1. This petition for stay has been moved by the assessee, K.M. Sugar Mills (P.) Ltd., Kanpur. It has been prayed that the demand of Rs. 8,99,673 along with interest thereon be stayed and the assessee applicant be allowed to pay the same in instalments of Rs. 37,490 per month and be permitted to furnish security to the satisfaction of the Commissioner (Appeals).
2. The facts leading to this petition may be, briefly, stated as follows : The assessee which is a limited company registered under the Companies Act, 1956, is carrying on the business of manufacture and sale of sugar. A penalty of Rs. 8,99,673 was levied on the assessee-company under Section 271(1)(c) of the Income-tax Act, 1961 ("the Act"), by the ITO vide his order dated 22-8-1979 for the assessment year 1973-74. The penalty was confirmed by the Commissioner (Appeals) vide order dated 10-11-1980 and in second appeal the same was also confirmed by the Appellate Tribunal vide its order dated 1-12-1981 in the appeal captioned above. The assessee moved a reference application No. 78/1962 under Section 256(1) of the Act on 26-2-1982 arising out of the aforesaid decision of the Appellate Tribunal which is pending disposal. So far as the quantum matter is concerned, at the instance of the assessee, the Hon'ble Allahabad High Court has vide its order dated 10-9-1980 directed the Tribunal under Section 256(2) of the Act to draw up the statement of the case and to refer the specified questions of law for its opinion. The Commissioner (Central), Kanpur rejected the request of the assessee for grant of instalments to pay the aforementioned demand which was communicated to the assessee by the ITO vide his letter dated 16-3-1982. The Commissioner directed the assessee to pay Rs. 3 lakhs by 25-3-1982 and the balance in monthly instalments of Rs. 50,000 each starting from April 1982. The assessee has contended that the present period is crushing period and the Government has issued a warning that no mill can stop crushing till the season is over. On the other hand, the banks have, under the Government policy to squeeze the credit, refused to grant the limits availed by the assessee in 1980-81 season and the last years book limit of Rs. 1.15 crores has already been availed of by the assessee. According to the assessee, its total requirement for 1981-82 season to fulfil the Government's mandate is of the order of Rs. 2.50 crores. The assessee has, therefore, submitted that it is already in absolute lack of funds for the purpose of running the mill and, therefore, it is not possible for it to pay Rs. 3 lakhs, there being no funds in the bank. The assessee has also contended that the release of sugar is controlled by the Government and that it is for the price of cane and wages and running the factory that all the funds are blocked in use. The assessee has expressed its readiness to furnish bank guarantee to the Commissioner or second charge over assets of the company to secure the entire disputed amount during the course of its payment in instalments of Rs. 37,490 as proposed. The assessee has also filed an affidavit in support of the stay petition.
3. Since a preliminary objection was raised on behalf of the revenue to the maintainability of the stay petition after the decision of the appeal by the Appellate Tribunal and during the pendency of the reference application, Shri Gulati argued on this preliminary objection. Firstly, he drew our attention to the provisions of Section 255(5) & (6) and Section 260 of the Act. Then he referred to the decision of the Supreme Court in ITO v. M.K. Mohd. Kunhi  71 ITR 815. Next he referred to the decision of the Delhi High Court in L.
Bans Dhar & Sons v. CIT  111 ITR 330. Lastly, he referred to the decision of the Andhra Pradesh High Court in Director D.R. & D.Laboratories v. C. Pandu AIR 1977 AP 7. Shri Gulati submitted on the basis of the decision of the Supreme Court in the case of M.K. Kunhi (supra) that the statutory power under Section 254 of the Act carries with it the duty in proper cases to make such orders for staying recovery proceedings pending the appeal before the Tribunal. Next he pointed out that in CWT v. Tungabhadra Industries Ltd.  75 ITR 196, (SC) the Supreme Court referring to the obervations of Chhagla, C.J. of the Bombay High Court in ITAT v. S.C. Cambatta & Co. Ltd.  29 ITR 118 observed that when a reference has been made to the High Court or the Supreme Court the decision of the Appellate Tribunal out of which the reference has arisen, cannot be looked upon as final ; in other words, the appeal before it is not finally disposed of, and it is only when the High Court or the Supreme Court decides the questions that have been referred, that the Tribunal reconsiders the matter and decides it and thus finally disposes of the appeal. These observations have been quoted in the case of L. Bansidhar & Sons (supra). From these observations Shri Gulati wanted us to hold that a reference is a continuation of appeal proceedings and the power of the Tribunal to grant stay during the pendency of the appeal being not disputed, the petition for stay is maintainable during the pendency of the reference application before the Tribunal. Next Shri Gulati submitted that since under Sub-sections (5) and (6) of Section 255, the Appellate Tribunal acted as a Civil Court, the stay could be granted by it in exercise of its inherent powers. He also submitted that in the case of Director D.R. & D. Laboratories (supra), the Andhra Pradesh High Court had recognised the jurisdiction of the High Court to pass interlocutory orders till parties have sufficient time to approach the Supreme Court after obtaining special leave to appeal. He submitted that on that basis the Appellate Tribunal can also entertain an application for stay and grant stay. On merits, he submitted that a debatable issue of law was involved in the reference application and, therefore, in this sense the assessee had established prima facie case. He also submitted that in view of the financing position of the assessee (for which he relied upon the certificate from the State Bank of India, the assessee was not in a position to pay in cash Rs. 3 lakhs and, therefore, the balance of convenience lay in passing stay order as requested by the assessee.
4. In reply Shri R.K. Upadhay, the learned departmental representative, strongly opposed the entertainment of the stay petition. He submitted that since the appeal had been disposed of by the Tribunal, no stay petition could be moved. He also submitted that the Tribunal not being a court, no question of invoking inherent powers for the purposes of stay arose. He also relied upon the observations of the Supreme Court in the case of M.K. Mohd. Kunhi (supra) to the effect that the stay was to be granted only in the most deserving and appropriate case where the Tribunal is satisfied that the entire purpose will be frustrated and rendered nugatory by allowing the recovery proceedings to continue. He submitted that no exceptional or special circumstances existed. He also pointed out that the assessee had not approached the CBDT after it was unsuccessful before the Commissioner (Appeals). On merits, he submitted that no prima facie case was made out by the assessee and that according to the assessee's own case it had already made an overdraft and that the assessee may have other resources also. In reply the additional point made by Shri Gulati was that the assessee had paid the tax due as a result of the order in the quantum matter and that only the penalty remained to be paid.
5. We have considered the rival submissions as also the various provisions of the Income-tax Act, 1961, having a bearing on the controversy and the decisions referred to above. The Appellate Tribunal acts as a civil court for certain purposes specified in Sub-section (6) of Section 255 and the purpose of stay not being stated or implied there, we do not accept the submission on behalf of the assessee that the Appellate Tribunal can invoke any inherent powers of a civil court.
In this connection it also needs to be pointed out that the position of the High Court and the Supreme Court by virtue of their being courts and by virtue of their enjoying constitutional powers, is different. We need not digress any further. There can be no manner of doubt that by provisions of the Act or the Income-tax Appellate Tribunal Rules, 1963, powers have not been expressly conferred upon the Appellate Tribunal to stay the proceedings relating to the recovery of penalty or tax due from an assessee. No doubt, in the case of M.K.M. Kunhi (supra), the Supreme Court has laid down that the statutory power under Section 254 carries with it the duty in proper cases to make such orders for staying recovery of proceedings pending an appeal before the Tribunal, as will prevent the appeal, if successful, from being rendered nugatory. However, admittedly the appeal has been already disposed of by the Appellate Tribunal and what is pending before it is only a reference application on which a reference may or may not be given under Section 256(1). So far as the reliance placed on behalf of the assessee on the observations of the Supreme Court in the case of Tungabhadra Industries (supra) is concerned, there is a distinction which requires to be noticed. There the Supreme Court was considering a situation in which a reference had been made to the High Court or the Supreme Court. Here the reference has not yet been made. In that case the Supreme Court had observed that when a reference is made, the decision of the Appellate Tribunal cannot be looked upon as final and the appeal before it cannot be taken as finally disposed of and that it is only when the High Court or the Supreme Court decides the question that has been referred that the Tribunal has to reconsider the matter and decide in conformity with the order of the High Court or the Supreme Court as the case may be. This is not the combined result of Section 254(4) and Section 260(1) of the Act. These provisions are to the effect that save as provided in Section 256, the orders passed by the Appellate Tribunal on appeal shall be final and that after the questions of law have been decided by the High Court and the Supreme Court on reference, the Appellate Tribunal shall pass such orders as are necessary to dispose of the case conformably to such judgment. It is one thing to say that the appeal is pending and it is quite another to say that though the appeal has been disposed of, its result is liable to alter as a consequence of the opinion that may be given by the High Court or the Supreme Court, as the case may be, on a reference. A perusal of Rule 35A of the Income-tax Appellate Tribunal Rules, 1963, shows that among the particulars required from the assessee to be stated in a stay petition it has to give the date of filing the appeal before the Appellate Tribunal and its number, if known. This means that the stay petition is to be given and entertained only during the time that the appeal has been moved before the Appellate Tribunal and has not been decided by it. In the case of M.K.M. Kunhi (supra) at page 821, reference has been made by the Supreme Court to the case of Polisetti Narayana Rao v. CIT  29 ITR 222 (AP). There the High Court held that the stay could be granted by pending reference of a case by the Appellate Tribunal to the High Court, in that case the High Court had directed the Appellate Tribunal to state a case and refer the special question of law arising out of the Tribunal's order and a question arose whether the High Court could grant stay during the time that the direction was pending before the Appellate Tribunal. We, therefore, take the view that the petition for stay could not be moved before the Appellate Tribunal during the pendency of the reference application before it.
6. So far as the merits of the prayer for stay is concerned this question would not arise in view of our decision on the preliminary issue. However, since we heard arguments on merits also, we proceed to express our opinion thereon also. Firstly, the mere possibility of a reference being granted to the assessee does not show that it is a case of existence of a strong prima facie case. Secondly, the mere inability to pay tax penalty on the part of the petitioner is not a proper ground for directing the stay of the recovery of the same. This was also held by the Andhra Pradesh High Court in the case of Pollisetti Narayana Rao (supra). The assessee is in receipt of ad hoc cash credit limit of Rs. 1.15 crores and the outstandings in its State Bank account on 22-3-1982 were Rs. 1,13,83,087. We have gone through the terms on which the stay of recovery has been passed at the instance of the Commissioner (Central), Kanpur and we do not consider that any interference is necessary therein on the facts of the present case.