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income-tax Officer, J-ward Vs. Khalid Mehdi Khan (Minor) (Represented by Father and Guardian) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition Nos. 1386 and 1440 of 1976
Judge
Reported in[1977]110ITR79(AP)
ActsIncome Tax Act, 1961 - Sections 153(2A), 254 and 263; Constitution of India - Article 226; Taxation Laws (Amendment) Act, 1970
Appellantincome-tax Officer, J-ward
RespondentKhalid Mehdi Khan (Minor) (Represented by Father and Guardian)
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateY.V. Anjaneyulu, ;K. Laxminarayana and ;V.V. Subba Rao, Advs.
Excerpt:
.....of introduction of section 153 (2a) said power of tribunal become curtailed - while granting stay tribunal to keep in mind period of limitation prescribed in section 153 (2a) - department entitled to bring to notice of tribunal difficulties in granting stay - tribunal has taken into consideration relevant circumstances in said case - court will not interfere with discretion by tribunal unless a strong case is made out establishing that tribunal has exercised its power in arbitrary manner. - - however, it was observed that the said power shall not be exercised by the tribunal in a routine manner or as a matter of course, but will be exercised only where a strong prima facie case is made out and after considering the several relevant circumstances, and only on being satisfied..........[1969] 71 itr 815 the supreme court held that section 254 of the act confers on the appellate tribunal powers of widest amplitude in dealing with appeals before it and that, by necessary implication, it also confers on the tribunal the power of doing all such acts or employing all such means as are essentially necessary for the exercise of its substantive power, viz., a proper and effective disposal of the appeal. in other words, it was held that the conferment of the substantive power to entertain and dispose of the appeal carried with it, by necessary implication, all the ancillary and incidental powers which are necessary to make the exercise of the substantive power fully effective. while holding that the income-tax appellate tribunal is not a 'court', it was held that it.....
Judgment:

Jeevan Reddy, J.

1. These two writ petitions filed by the Income-tax Officer raise a common question for our consideration and can be disposed of together. It is sufficient if we state the facts in W. P. No. 1440/1976.

2. In respect of the assessment years 1971-72 and 1972-73 the respondent-assessee filed returns of his income showing the receipt of certain amountstowards his l/5th share in the lease amount in respect of Skyline Theatre building, furniture, fittings and machinery. The said return was accepted by the Income-tax Officer. However, the Commissioner of Income-tax, in exercise of his powers under Section 263 of the Income-tax Act, revised the order of assessment and directed the Income-tax Officer to reassess the same according to law. Under the said order dated February 27, 1976, the Commissioner of Income-tax expressed his prima facie opinion that the lease income from the said theatre should be assessed in the hands of the association of persons comprising of the respondent-assessee herein and other interested persons, and not separately in the hands of each assessee. As against the said order of the Commissioner, the assessee preferred appeals before the Income-tax Appellate Tribunal, Hyderabad. Two appeals were preferred in respect of the two assessment years. Along with his appeals, the assessee applied for stay of further proceedings in pursuance of the orders of the Commissioner. The Appellate Tribunal, by its order dated April 2, 1976, granted stay of further proceedings, including the making of a fresh assessment in pursuance of the orders of the Commissioner. Under the same order, the Tribunal directed the appeals to be posted for hearing within two months from the said date. It is against the said order granting stay that these two writ petitions have been filed by the department.

3. It is contended by Sri P. Rama Rao, the learned standing counsel for the department, that even if the Income-tax Appellate Tribunal is presumed to have the power to grant stay of operation of the order appealed against, as held by the Supreme Court in Income-tax Officer v. M.K. Mohammed Kunhi [1969] 71 ITR 815 even then, by virtue of the introduction of Sub-section (2A) in Section 153 of the Act by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, the said power of the Tribunal become curtailed and must now be read in the light of the said sub-section, and particularly Clause (ii) in Explanation 1 in Section 153(3). He submits that inasmuch as the Tribunal has not been held to be a 'court', the department cannot have the benefit of Clause (ii) in Explanation 1 and cannot, therefore, seek to exclude the period during which the stay granted by the Tribunal is in operation. He submits that, in a given case, it may happen that the stay-granted by the Tribunal may be operative for a sufficiently long period, leaving no sufficient time for the department to complete the assessment within the period of limitation prescribed by Sub-section (2A) of Section 153, which would naturally result in grave prejudice to the revenue.

4. For the purpose of examining the said contention, it is necessary to refer to the relevant provisions in the Act. Section 253 provides for an appeal tothe Appellate Tribunal against the orders of the Appellate Assistant Commissioner, and the Commissioner, passed under specified provisions of the Act. Sub-section (1) of Section 254 empowers the Tribunal to pass such orders on the appeal as it thinks fit, after giving both the parties to the appeal an opportunity of being heard. In Income-tax Officer v. M. K. Mohammed Kunhi [1969] 71 ITR 815 the Supreme Court held that Section 254 of the Act confers on the Appellate Tribunal powers of widest amplitude in dealing with appeals before it and that, by necessary implication, it also confers on the Tribunal the power of doing all such acts or employing all such means as are essentially necessary for the exercise of its substantive power, viz., a proper and effective disposal of the appeal. In other words, it was held that the conferment of the substantive power to entertain and dispose of the appeal carried with it, by necessary implication, all the ancillary and incidental powers which are necessary to make the exercise of the substantive power fully effective. While holding that the Income-tax Appellate Tribunal is not a 'court', it was held that it exercises all the judicial powers similar to and identical with the powers of an appellate court under the Civil Procedure Code and that, therefore, the power to grant stay is necessarily implied. However, it was observed that the said power shall not be exercised by the Tribunal in a routine manner or as a matter of course, but will be exercised only where a strong prima facie case is made out and after considering the several relevant circumstances, and only on being satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory if the proceedings sought to be stayed are allowed to continue during the pendency of the appeal.

5. The question that then arises is, whether the introduction of Sub-section (2A) of Section 153 of the Act makes any difference to the principle enunciated by the Supreme Court in the above decision. Sub-section (2A) of Section 153 reads as follows :

'(2A) Notwithstanding anything contained in Sub-sections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh, assessment under Section 146 or in pursuance of an order, under Section 250, Section 254, Section 263 or Section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of me financial year in which the order under Section 146 cancelling the assessment is passed by the Income-tax Officer or the order under Section 250 or Section 254 is received by the Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Commissioner. '

6. It would also be relevant to set out Explanation 1 in so far it is relevant:

'Explanation 1.--In computing the period of limitation for the purposes of this section--.........

(ii) the period during which the assessment proceeding is stayed by an order or injunction of any court......shall be excluded.'

7. Now, it would be seen that neither Sub-section (2A) nor any other provision in the Act expressly qualifies or abridges the power of the Tribunal to pass all necessary orders under Section 254(1) of the Act. Does it do so by necessary implication? It is, no doubt, true that Clause (ii) in Explanation 1 may not help the department in seeking to exclude the period during which the stay granted by a Tribunal is in operation, since the Tribunal is, admittedly, not a court, yet we are not convinced that Subsection (2A) has the effect of depriving or abridging the power of the Tribunal to grant appropriate interim orders under Section 254(1) of the Act. The decision of the Supreme Court was rendered in September, 1968, while Sub-section (2A) was introduced by the Taxation Laws (Amendment) Act, 1970. Parliament must be presumed to have known about the said decision of the Supreme Court with reference to the powers of the Tribunal under Section 254 of the Act, and if it wanted to deprive the Tribunal of the said power or to abridge the same, it could have done so expressly. Moreover, no reasons are placed before us compelling us to hold that Sub-section (2A) cuts down the power of the Tribunal under Section 254(1) of the Act in any manner. However, it is obvious that the provision contained in sub-section (2A) shall have to be an additional factor which the Tribunal has to take into consideration while passing an order of stay or other interlocutory order pending the appeal before it. In other words, while granting the stay or any other interlocutory order, the Tribunal shall have to keep in mind the period of limitation prescribed in Section 153(2A) of the Act and pass orders in the light of the same. It is always open to the department to bring to the notice of the Tribunal the particular difficulties, if any, it would face in case a stay is granted, and the Tribunal shall of course consider the said plea and all other relevant circumstances and shall exercise its power having regard to them and in the light of the principles enunciated by the Supreme Court in Income-tax Officer v. Mohammed Runki [1969] 71 ITR 815. That the Tribunal has taken into consideration the relevant circumstances in this case is evident from the fact that, having granted a stay, it directed the appeals to be posted for hearing within two months therefrom. We are told, however, that the appeals could not be so heard on account of the filing of these writ petitions which necessitated the remittance of relevant records to this court.

8. We may also point out that granting of stay or any other interlocutory order pending the appeal is within the discretion of the Tribunal, and this court will not ordinarily interfere with the exercise of discretion by aTribunal, unless a strong case is made out establishing that the Tribunal has exercised its power in a totally arbitrary manner, or under a total misapprehension of legal position, or without applying its mind to the relevant circumstances and without regard to the principles enunciated by the Supreme Court in the aforementioned decision in [1969] 71 ITR 835. Of course, the grounds indicated by us are not exhaustive ; the question of interference will be a matter to be decided by the court in each case having regard to the facts of the case. In view of the above circumstances, we do not find any grounds warranting interference with the interlocutory orders passed by the Tribunal and, accordingly, these writ petitions are dismissed but, in the circumstances, without costs. Advocate's fee Rs. 150 in each.


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