SHIV SHAKTI RUBBER AND CHEMICALS WORKS VS INCOME-TAX APPELLATE TRIBUNAL
1996 P T D 1196
[213 I T R 299]
[Allahabad High Court (India)]
Before K.L. Sharma, J
SHIV SHAKTI RUBBER AND CHEMICALS WORKS
Versus
INCOME-TAX APPELLATE TRIBUNAL and others
Civil Miscellaneous Writ Petition No. 1103 of 1994, decided on 05/01/1995.
(a) Income-tax---
----Stay of recovery proceedings---Penalty---Tribunal rejecting application for stay of recovery proceedings during pendency of appeal---Not justified--- Tribunal to consider application on basis of accepted judicial principles-- Indian Income Tax Act, 1961, Ss. 254 & 271(1)(c).
The Tribunal has got implied power of staying the recovery proceedings during the pendency of the appeal but this power cannot be exercised in a routine way or as a matter of course.
Where the Tribunal rejected the application of the assessee for stay of the recovery proceedings in respect of penalty imposed on him during the pendency of the second appeal before it:
Held, that the Tribunal had only vaguely mentioned that all the conditions for grant of stay had not been complied with whereas it referred only to one condition that the liquidity position of the assessee had not been clearly spelt out. None of the reasons mentioned in the impugned order by the Tribunal for rejection of stay application was judiciously justified. The assessee may move a second application for stay and the Tribunal shall consider the same afresh on the basis of accepted judicial principles.
(b) Writ---
---- Extraordinary jurisdiction---Reasons recorded by judicial authority opposed to judicial canons---High Court can give proper directions to judicial authority---High Court does not normally interfere in orders passed by judicial authority in pending proceedings.
Normally, the High Court does not interfere in matters passed by the judicial authority in a pending judicial proceeding but when the reasons recorded by the judicial authority are opposed to judicial canons the High Court has no alternative except to give proper direction to the judicial authority so that it may not only act correctly in the case under judicial review but also in similar other cases with a view to prevent injustice to litigants.
I.T.O. v. M.K. Muhammad Kunhi (1969) 71 ITR 815 (SC) ref.
G.D. Sriwastava for Petitioner.
Ashok Kumar for Respondents.
JUDGMENT
This writ petition is directed against the order dated September 30, 1994, whereby the Income-tax Appellate Tribunal, Allahabad, rejected the application of the petitioner for stay of the recovery proceedings in respect of penalty imposed on him, during the pendency of the second appeal before the Tribunal.
I have Beard Sri G.D. Srivastava, learned advocate for the petitioner, and Sri Ashok Kumar, learned counsel appearing on behalf of the respondents, and perused the material brought on record.
Learned counsel for the petitioner has submitted that the reasons for rejection of the stay application accorded by the Tribunal in its impugned order dated September 30,1994, are not at all justified on judicial principles. In support of his contention, he has invited my attention to the decision of the Supreme Court in the case of I.T.O. v. M.K. Muhammad Kunhi (1969) 71 ITR 815. In this case the Supreme Court has interpreted that even though there is no express provision in the Income-tax Act conferring power on the Income-tax Appellate Tribunal to stay the recovery proceedings, yet it is implied by conferment of the appellate jurisdiction under section 254 of the Income Tax Act, 1961, that the Tribunal has got powers of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries within its sweep the duty in proper cases to make such orders for staying proceeding as will prevent the appeal is successful from being rendered nugatory. The Supreme Court further held as follows at page 822:
"The power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course, in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the Tribunal will consider whether to stay the recovery proceedings and on what conditions and the stay will be granted in most deserving and appropriate cases where the Tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal. "
It is now clear that the Income-tax Appellate Tribunal has got implied power of staying the recovery proceeding during the pendency of the appeal, but this power cannot be exercised in a routine way or as a matter of course. The Tribunal is required to see whether there is strong prima facie case made out by the appellant that the stay or recovery proceeding is necessary with a view to prevent the frustration and negation of the purpose of filing the appeal. If the Tribunal considers that there is strong prima facie case, it should grant stay of the recovery proceeding in such appropriate and deserving cases. .
For ready reference the relevant portion containing reasons for the impugned order is reproduced as follows:
"The matter involved in this, appeal which gives rise to the present stay petition relates to the imposition and recovery of penalty under section 271(1)(c) of the Income Tax Act, 1961. At the very outset, we would like to make it clear that this is not the proper stage at which the merits of levy under section 271(1)(c) can be considered. It has not been the policy of the Bench to consider the merits in a stay petition. The merits can be considered only at the time of final disposal of the appeal. Secondly, this Bench has always expressed its opinion that recovery proceedings of the Revenue the exclusive domain of, the executive with which judicial interference is not desirable. Thirdly, granting of stay does not solve any problem either of the taxpayer or of the Department. Finally, tali the conditions for grant of stay are not satisfied, as, for example, the liquidity position of the petitioner has not been clearly spelt.For these reasons, we decline to grant stay notwithstanding, the contentions to the contrary raised by the learned counsel for the assessee in this behalf."
Learned counsel for the petitioner has pointed out .by reading the reasons from the impugned order that the Tribunal has not attempted p see whether there is strong prima facie case made out by the appe119nr and instead has refused to go into merits of the case with a view to dispose o f the stay application. The Tribunal has referred to some policy of .the Beach not to grant stay order. There cannot be any policy of refusing to grant slay of recovery proceeding, in view of the decision of the Supreme Court. The power of granting stay casts a duty, upon the Tribunal to see whether strong prima facie case is made out or not, whether the recovery proceeding are required to be stayed during and until disposal of the appeal with a View to prevent the purpose from being frustrated or rendered nugatory learned counsel has further pointed out that the Tribunal was wholly erroneous in its approach that the recovery proceedings are in the exclusive domain Of the executive. It appears that the Tribunal was not exercising its jurisdictional power in a judicial manner and was observed with the influence of the executive, even in the disposal of the judicial proceedings. It was also wrong on the part of the Tribunal to say that the stay of the recovery proceedings will not solve the problem either of the appellant or of the Department. In my view, the stay of the recovery proceedings would have brought great relief to the appellant and the Department, if so entitled, could have got its due revenue only after the disposal of the appeal, when there was a statutory right of the appellant to file the second appeal, The Tribunal has further vaguely mentioned that all the conditions for grant of stay have not been complied with whereas it could refer only to one condition that the liquidity position of the appellant has not been clearly spelt out. In my opinion, none of the reasons mentioned in the impugned order by the Tribunal for rejection of the stay application is judiciously justified.
The petitioner has invoked the extraordinary jurisdiction of this Court in writ jurisdiction not only under Article 226, but also under Article 227 of the Constitution of India for having a judicial review of the impugned order. Normally, this Court does not interfere in such matters passed by the judicial authority in a pending judicial proceeding, but when the reasons recorded by the judicial authority are opposed to the judicial canons, this Court has no alternative except to give proper direction in the judicial authority so that the judicial authority may not only act correctly in the case under judicial review, but also in similar other cases with a view to prevent injustice to the litigants. In similar situation, it is obnoxious on the part of the Tribunal to say as in the impugned order that it is the policy of the Bench not to grant stay order and that the recovery proceedings are in the exclusive domain of the executive. This Curt hereby directs the Tribunal to abandon this undesirable and injudicious approach in dealing with the application for stay in the pending appeal and to consider the merits of each case on the basis of the accepted judicial principles and then to make a decision either to grant stay or to refuse stay of the recovery proceedings under challenge in the appeal. Since the rejection of the stay application would not amount to res judicata, the petitioner/appellant may move a second application for stay and the Tribunal shall consider the same. This Court refrains from issuing a writ of certiorari for quashing the impugned order or from issuing a writ of mandamus directing the Tribunal to grant a stay order, which may not be justified on the basis of the merits of the case under scrutiny before the Tribunal. Therefore, in view of the facts and circumstances of the case, it would be appropriate that the petitioner may move another stay application before the Tribunal and thereupon the Tribunal shall consider the stay application afresh on the basis of the accepted judicial principles ignoring the over-influencing effect of the executive and the administrative policy of the Bench and to make an order which may be justified by the facts and circumstances of the case.
Learned counsel for the respondents pointed out that the Tribunal while rejecting the application for stay has already been pleased to direct the registry, to fix up this appeal on priority basis for hearing, but learned counsel for the petitioner himself obtained sometime for submitting papers for the purpose of the paper book. Learned counsel for the petitioner has replied that until and unless the paper book of the second appeal is prepared and ready, the hearing of the appeal cannot be expedited by the Tribunal and he has already taken steps to submit the necessary papers for the purpose of preparation of the paper book, so that the appeal may be heard expeditiously. However, this could not prevent the petitioner from moving the second application for stay and the Tribunal will exercise its independent judicial mind for decision after hearing the petitioner on the stay application even though the hearing of the second appeal is being expedited.
With the aforesaid directions, this writ petition is finally disposed of at the admission stage.
Let a certified copy of this order be issued to learned counsel for the petitioner within two days on payment of usual charges.
M. B. A./1161/FC Order accordingly.