Case Law Details

Case Name : M/s. Tata Communications Ltd Vs. ACIT (ITAT Mumbai)
Appeal Number : S.A. Nos. 196 to 198/Mum/2009
Date of Judgement/Order : 29/03/2011
Related Assessment Year : 2000- 01 to 2002- 03

M/s. Tata Communications Ltd Vs. ACIT (ITAT Mumbai)
S.A. Nos. 196 to 198/Mum/2009
(Arising I.T.A. Nos. 1106 to 1108/Mum/2008)
Assessment Years : 2000- 01 to 2002- 03

O R D E R

PER P.M. JAGTAP, AM :

This Special Bench has been constituted by the Hon’ble President, Income-tax Appellate Tribunal, inter alia, to consider and decide the following question:

“Whether in the facts and circumstances of the case where the delay in the disposal of the relevant appeals is not attributable to the assessee, the Tribunal can extend the stay already granted beyond the period of 365 days even after 01.1 0.2008 or it has no power to grant/extend such stay as a result of amendment made by the Finance Act 2008 by substituting third proviso to Section 254(2A) w.e.f. 01.10.2008?”

2. The assessee in this case is a company which moved its applications before the Tribunal being S.A. Nos. 196 to 198/Mum/2009 seeking extension of stay of outstanding demand already granted beyond the period of 365 days. The outstanding demand sought to be stayed was on account of penalties imposed by the Assessing Officer u/s 271(1)(c) and confirmed by the Learned Commissioner of Income-tax (Appeals) for the assessment years 2000-01, 2001-02 and 2002-03 aggregating to Rs.369.40 crores. During the course of hearing of the said stay applications initially before the Division Bench, reliance was placed on behalf of the assessee on the decision of the Co-ordinate Bench of this Tribunal in the case of Ronak Industries Limited (S.A. No. 137/M/09 dated 22.05.2009) wherein the stay was granted beyond the period of 365 days by an order dated 22.05.2009 i.e. after the amendment made by the Finance Act 2008 by substituting Third proviso to section 254(2A) with effect from 1.10.2008 ( ‘2008 amendment’ in short ). In the said order, the Tribunal had mainly relied on the decision of the Hon’ble Bombay High Court in the case of Narang Overseas P. Ltd. Vs. ITAT and others 295 ITR 22( Bom) which was delivered prior to 01.10.2008. The Division Bench of the Tribunal which initially heard these stay applications filed by the assessee was of the opinion that the reliance of the Tribunal on the decision of the Hon’ ’ble Bombay High Court in the case of Narang Overseas P. Ltd. (supra) to extend the say beyond the period of 365 days in the case of Ronak Industries Ltd., by an order passed on 22.05.2009 i.e. after 01.10.2008 was misplaced. The division Bench of the Tribunal, therefore, felt that the decision of the Coordinate Bench in the case of Ronak Industries Ltd., (supra) extending the date beyond the period of 365 days required re­consideration/review by a larger bench and accordingly a reference was made by it to the Hon’ble President of the I.T.A.T for constitution of a Special Bench for the reasons given elaborately in its referral order dated 22.09.2009. Accordingly, the Hon’ble President, I.T.A.T. constituted this Special Bench to decide the question as already indicated above.

3. As per the order of the Hon’ble President, I.T.A.T., this case was posted for hearing before the Special bench. The hearing, however, got adjourned from time to time, inter alia, on the ground that the appeal filed by the revenue against the order passed by the Tribunal in the case of Ronak Industries Ltd. (supra) involving a similar issue was already heard by the Hon’ble Bombay High Court and the decision of Their Lordships thereon was awaited. The Hon’ble Bombay High Court finally delivered its judgment on 22nd November, 2010 dismissing the appeal filed by the revenue in the case of Ronak Industries Ltd., being IT Appeal No. 3190 of 2009. Thereafter, this case was taken up for hearing by the Special Bench and the arguments raised by the learned representatives of both the sides have been heard.

4. The learned counsel for the assessee, Shri Dinesh Vyas, Senior Advocate, submitted that the issue raised in this case for the consideration of Special Bench now stands squarely covered in favour of the assessee by the decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra). He submitted that the decision of the Tribunal in the case of Ronak Industries Ltd.(supra) granting the stay of outstanding demand beyond the period of 365 days was challenged by the Revenue in the appeal filed before the Hon’ble Bombay High Court and the question raised in the said appeal was –

“Whether on the facts and in the circumstances of the case and in law, the I.T.A.T. was justified in holding that the case of the assessee is a fit case for stay of outstanding demand beyond the period of 365 days as per the provisions of section 254(2) by ignoring the mandatory amendment in the Third proviso to section 254(2A) made by the Finance Act, 2008 with effect from 01.10.2008, providing that the order of the stay granted shall vacate after the expiry of 365 days even if the delay in disposing of the appeal is not attributable to the assessee?”

Shri. Dinesh Vyas submitted that the Hon’ble Bombay High Court has upheld the order of the Tribunal passed in the case of Ronak Industries Ltd. (Ltd.) and dismissed the appeal filed by the assessee thereby answering the said question in the affirmative i.e. in favour of the assessee. He contended that since the issue referred to this Special Bench is identical to the issue involved before the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra), the same now stands squarely covered in favour of the assessee by the judgment of the Hon’ble Bombay High Court delivered in the said case. He contended that as held by the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra), the Tribunal thus has the power to grant the stay of outstanding demand beyond the period of 365 days and proceeded to make his submissions in support of the stay applications filed by the assessee in this case on merits.

5. On merit, Shri Dinesh Vyas submitted that the assessee has a good prima facie case to succeed in its appeals filed before the Tribunal challenging the penalties imposed by the Assessing Officer under section 271(1)(c) and confirmed by the learned CIT(A). He submitted that the said penalties are imposed mainly in respect of additions made on two issues. He submitted that although the first issue in respect of which penalty is imposed has been decided against the assessee by the Special Bench of I.T.A.T in the quantum proceedings, the fact that one Member of the Special Bench has not agreed with the majority view and has expressed a different view which is in conformity with the view adopted by the assessee, is sufficient to show that the said issue is highly debatable on which two views are possible. He submitted that the claim made by the assessee on the said issue thus is based on one possible view of the matter and although the said claim has been disallowed by the Special Bench of I.T.A.T as per the majority view, there is no concealment as envisaged in section 271(1)(c). He submitted that the other issue in respect of which the addition has been made and penalty has been levied is whether the expenditure claimed by the assessee is of capital nature or revenue nature. He submitted that this issue is purely a legal issue and since all the material facts relevant to the said issue were fully and truly furnished by the assessee, no penalty u/s.271(1)(c) can be imposed in respect of addition made by way of disallowance of assessee’s claim involving such a legal issue. Shri Dinesh Vyas submitted that the assessee thus has a good prima facie case on merit to succeed in its appeal filed before the Tribunal challenging the imposition of penalty u/s.271(1)(c) and it is, therefore, a fit case to grant the stay of the outstanding demand. He submitted that the Assessing Officer, however, has already recovered the entire outstanding demand by way of adjustment of the refund due to the assessee for other years as a result of relief given by the Tribunal in the said years. He submitted that the entire outstanding demand thus has been recovered by the Assessing Officer during the period when the stay applications filed by the assessee before the Tribunal were pending. He submitted that substantial amount has been borrowed by the assessee for the purpose of its business which shows that the assessee continuously requires funds for the purpose of its business and as a result of recovery made by the by Assessing Officer by way of adjustment of refunds for other years, the assessee is deprived of an opportunity to utilize the amount of refund for the purpose of its business. He submitted that a specific objection was raised by the assessee before the Assessing Officer in writing to his proposal of making adjustment of the refund due for other years against the outstanding demand pending on account of penalty imposed under section 271(1)(c). He submitted that it was specifically brought to the notice of the Assessing officer that the stay applications fixed before the Tribunal are pending before the Special Bench, but still he proceeded to ignore the objection of the assessee and recovered the outstanding demand by adjusting the refund due for other years. He contended that the amount so recovered by the Assessing Officer ignoring the specific objection raised by the assessee and disregarding the position that stay applications filed by he assessee were pending before the Tribunal thus may be directed to be refunded to the assessee while allowing these stay applications. In support of this contention, Shri. Dinesh Vyas relied on the decision of Delhi bench of this Tribunal in the case of Hewlett Packard India (P) Ltd. Vs. Addl. CIT (S.A. No. 426/D/04 dated 16.02.2005) and submitted that in the similar facts and circumstances when the stay applications filed by the assessee were pending before the Tribunal, the amount recovered by the Assessing Officer against the outstanding demand was directed to be refunded. He also relied on the following judicial pronouncements:

(i) Mahindra & Mahindra Ltd. 59 ELT 504 (Bom)

(ii) RPG Enterprises Ltd. 251ITR (AT) 20 (Mum.)

(iii) M.S.E.B. 81 ITD 299 (Mum)

(iv) Western Agencies (Madras) Ltd. 86 ITD 462(Mad.)

6. The learned Departmental Representative, on the other hand, submitted that the case of Ronak Industries ltd. (supra) involving a similar issue as raised before this Special Bench has been decided by the Hon’ble Bombay High Court following its earlier decision in the case of Narang Overseas P. ltd. (supra). He submitted that the issue involved in the case of Narang Overseas Pvt. Ltd., however, was different inasmuch as the position of law under consideration in that case was prior to the 2008 amendment. He submitted that the amendment made in the year 2007 was only considered by the Hon’ble Bombay High Court in the case of Narang Overseas Ltd. (supra) and there was thus no occasion for the Hon’ble Bombay High Court to consider the 2008 amendment. He contended that the said amendment made in the year 2008 in the relevant provisions is very clear in this regard and keeping in view the legislative intention behind the said amendment to limit the maximum period of stay which can be granted by the Tribunal to 365 days, it cannot be said that after the said amendment, the Tribunal still has the power to grant stay beyond a period of 365 days. The learned Departmental Representative contended that the decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra) thus need not be followed by this Special Bench as a binding precedent. In support of this contention, he relied on the decision of the Full Bench of the Hon’ble Andhra Pradesh High Court in the case CIT vs. B.R. Construction reported in 73 Taxman 473 and submitted that the binding precedent, as held therein, can be ignored inter alia in three situations viz. (i) when it is inconsistent with the earlier decision of the same rank, (ii) when it is sub-slientio and (iii) when it is rendered per incuriam.

7. The learned Departmental Representative submitted that in the case of Jethamal Faujimal Soni vs. ITAT reported in 231 CTR 332, the Hon’ble Bombay High Court had an occasion to consider the effects of 2008 amendment and on such consideration, it was clearly laid down by the Hon’ble Bombay High Court that after the 2008 amendment, the Tribunal cannot grant the stay of outstanding demand beyond the period of 365 days even if the delay in disposal of the appeal by the Tribunl is not attributable to the assessee. He contended that the decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd.(supra) taking a different view thus is inconsistent with its own decision taken in the case of Jethamal Faujimal Soni (supra). The learned Departmental Representative then submitted that the effect of 2008 amendment has not been considered at all while deciding the case of Ronak Industries Ltd. (supra) by the Hon’ble Bombay High Court, inasmuch as, there is no discussion whatsoever made on this vital aspect. He submitted that the Hon’ble Bombay High Court while deciding the said case, on the other hand, has simply relied on its earlier decision in the case of Narang Overseas P. Ltd. (supra) which was rendered on 13.07.2007 i.e. much before the amendment was made in the year 2008 in the relevant provision. He contended that the decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd.(supra) is thus sub-silentio in so far as the amendment made in 2008 is concerned and the said amendment being very vital and material to decide the issue under consideration, the decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd.(supra) cannot be followed as a binding precedent. He contended that the non-consideration of its earlier decision in the case of Jethamal Faujimal Soni (supra) as well as non-consideration of the relevant amendment made in the year 2008 while deciding the case of Ronak Industries Ltd. (supra) thus has rendered the decision of the Hon’ble Bombay High Court per incuriam and the same cannot be followed as a binding precedent as held by the full bench of Hon’ble Andhra Pradesh High Court in the case of CIT v. B.R,. Constructions (supra). The learned Departmental Representative submitted that in the similar situation, the Special Bench of I.T.A.T. At Delhi in the case of Hindustan Mint & Agro Products (P) Ltd. reported in 119 ITD 107, has declined to follow the decision of the Hon’ble Madras High Court in the case of SCM Creations vs. ACIT although the same was on a similar issue holding that it was per incuriam. He invited our attention to the paragraph 11.5 and 11.6 of the order passed by the Tribunal in the said case and read out the relevant portion thereof. He submitted that even the Hon’ble Bombay High Court in the similar situation did not follow the decision of the Hon’ble Supreme Court in the case of Vinay Cement Ltd. 212 CTR 384 while deciding the case of CIT vs. Pamwi Tissues Ltd. 215 CTR 150. He also relied on the decision of the Andhra Pradesh High Court in the case of CIT vs. Gangappa Cables Ltd. 116 ITR 778 and the Third Member decision of the Ahmedabad Bench of the I.T.A.T in the case of Kanel Oil & Export Inds. Ltd. 121 ITD 596 in support of his contention that in a situation like the one in hand, the decision of the higher judicial forum/Court need not be followed as a binding precedent. He contended that decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra) is also per incuriam as the same is inconsistent with its earlier decision and has been rendered without considering the amendment made in 2008 which was material and relevant. He also contended that the case of Ronuk Industries Ltd. (supra) has been decided by the Hon’ble Bombay High Court by upholding the order of the Tribunal and dismissing the appeal of the revenue without any discussion and the same, therefore, cannot be said to be laying down any ratio decidendi.

8. As regards the contention raised by the learned counsel for the asses see claiming refund of outstanding demand already recovered to by the Assessing Officer, the learned Departmental Representative submitted that the recovery of outstanding demand has been made by the Assessing Officer only after a period of three years from the date when it was raised and that too after the expiry of stay granted by the Tribunal. He submitted that the said recovery has been made by the Assessing Officer by way of adjustment of refund due to the assessee for other years and there is no coercive measure which has been taken by him to recover the outstanding demand. He stated that in all cases cited by the learned counsel for the assessee in support of the assessee’s claim for refund of outstanding demand recovered, there was coercive measure taken by the Assessing Officer to recover the outstanding demand and that too when the stay applications filed by the assessee were pending for hearing before the Tribunal. He contended that the facts involved in the present case, however, are entirely different from the facts involved in the said cases cited by the learned counsel for the assessee and the same cannot be of any help to support the claim of the assessee for refund of tax already recovered.

9. The learned Departmental Representative then raised a preliminary objection regarding the power of this special bench to dispose of the stay applications. In this regard, he contended that this Special has been constituted by the Hon’ble President, I.T.A.T, for the limited purpose of answering the specific question referred to it and keeping in view this limited purpose for which the Special Bench has been constituted, the question referred to it can only be answered and the matter of disposing of the stay applications should be left to the Division Bench. In support of this contention, he relied on the judicial pronouncements in the cases of ACIT vs. DHL Operation BV 13 SOT 581 (Mum) (SB), Central Wines Vs. ITO 244 ITR 307 (AP) and CIT vs. Highway Construction Co. (P) Ltd. 217 ITR 234(Gauhati).

10. Keeping in view the various submissions made by the learned Departmental Representative in the rejoinder and after taking leave of the Special Bench, the learned counsel for the assessee has prepared and furnished a written note explaining how the various judicial pronouncements cited by the learned Departmental Representative are distinguishable on facts and in law. He has also summarized in the said note the issues which are required to be considered and decided by the Special Bench and the various judicial pronouncements which the assessee has cited in support of its case on the said issues.

11. We have considered the rival submissions and also perused the relevant material on record. We have also carefully gone through the various judicial pronouncements cited by the leaned representatives of both the sides.

The preliminary issue which is required to be considered and decided by this Special bench is whether the main issue referred to the Special Bench now stands squarely covered by the decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra) and whether the same has to be followed being a binding precedent to decide the said issue. There is no dispute that the issue before the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra) was identical to the one referred to this Special Bench. The learned Departmental Representative, however, has contended relying on the decision of the Hon’ble Andhra Pradesh High Court in the case of B.R. Constructions (supra) that the same need not be followed by this special bench being per incuriam as it is inconsistent with its earlier decision rendered in the case of Jethamal Faujimal Soni (supra) and the amendment made in 2008 in the relevant provision has not been taken into consideration. A perusal of the judgment of the Hon’ble Bombay High Court passed in the case of Jethamal Faujimal Soni (supra), however, shows that a writ petition was filed by the assessee in the said case challenging the constitutional validity of 2008 amendment whereby the third proviso was inserted in section 254(2A) by the Finance Act of 2008 w.e.f. 1.10.2008 and the same was finally disposed by the Hon’ble Bombay High Court without deciding the issue raised therein on merit by simply directing the Tribunal to dispose of the pending appeal within a period of four months keeping in view the assurance given by the learned counsel for the revenue that no coercive steps shall be taken by the department to enforce the demand which formed the subject matter of the appeal. Hon’ble Bombay High Court in the case of Jethamal Faujimal Soni (supra) thus has not rendered any decision on merit of the issue and in our opinion, it cannot be said that the decision given by the Hon’ble Bombay High Court in the case of Ronak Industries Ltd. (supra) is inconsistent with that decision rendered earlier.

12. As regards non-consideration of the 2008 amendment, the learned Departmental Representative has submitted that the decision in the case of Ronak Industries Ltd.(supra) has been rendered by the Hon’ble Bombay High Court mainly relying on its earlier decision in the case of Narang Oversea Ltd.(supra) which was rendered in the year 2007 i.e. prior to 2008 amendment. He has contended that the Hon‘ble Bombay High Court thus had no occasion to consider the effect of 2008 amendment and its judgment on this material and relevant aspect is sub-silentio. It is no doubt true that reliance was placed by the Hon’ble Bombay High Court while deciding the case of Ronak Industries Ltd., on its earlier decision in the case of Narang Overseas Ltd(supra) which was rendered in the year 2007 when the 2008 amendment was not on the statute. However, a perusal of the judgment passed by the Hon’ble Bombay High Court in the case Narang Overseas Ltd(supra) shows that a wider view on the issue was taken therein by holding as under :

“1) The power to grant stay or interim relief has to be read as co‑extensive with the power to grant final relief, the object being that in the absence of the power to grant interim relief, the final relief itself may be difficult.

2) Once an appeal is provided, it cannot be rendered negative in cases where the assessee was not at fault.

3) The object of amendment made in Section 254(2A) by the Finance Act (2007) was not to defeat the vested right of an appeal in an assessee whose appeal could not be disposed not on account of any omission or failure on his part, but either the failure of the Tribunal or acts of Revenue resulting in non-disposal of the appeal within the extended period as provided.

4) It would not be possible on one hand to hold that there is a vested right of appeal and on the other hand to hold that there is no power to continue the grant of interim relief for no fault of assessee by divesting the incidental power of the Tribunal to continue the interim relief. Such a reading would result in such an exercise being rendered un-reasonable and violative of Article 14 of the Constitution.”

13. It is also observed that the following question was raised before the Hon’ble Bombay High Court in the case of Ronak Industries Ltd.(supra) : “Whether on the facts and in the circumstances of the case and in law, the I.T.A.T. was justified in holding that the case of the assessee is a fit case for stay of outstanding demand beyond the period of 365 days as per the provisions of section 254(2) by ignoring the mandatory amendment in the Third proviso to section 254(2A) made by the Finance Act, 2008 with effect from 01.10.2008, providing that the order of the stay granted shall vacate after the expiry of 365 days even if the delay in disposing of the appeal is not attributable to the assessee?”

A perusal of the above question makes it clear that the material change stated to be brought about by the amendment made in the Third proviso to section 254(2A) by the Finance Act, 2008 with effect from 01.10.2008 was specifically highlighted therein. As a matter of fact, the grievance specifically projected by the Revenue in the said question was that the said amendment had been ignored by the Tribunal while extending the stay of demand granted earlier beyond the period of 365 days. In our opinion, it cannot therefore be said that the Hon’ble Bombay high Court has not taken cognizance of the said amendment or effect thereof while deciding the case of Ronuk Inustries Ltd. (supra). In any case, Hon’ble Madhya Pradesh in the case of National Textile Corpn. Ltd. Vs. CIT (2008) 171 Taxman 339 (MP) has held that it is not permissible for the Tribunal to sidetrack or/and ignore the decision of the jurisdictional High Court on the ground that it did not take into consideration a particular provision of law. It was held that if such approach is resorted to by the subordinate court or Tribunal, the same will be liable to be deprecated being not in conformity with the law laid down by Hon’ble Supreme Court.

14. The learned Departmental Representative has also contended before us that in the absence of any discussion whatsoever about the 2008 amendment in the judgment of the Hon’ble Bombay High court passed in the case of Ronbak Industries Ltd.(supra), the said decision cannot be taken as laying down any ratio decidendi. It is pertinent to note here that even though there is no such discussion made in the judgment of Hon’ble Bombay High Court passed in the case of Ronak Industries Ltd. (supra), the decision of the Tribunal has been upheld by the Hon’nle Bombay High Court dismissing the appeal filed by the revenue. In the case of Nirma Industries Ltd., 283 ITR 402, the Hon’ble Gujarat High Court has held that the only jurisdiction that the High Court has while hearing the appeal filed under section 260A is the appellate jurisdiction and where an order of subordinate forum is reversed or modified exercising such appellate jurisdiction or the appeal filed is merely dismissed confirming the order under appeal without any modification, it is the appellate decision alone which subsists and is operative and capable of enforcement. It was held that in all such eventualities, what emerges is the operative part of the order under appeal after its confirmation, reversal or modification and there would be a merger even in a case where the reasoning of the subordinate forum is not expressly approved. It was held that if the merger is issue specific, there is fusion of the order only to that limited extent but it cannot be successfully contended that where appellate court merely accords approval to the reasoning of the lower court or forum, there is no decision of the appellate court or forum. Keeping in view this proposition propounded by the Hon’ble Gujarat High Court in the case of Nirma Industries Ltd.(supra), we find it difficult to accept the contention of the learned Departmental Representative that in the absence of any discussion on the 2008 amendment, the decision of the Hon’ble High Court in the case of Ronak Industries Ltd. (supra) cannot be said to be laying down any ratio decidendi and that the same, therefore, need not be followed by this Special Bench as a binding precedent. In our opinion, as a result of dismissal of the appeal filed by the revenue and upholding of the order passed by the Tribunal, the question referred to in the case of Ronak Industries Ltd.,(supra) has been answered by the Hon’ble Bombay High Court in the affirmative thereby holding that the Tribunal even after the 2008 amendment has the power to grant the stay beyond the period of 365 days in the cases where the delay is not attributable to the assessee and this is the ratio which has been laid down in the said decision by the Hon’ble jurisdictional High Court, which is binding on this Special Bench.

15. At the time of hearing before us, the learned Departmental Representative has relied on various judicial pronouncements wherein the decision of the higher appellate forum has not been followed by the lower appellate authorities. A perusal of the orders passed in the said cases, however, shows that the factual position in which the decision of the higher forum was not followed by the lower forum was entirely different. For example, in the case of Hindustan Mint & Agro Products (P) Ltd. (supra), the decision in the case of SCM Creation (supra) which the Delhi Special Bench of the I.T.A.T did not follow was that of a non-jurisdictional High Court i.e. Hon’ble Madras High Court. Moreover, the relevant statutory provision having a direct bearing on the issue under consideration was found to be not at all considered by the Hon’ble Madras High Court while deciding the said issue. Furthermore, there was a subsequent decision rendered by the Hon’ble Madras High Court itself on 27.12.2008 in the case of General Optics (Asia) Ltd. whereby the controversy was put beyond any shadow of doubt after taking into consideration the statutory provision which was not considered while deciding the case of SCM Creation (supra). In the case of Gangappa Cables Ltd. (supra), the decision of the Hon’ble Supreme Court in the case of Gurjargravures P. Ltd. 111 ITR 1 was found to be no bar to the entertaining of claim by the AAC or the Tribunal and the same, therefore, was not followed by the Hon’ble Andhra Pradesh High Court being distinguishable on facts. In the case of Kanel Oil & Export Inds. Ltd. (supra), the decision in the case of Snowcem India Ltd. which the Third Member did not follow was again of a non-jurisdictional High Court i.e. Hon’ble Bombay High Court and the same was rendered without taking into consideration certain statutory provision which was relevant and material. In the case of CIT vs. Pamwi Tissues Ltd. (supra), the decision of Hon’ble Supreme Court in the case of Vinay Cement Ltd. (supra) was not followed by the Hon’ble Bombay High Court on the ground that only the Special Leave Petition filed in the said case having been dismissed by the Hon’ble Supreme Court, there was no law laid down therein on the issue involved. As already discussed, the position arising in the present case, however, is entirely different inasmuch as, a specific question as referred to the Hon’ble jurisdictional High Court incorporating the relevant provision as amended in 2008, was answered by Their Lordships in the affirmative dismissing the appeal filed by the revenue thereby holding that the Tribunal has the power to extend the stay beyond the period of 365 even after the insertion of Third proviso to section 254(2A) w.e.f. 1.10.2008 in the cases where the delay in disposing of the appeal is not attributable to the assessee. Respectfully following the said decision of the Hon’ble Bombay High Court in the case of Ronak Industries Ltd., (supra), we hold that in the case like the one in hand where the delay in the disposal of the relevant appeals is not attributable to the assessee, the Tribunal has the power to extend the stay beyond the period of 365 even after the insertion of Third proviso to section 254(2A) w.e.f. 1.10.2008. The question referred to this special bench is answered accordingly.

16. The next issue raised by the learned Departmental Representative at the time of hearing before us is that the special bench has been constituted by the Hon’ble President I.T.A.T only for the limited purpose of answering the question referred to it. He has contended that this Special bench thus should confine itself to answer the said question and leave the matter of disposing of the stay applications filed by the assessee to Division Bench keeping in view the limited scope of reference made by the Hon’ble President, I.T.A.T. In support of this contention, he has relied on the cases of ACIT vs. DHL Operation BV (supra), Central Wines V/s. ITO (supra) and CIT vs. Highway Construction Co. (P) Ltd. (supra). From the perusal of the orders passed in the said cases, it is, however, observed that a restricted reference was made therein whereby only the specific question was referred for the consideration and decision of the Special Bench. In the present case, the Hon’ble President, I.T.A.T however, has passed the following order dated 14.10.2009 while constituting this Special Bench.

“Reg:- Reference u/s.255(3) in the case of Tata Communications  Ltd., S.A. 196 to 198/M/09 for A. Ys. 2000-01 to 2002-03

“After considering facts and circumstances of the case, the notices of the Ld. Members of the Bench and of the Zonal Vice-President including Notes dated 14.1 0.2009, I constitute Special Bench in ITA No. 1106/M/08, ITA No.1107/M/08, 1108/M/08, 138 7/M/08 and ITA No. 1835, 1836/M/08, ITA 4218, 4219/M/05, ITA 4220, 4221/M/05, ITA 6981/M/05, ITA 7071/M/05, 7205/M/04, 3062/M/03 and ITA No. 3438/M/03, comprising of Shri G.D. Agarwal, Vice-President, Shri P.M. Jagap, Accountant Member and Smt. P. Madhavi Devi, Judicial Member. The Special bench may hear entire appeal

or only the referred question as deemed necessary on the facts and circumstances of the case. In case, an objection is raised by any party to the inclusion of any Hon ’ble Member in the Special Bench on the ground that he or she has already expressed view on the issue, the Vice-President is authorized to take necessary action on such objection. Let files of all quantum and penalty appeal be placed before the Special Bench for action in accordance with law.”

17. As is clearly evident from the perusal of the above order passed while constituting this special Bench, the Hon’ble President, I.T.A.T has not only referred the stay applications filed by the assessee but even the corresponding appeals pending before the Tribunal to the Special Bench with a liberty to either consider and decide only the question referred or even to dispose of the stay applications and the appeals. While constituting this special bench, the Hon’ble President of I.T.A.T thus has passed a specific order whereby the stay applications bearing Nos.SA 196 to 198/M/2009 have also been referred to the special bench for hearing and disposal. Even the provisions of section 255(3) specifically provides that the President I.T.A.T may for the disposal of any particular case constitute a special bench consisting of three or more members. It is observed that the Delhi Spl. Bench of the I.T.A.T in the case of National Thermal Power v. IAC 24 ITD 1 also had an occasion to consider a similar issue wherein it was held that while referring a case to the special bench, the question is framed in order to enable the possible interveners to understand the issue or the range of controversy going to be considered by the Special Bench so that they could assist the Bench by placing their views on the issue concerned. It was held that the entire appeal, however, is open before the Special Bench and it is not confined to the question framed like a question of law framed and referred to the Hon’ble High Court u/s.256 of the I.T.Act, 1961. The special bench of I.T.A.T in the case of National Thermal Power (supra) thus overruled the similar preliminary objection as sought to be raised by the learned DR in the present case. This issue again came up for consideration before another special bench of the Tribunal at Mumbai in the case of ACIT v. DHL Operations, BV. (2007) 13 SOT 581 wherein it was held that section 255(1) provides that the powers and functions of the Tribunal are to be exercised and performed by the Benches constituted by the President from among the members thereof. It was held that section 255(3) further provides, inter alia, that the President, I.T.A.T, may constitute a Special Bench for disposal of a particular case and it is, therefore, clear that it is the bench so formed which will exercise the powers of the Tribunal unless, of course, reference to the special bench itself restricts the powers of such a special bench, as may be expedient and necessary, to deal only with a limited aspect of the appeal. Keeping in view these two decisions of the special bench of this Tribunal, the provisions contained in section 255(3) and the order of the Hon’ble President, ITAT referring, inter alia, the stay applications filed by the assessee to this Special Bench, we find no merit in the objection raised by the Ld. D.R. in this regard and overruling the same, we proceed to dispose of the stay applications filed by the assessee in the present case being S.A. Nos. 196 to 198/Mum/2009 on merits.

18. As pointed out by the learned counsel for the assessee, the entire amount of outstanding demand on account of penalties imposed for the three years under consideration, i.e. A.Y. 2000-01, 2001-02 and 2002-03 has already been recovered by the AO by way of adjustment of refund due to the assessee for the other years as a result of relief given by the Tribunal in the said years. He has, therefore, urged that while granting the stay as sought by the assessee in the present applications, the AO may be directed to refund the amount of demand recovered especially during the pendency of these stay applications before the Tribunal. In support of this contention, he has relied on various judicial pronouncements. We have carefully gone through these judicial pronouncements cited by the learned counsel for the assessee. There cannot be a dispute that the Tribunal, as held in the said cases after taking into consideration the proposition propounded on this issue in the various judicial pronouncements, can issue direction while exercising its power to grant the stay to refund the amount already recovered by the Revenue in appropriate cases where such direction is warranted in the facts and circumstances of the case. As a matter of fact, the Co-ordinate Benches of this Tribunal have directed the Department to grant the refund of outstanding amount recovered inter alia in the cases of RPG Enterprises Ltd. 251 ITR (AT) 20 (Mum), MSEB Vs. Joint CIT 81 ITD 299 (Mum), Western Agencies (Madras) Ltd. 86 ITD 462 (Mad) and Hewlett Packard India (P) Ltd. since the facts and circumstances involved in the said cases justified such direction.

19. It is observed that the facts and circumstances as involved in the aforesaid cases, however, were materially different from the facts involved in the present case in as much as in the said cases, the outstanding demand was recovered by the Assessing Officer by coercive measures and that too when the stay applications filed by the assessee before the Tribunal were pending in the sense that they were not even fixed for hearing. For instance, in the case of RPG Enterprises Ltd. (supra), the order of the Assessing Officer giving effect to the order of the Commissioner and the demand notice were both dated March 21, 2000. In the demand notice, the Assessing Officer had recorded that he recovered the outstanding demand from the assessee’s banker but the demand was actually recovered from the bank only March 29, 2000. Since it was not possible to mention the fact of recovery in the demand notice issued on March 21, 2000 unless he had pre-dated the notice and the coercive action for recovery of demand was taken even before the expiry of time available to the assessee for filing of the appeal before the Tribunal, the action of the AO to recover the demand was held to be improper and unjustified by the Tribunal and refund of the amount so recovered was granted. In the case of MSEB Vs. Joint CIT (supra), the assessee was a State Electricity Board and the demand raised against it was stayed by the Hon’ble High Court up to 28.2.2001. Before the expiry of the said period, the assessee moved an application for stay before the Tribunal which was fixed for hearing on 2.3.2001. The notice of the said hearing had been served on the office of the departmental representative on 27.2.2001. The Assessing Officer, however, issued garnishee orders to the bank on 1.3.2001 and recovered the entire outstanding demand. Even in the case of Mahindra & Mahindra Ltd. (supra) cited by the learned counsel for the assessee, the recovery of outstanding demand was made by the Assistant Collector of Central Excise by en cashing the bank guarantee on 3.2.1992 when the statutory period of three months available to the assessee to file the appeal to the Tribunal had not expired and when the assessee had specifically informed that the stay application filed by it was fixed for hearing before the Tribunal on February 17, 1992. In these facts and circumstances, Hon’ble Bombay High Court held the action of the Assistant Collector of Central Excise to be improper and directed him to refund the amount recovered. Similarly, in other cases cited by the learned counsel for the assessee, coercive steps were found to be taken by the AO to recover the outstanding demand in undue haste so as to render the process of stay proceedings before the Tribunal as nugatory and in these facts and circumstance involved in the said cases, the amount recovered was directed to be refunded by the Tribunal.

20. The facts and circumstances involved in the present case, however, are entirely different inasmuch as the stay granted by the Tribunal had already been expired and the application filed by the assessee seeking further extension of stay beyond the period of 365 days was referred to the Special Bench in view of the 2008 amendment. The Division Bench, which heard the said stay applications of the assessee initially, was of the opinion that in view of the 2008 amendment, further stay beyond the period of 365 days was not possible after 1.10.2008. Keeping in view this opinion expressed by the division Bench, it can reasonably be said that the AO had a justifiable basis to believe that the assessee was not entitled to get a stay of outstanding demand beyond the period 365 days and with this bona fide belief, he proceeded to recover the outstanding demand which was pending for more than three years. Moreover, the said recovery was made by him by way of adjustment of refund which had become due to the assessee for other years as a result of relief allowed by the Tribunal. The mode of recovery adopted by the Assessing Officer, therefore, cannot be regarded as a coercive measure taken by him to recover the outstanding demand from the assessee in undue haste and that too with an intention to thwart the stay proceedings before the Tribunal. In the case of Ramanathan Chettiar 29 ITR 683 cited by the learned DR, it was held by the Hon’ble Madras High Court that even though the petitioner could not be deemed to an assessee in default, he continued to be a person liable to pay the tax and the liability to pay the tax should suffice to bring the assessee’s case within the scope of section 49E of the 1922 Act (section 245 of the 1961 Act). It was held that the ITO thus acted well within his jurisdiction when he exercised the discretion vested in him by section 49E of the 1922 Act (section 245 of the 1961 Act) to adjust certain portion of the amount refundable to the petitioner towards the arrears payable by the petitioner out of the tax to which he had been assessed in other years. This proposition was reiterated by the Hon’ble Madras High Court in the case of Sabena Detergents Ltd. Vs. CIT 248 ITR 385 (Mad) wherein it was held that section 245 requires mere intimation in writing to the assessee and it does not require any show-cause notice being given nor does it contemplate any hearing to the assessee before adjustment of refund against tax arrears. Keeping in view these decisions of Hon’ble Madras High Court in the cases of Ramanathan Chettiar (supra) and Sabena Detergents Ltd. (supra) and having regard to all the relevant facts of the case as discussed above, we are of the view that it is a not fit case to direct the refund of the amount already recovered by the Assessing officer. As a result of the said recovery made by the AO of the entire outstanding demand, which is being sought to be stayed by the assessee, the present applications filed by the assessee have become virtually infructuous. Accordingly, the same are dismissed.

21. Before parting, we may clarify that all the judicial pronouncements cited by the learned representatives of both the sides in support of their respective stands have been considered and deliberated upon by us while arriving at our conclusions. Some of them, however, are not specifically mentioned or discussed in the order as the same have been found to be not directly relevant to the issue or the proposition propounded therein is found to be repetitive which has already been considered by us.

22. In the result, the stay applications filed by the assessee are dismissed. Order pronounced in the open court on this 29th day of March, 2011.

Dated, this 29th day of March 2011

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