 days), the order of stay shall stand vacated even if the delay in disposing of the appeal is not attributable to the assessee. The assessee filed a stay application requesting stay of demand for penalty of Rs. 369 crores. On the expiry of 365 days of stay, the assessee asked for extension of stay relying on the Tribunal’s order in Ronak Industries where, stay had been granted beyond 365 days relying on the judgement of the Bombay High Court in Narang Overseas 295 ITR 22 (Bom). As it was felt by the Tribunal that the reliance in Ronak Industries on Narang Overseas was misplaced in view of the amendment to the Third proviso to s. 254(2A) w.e.f. 1.10.2008, the question whether the Tribunal had jurisdiction to extend stay beyond 365 days referred to the Special Bench. HELD by the Special Bench:
(i) In Ronak Industries, the Tribunal held, relying on Narang Industries, that the Tribunal has the power to extend stay beyond 365 days. This decision of the Tribunal was challenged by the department in the Bombay High Court by specifically raising a question as to the applicability of the Third Proviso to s. 254(2A) as amended w.e.f 1.10.2008. The High Court, vide order dated 22.10.2010, dismissed the department’s appeal. As such, the Tribunal’s order holding that there was power to extend stay even after 365 days stood affirmed;
(ii) The department’s argument that the High Court’s order in Ronak Industries should be treated as per incuriam on the ground that the amendment made by the FA 2008 was not considered by it is not acceptable because (a) In Narang Overseas (rendered prior to the amendment) a wider view was taken as regards the power to grant stay, (b) In the appeal filed by the department in Ronak Industries a specific question with regard to the effect of the Third Proviso was raised and so it cannot be said that the High Court had not taken cognizance of the amendment, (c) the Tribunal cannot ignore a High Court’s decision on the ground that a provision of law was not considered by the High Court and (d) the fact that there is no discussion in the High Court’s order in Ronak Industries does not mean that does not lay down any ratio decidendi;
(iii) However, the recovery of the arrears by the AO on the expiry of 365 days of stay cannot be ordered to be refunded because on the date of recovery the stay had expired and the application for extension was pending before the Special Bench. The AO’s act was bona fide and as the recovery was by adjustment of refunds, it was not a “coercive measure” (RPG Enterprises 251 ITR (AT) 20 (Mum) & other cases holding that the AO must refund taxes collected during the pendency of a stay application distinguished).