Income-tax---

----Recovery of tax --Power to grant stay of collection of tax---Appellate Authority has power to grant stay in appropriate cases for effective exercise of appellate powers---Power conferred on Assessing Authority to treat an assessee as not in default---Does not militate against power of Appellate Authority to grant stay ---Assessee directed to approach Appellate Authority for stay---Indian Income Tax Act, 1961, S.220(6)---Constitution of India, Art.226,

The power to grant stay of collection of tax 'is an inherent and incidental power of the Appellate Authority for the effective exercise of the appellate powers. The Appellate Authority, i.e., the Commissioner (Appeals), thus, has an inherent power to grant stay of collection of tax in appropriate cases. Merely because power has been conferred upon the Assessing Authority under section 220(6)of the Income Tax Act, 1961,to treat an assessee as not in default, the same will not in any way militate against the power of the Appellate Authority to grant stay.

For the assessment year 1995-96, a demand of Rs.10, 41, 633 was raised on the petitioner upon assessment made under section 143(3) of the Income Tax Act, 1961. The petitioner preferred an appeal before .the Commissioner (Appeals). Meanwhile, the petitioner also filed an application under section 220(6)of the Act before the Assessing Authority requesting that the demand be stayed on account of pendency of the appeal before the Commissioner of Income-tax (Appeals) against the order of assessment and that the petitioner should not be treated as an assessee in default. The Assessing Authority by order, dated January 21,1998, directed the petitioner to pay 50 percent. of the demand and upon such payment the application for stay would be considered. Seven days time for payment was granted, failing which it was directed that the stay petition shall stand rejected and recovery measures shall be initiated. The petitioner tiled a writ petition challenging the said order of the Assessing Authority:

Held, (i) that the Appellate Authority before whom the appeal was pending had the power to grant stay of the demand in the appeal pending before him. Therefore, the petitioner should be relegated to avail of the said remedy before invoking the jurisdiction of the High Court under Article 226 of the Constitution of India.

(ii) That, however, in so far as the order of the Appellate Authority was concerned, the order was one passed without application of mind and was not in comformin with law. A bare reading of the order would show that the petitioner liaci been asked to pay the amount, that is 50 percent. of the demand, before his request for stay was considered, which meant that only if the assessee paid 50 percent. of the demand, the request of the assessee for staying the demand would be considered and not before. It was not as though that the stay application had been considered and orders thereon had been passed on the merits of the case. Therefore, the order of the' assessing authority, dated January 21, 1998, was liable to be set aside.

(iii) That if the petitioner filed an application within one week from the date of this order, for stay of collection of tax before the Appellate Authority before whom the petitioner's appeal was pending against the order of assessment, the Appellate Authority should consider the same and pass appropriate orders thereon in accordance with law after affording the petitioner an opportunity of being heard.

(iv) That until the stay petition was disposed of by the Appellate Authority, there should be stay of recovery of tax pursuant to the demand notice raised against the petitioner for the assessment year 1995-96.

ITO v. Muhammad Kunhi (M.K.) (1969) 71 ITR 815 (SC); Purushotharnan (V.N.).v. ITO (Agrl.) (1984) 149 ITR 120 (Ker.) and Prem Prakash Tripathi v. CIT (1994) 208 ITR 461 (All.) ref.

R. N. Dutt for Petitioner.

S. N. Datta and Ramesh Chowdhury for Respondent.

JUDGMENT

The petitioner is the assessee in the instant case for the relevant assessment year 1995-96. A demand of Rs.10,41,633 was raised upon assess?ment made under section 143(3) of the Income-tax Act. Being aggrieved the petitioner preferred an appeal before the Commissioner (Appeals). Meanwhile, the petitioner made an application under section 220(6) of the Income--tax Act before the assessing authority requesting that the demand be stayed on account of pendency of the appeal against the order of assessment and that the petitioner should not be treated as an assessee in default.

By the order dated January, 28, 1998, the assessing authority held that in view of the appeal having been preferred by the assessee the assessee was requested to pay 50 percent. of the demand and upon such payment the application for stay would be considered. Seven days time for payment was granted failing which it was directed that the stay petition shall stand rejected and recovery measures shall be initiated.

Being aggrieved against the order passed by the assessing authority, the petitioner has filed the writ petition assailing the said order of the assessing authority on several grounds.

Admittedly an appeal has been preferred by the petitioner and the same is pending adjudication. The power to grant stay of collection of tax, as has been held in a decision of the Supreme Court in the case of ITO v. M. K. Mohammed Kunhi (1969) 71 ITR 815 is an inherent and incidental power of the appellate authority for the effective exercise of the appellate powers. The appellate authority, i.e, the Commissioner (Appeals), thus, has an inherent power to grant stay of collection of tax in appropriate cases. Merely because power has been conferred upon the assessing authority under section 220(6) of the Income-tax Act to treat an assessee as not in default, the same will not in any way militate against the power of the appellate authority to grant stay .I am fortified by a judgment of the Kerala High Court in the case of V. N. Purushothaman v. Agrl. ITO, (1984) 149 ITR 120 and also by the judgment of the Allahabad High Court in the case of Prem Prakash Tripathi v. CIT (,1994) 208 ITR 461.

The Appellate Authority before whom the appeal is pending has the power to grant stay of the demand impugned in the appeal pending before him. It is appropriate that the petitioner-assessee should be relegated to availing of the said remedy before invoking the jurisdiction of this Court under Article 226 of the Constitution of India. I cannot accede to the contention of learned counsel for the petitioner that the petitioner has no other efficacious remedy except invoking the jurisdiction of this Court in the light of the judgments of the Allahabad High Court and the Kerala High Court referred to above, which, in turn, are based upon the Supreme Court judgment in M..K. Muhammad Kunhi's case (1969) 7 1 ITR 815.

However, in so far as the impugned order of the ass authority is concerned, suffice it to note here that the order is one passer, without application of mind and not in conformity with law. A bare reading of the order would show that the assessee has been asked to pay the amount that is, 50 percent. of the demand, before his request for stay is considered. In other words, only if the assessee pays 50 per cent, of the demand, the impugned order states, the request of the petitioner would be considered for staying the demand and not before. It is not as though that the stay application has been considered and orders thereon have been passed on the merits of the case. I accordingly set aside the order of the assessing authority, dared January 28, 1998.

No useful purpose would be served by keeping the writ petition on file as the same can accordingly be disposed of with appropriate directions, as under.

If the assessee files an application within one week from this date for stay of collection of tax before the appellate authority before whom the petitioner's appeal is pending against the order of assessment, the appellate authority shall consider the same and pass appropriate orders thereon in accordance with law after affording the petitioner an opportunity of being heard without in any manner being influenced by any observation contained either in this order or in the order of the assessing authority, dated January 28,. 1998.The petitioner shall cooperate in the early disposal of the stay application and it is directed that the stay application shall be disposed of within thirty days from the date it is received by the appellate authority.

Until the stay petition is disposed of by the appellate authority, as directed above, there shall be stay of recovery of tax pursuant to the demand notice raised against the petitioner for the assessment year.1995-96,which is the subject-matter of appeal before the Commissioner.

It is clarified that if the petitioner defaults in filing the application within the period of one week specified above, the order of stay hereby granted shall stand vacated.

The writ application is accordingly disposed of. There will be no order as to costs.

All parties are to act on a signed xeroxed copy of this order on the usual undertaking.

M.B.A./3202/FC???????????????????????????????????????????????????????????????????????????????? Order accord