Power of the High Court to extend stay on recovery envisaged under Income Tax Act, 1961

The third proviso also does not bar or prohibit the Revenue or departmental representative from making a statement that they would not take coercive steps to recover the impugned demand

The Revenue in the instant matter contended that the Income Tax Tribunal does have power to grant stay of demand during the pendency of Appeal as this right is restricted and exercisable in accordance to Section 254(2A) of the Income tax Act, 1961 (Act). Accordingly, as was further contended, Section 254(2A) of the Act mandates that no stay order can exceed total period of 365 days and Tribunal is foreclosed and barred from passing any order extending stay of demand beyond 365 days and since tribunal is a creation of the statute, it is bound by the provision.

Tribunal while granting stay exercises its right not as a matter of right but has to pass a speaking order and recording prima facie view on merits. Revenue on being aggrieved is not without remedy and can move before the High Court in accordance with law. Similarly, the third proviso which after amendment to Section 254(2A) as substituted by Finance Act, 2008 with effect from 1st October, 2008, bars and prohibits the tribunal from extending interim stay order beyond 365 days from the date of first order of stay. In the event of there being any default and delay due to lapse on the part of the Revenue, the tribunal is at liberty to conclude hearing and decide the appeal, and there is a likelihood that the third proviso to Section 254 (2A) would come into operation.

The third proviso also does not bar or prohibit the Revenue or departmental representative from making a statement that they would not take coercive steps to recover the impugned demand and on such statement being made, it will be open to the tribunal to adjourn the matter at the request of the Revenue. An assessee can file a writ petition in the High Court pleading and asking for stay and the High Court has power and jurisdiction to grant stay and issue directions to the tribunal as may be required, including granting stay of recovery.

[Commissioner of Income Tax- II vs. M/s Maruti Suzuki (India) Limited]
(Delhi HC, 21.02.2014)