Case Law Details
Infosys Ltd. Vs The ACIT (ITAT Bangalore)
The issue under consideration is whether the stay application seeking an extension of the stay approve by the Tribunal?
In the present case, the assessee submitted that the appeal had been fixed for hearing on January 20, 2020, when the earlier stay order was passed. Thereafter, the case was fixed on 18th March 2020, and 9th June 2020. On all the three occasions, the Revenue sought an adjournment and hence the appeal has now been posted for hearing on September 24, 2020.
ITAT stated that there is no change in the facts and circumstances of the case and further they notice that the delay in disposing of the appeal is not attributable to the assessee, they are of the view that the stay already granted by the Tribunal deserves extension. Accordingly ITAT extend the stay for further period of 180 days commencing from the date of this order or till the date of disposal of the appeal, whichever period expires earlier. They make it clear that the assessee should not seek adjournment on the date of hearing without reasonable cause, failing which the present stay order shall be subjected to review by the Division Bench hearing the appeal.
FULL TEXT OF THE ITAT JUDGEMENT
The assessee has filed this stay application seeking extension of the stay granted by the Tribunal vide its order dated 10/01/2020 in S.P No.340/Bang/2019 for assessment year 2012-13.
2. The ld counsel for the assessee submitted that the appeal had been fixed for hearing on 20/01/2020, when the earlier stay order was passed. Thereafter, the case was fixed on 18th March, 2020 and 9th June, 2020. On all the three occasions, the Revenue sought adjournment and hence the appeal has now been posted for hearing on 24/9/2020. He further submitted that there is no change in facts and further the delay in disposing the appeal is not attributable to the assessee. Accordingly he prayed that the stay granted earlier may kindly be extended.
3. On the contrary the ld DR vehemently opposed the stay petition. He submitted that the Hon’ble Karnataka High Court has held in the case of CIT Ecom Gill Coffee Trading (P.) Ltd. [2014] (362 ITR 204) that the stay could not be extended by the Tribunal beyond the period of one year. He submitted that the stay was originally granted to the assessee on 21.4.2017 and since then, the Tribunal has extended the stay several times. Accordingly, he pleaded that the assessee may be directed to pay further amount towards the outstanding demand.
4. We have heard the rival contentions. With regard to the contentions of Ld D.R, we notice that the co-ordinate bench of Tribunal has extensively dealt with the same in SAP labs (I) P Ltd (67 taxmann.com 78). For the sake of convenience, we extract below the observations made by the Tribunal in SAP labs (I) P Ltd (supra):-
“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 such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) or sub-section (2A) of section 253.
Provided 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 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 thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days 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, which shall not, 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 Ecom Gill Coffee Trading (P.) Ltd. [2014] 362 ITR 204/[2012] 209 Taxman 190/23 taxmann.com 235 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 Karnataka High Court held that the third proviso to s. 254(2A) not merely indicates that the extension of stay order cannot be beyond total number of 365 days put together, but also indicates that even assuming an order of this nature had been passed, such an order of stay shall stand vacated after the expiry of outer limit of 365 days and, in the first instance, the Tribunal which is the creature of statute should abide by these statutory provisions in letter and spirit and the introduction of the 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 contrary to such statutory provision. The language of the Section cannot be ignored and intended amendment brought about by the Finance Act, 2008 and the language of the legislature being quite clear about the outer time limit stipulated for the duration of the operation of stay and if the legislature has stipulated the outer time limit of 365 days within which the stay order granted by the Tribunal can operate, the Tribunal is not enabled to pass orders granting stay beyond the period of 365 days.
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 Trading (P.) (supra) and submitted that in a later decision rendered by the Hon’ble Delhi High Court in the case of Pepsi Foods (P.) Ltd. v. Asstt. CIT [2015] 376 ITR 87/232 Taxman 78/57 taxmann.com 337 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’ – by virtue of the Finance Act, 2008, violates the non-discrimination clause of Article 14 of the Constitution of India. The object that appeals should be heard expeditiously and that assesses should not misuse the stay orders granted in their favour by adopting delaying tactics is not at all achieved by the provision as it stands. On the contrary, the clubbing together of ‘well behaved’ assesses and those who cause delay in the appeal proceedings is itself violative of Article 14 of the 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 (P.) Ltd. v. ITAT [2007] 295 ITR 22/165 Taxman 557, 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 has the power to grant extension of stay beyond 365 days in deserving cases.
16. In the case of Narang Overseas (P.) Ltd. (supra), the third proviso to Section 254(2A) had been read down in such a manner that even if the period of 365 days from the initial grant of stay had expired, the Tribunal could extend the stay granted, provided the delay was not attributable to the assessee. The amendment brought about by the Finance Act, 2008 sought to 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 after the insertion of the third proviso to Sec. 254(2A) of the Act by the Finance Act, 2008. According to him therefore the decision of the Hon’ble Karnataka High Court will no longer be applicable in view of the third proviso being declared unconstitutional by the Hon’ble Delhi High Court. The leanred counsel for the Assessee drew our attention to the decision of the Hon’ble Supreme Court in the case of Kusum Ingots & Alloys Ltd. Union of India AIR 2004 SC 2321, wherein it was held 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 Constitution 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 Shiv Kumar v. Union of India W.P. No. 13112/2012 (GM-RES-PIL) wherein the Hon’ble Karnataka High Court following the ruling in the case of Kusum Ingots & Alloys Ltd. (supra) held that a provision of the Central Act declared unconstitutional by Hon’ble Kerala High Court will be applicable throughout India. The case before the Hon’ble Karnataka High Court was a case in which a Writ Petition had been filed in public interest to seek a declaration that Section 10-A of the Indian Divorce Act, 1869 (for short ‘the Act’) prescribing a period of ‘two years’ as the separation period before filing a petition for divorce by mutual consent is discriminatory 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 v. Union of India 2010 (1) KLT 869, 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 Kerala High Court having held that the period of ‘two years’ in Section 10A(1) being violative of Articles 14 and 21 of the Constitution further held that the period must be read down as a period of ‘one year’. It is based on this decision that the alternate prayer was made by the petitioner. The Hon’ble Karnataka High Court held as follows:
“7. Having heard learned counsel and on perusal of the judgment of the Kerala High Court in Soumya Ann Thomas, as well as the judgment of the 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 India. This is made clear by Hon’ble Supreme Court in Kusum Ingots and Alloys Ltd., wherein it has been stated that an order passed on a Writ Petition questioning the constitutionality of a Parliamentary Act whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution, would have effect throughout the territory of India subject of course to the applicability of the Act. In that view of the matter, this Writ Petition would not call for any 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 Hon’ble Bombay High Court in the case of CIT Smt. Godavaridevi Saraf [1978] 113 ITR 589 wherein the Hon’ble Bombay High Court. In the aforesaid decision the facts were that the assessee submitted a return of income for the asst. yr. 1968- 69 declaring therein income of Rs. 29,038 on August 30, 1969. Having regard to the provision of s. 140A(1) of the Act, she was required to make self- assessment by September 29, 1969. The amount of tax payable by way of assessment was Rs. 4,342. The assessee 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 Rs. 800. In a second appeal before the Tribunal, the attention of the Tribunal was drawn to the decision of the Madras High Court in the case of A.M. Sali Maricar v. ITO [1973] 90 ITR 116, wherein that High Court held that s. 140A(3) was violative of the provisions of Art. 19(1)(f) of the Constitution and the said section was struck down by that High Court as being unconstitutional. The Tribunal held that it had no jurisdiction to go into the question of vires of particular provisions under the Act but nevertheless proceeded on the footing that s. 140A(3) was non-existent in view of the decision 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, in view of the decision of the Supreme Court in K.S. Venkataraman and Co. (P.) Ltd. v. State of Madras (1966) 60 ITR 112 (SC), that an authority created by a statute cannot question the vires of that statute or any of the provisions thereof whereunder it functions. It must act under the Act and not outside it. If it acts on the basis of a provision of the statute which is ultra vires, to that extent it would be acting outside the Act. In view of this clear pronouncement of the Supreme Court, the Tribunal 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 administrative Tribunal cannot ignore the law declared by the highest Court in the State. Taking into consideration the provisions of Arts. 215, 226 and 227 of the Constitution of India, it would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that Court and start proceeding in direct violation of it. If a Tribunal can do so, all the subordinate Courts can equally do so, for there is no specific provision, just like in the case of the 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 is not controverted by Mr. Joshi on behalf, of the Revenue that an Tribunal sitting at Madras is bound to proceed on the footing that s. 140A(3) of the Act is non-existent in view of the pronouncement of the Madras High Court in the case of M. Sali Maricar (supra). Actually, the question of authoritative or persuasive decision does not arise in the present case because a Tribunal constituted under the Act has no jurisdiction to go into the question of constitutionality of the provisions of that 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 Court, though of another State, is the final law of the land. When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of s. 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary 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 following the decision of the Madras High Court. What the Tribunal really did was that in view of the law pronounced by the Madras High Court it proceeded on the footing that s. 140A(3) was non-existent and so the order of penalty passed thereunder cannot be sustained.” (Emphasis supplied)
20. It was further submitted by him that in view of the above circumstances, in the light of the admitted factual position that the delay in not disposing of the appeal by the tribunal is not owing to the delay on the 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 Trading (P.) Ltd. (supra) has not followed the decision in the case of Narang Overseas (P.) Ltd. (supra) whereas the Hon’ble Delhi High Court in the case of Pepsi Foods (P.) (supra) has followed the ratio laid down in the case of Narang Overseas (P.) Ltd. (supra). He therefore submitted that the decision of the Hon’ble Karnataka High Court should be followed and the extension of stay should not be granted. He also submitted that the Assessee has no financial hardship and therefore should be directed to pay the outstanding demand.
22. The learned counsel for the Assessee in his rejoinder pointed out that the decision rendered in the case of Narang Overseas (P.) Ltd. (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 Mumbai Metropolitan Region Development Authority v. Dy. DIT (Exemption-1) [2015] 55 com 307/230 Taxman 178 has held that non-existence of financial hardship is not the only basis on which an order of stay of recovery of outstanding demand can be refused. He also submitted that all these aspects were already considered by the Tribunal while passing the original order of stay.
23. We have given a very careful consideration to the rival submissions. We are of the view that the Hon’ble Karnataka High Court in the case of Ecom Gill Coffee Trading (P.) Ltd. (supra) has not dealt with the constitutional validity of the 3rd proviso to Sec. 254(2A) of 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 Court) then the 3rd proviso to the extent that it lays that extension of order of stay cannot be granted beyond 365 days “even if the delay in disposing of the appeal is not attributable to the assessee”, has to be considered as not existing in the statute book, in a case where such default is not attributable to the Assessee. The decision referred to by the learned counsel for the Assessee clearly the support the plea raised by the learned counsel for the Assessee.
24. We are also of the view that the decision rendered in the case of Narang Overseas (P.) Ltd. (supra) by the Hon’ble Bombay High Court was prior to the insertion of the 3rd proviso to Sec. 254(2A) of the Act and the reference to the said decision by the Hon’ble Delhi High Court in the case of Pepsi Foods (P.) Ltd. (supra) is only in the context of the legal position that ought to be but for the insertion of the 3rd proviso to Sec. 254(2A) of the Act. 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 granted an order of stay subject to certain conditions.
25. For the reasons given above, we direct that there shall be an order of stay of recovery of outstanding demand for a period of 180 days from this day or till disposal of the appeal of the Assessee by the tribunal, whichever is earlier.”
5. It is stated that there is no change in the facts and circumstances of the case and further we notice that the delay in disposing of the appeal is not attributable to the assessee, we are of the view that the stay already granted by the Tribunal deserves extension. Accordingly we extend the stay for further period of 180 days commencing from the date of this order or till the date of disposal of the appeal, whichever period expires earlier. We make it clear that the assessee should not seek adjournment on the date of hearing without reasonable cause, failing which the present stay order shall be subjected to review by the Division Bench hearing the appeal.
6. In the result, stay application filed by the assessee is allowed. Order pronounced in the open court on 24th July, 2020.
