Hindustan Lever Ltd. v. Dy. CIT

Case snapshot

Sections / provisions: 254(2A)

Questions before the Court / Tribunal

• S. 254(2A) : Appellate Tribunal-Stay-ITAT has power to grant stay only if the asseessee pays 20 % of the tax in dispute or furnishes equal amount of security of like amount. [S. 220(6), 253, 254(1)] The Assessee filed a stay application before ITAT against demand raised Assessee submitted that most issues were covered and hence blanket stay be granted. It argued that ITAT has powers to grant stay and submitted that new amendment of asking assessee to pay 20% of demand is not applicable as it runs down the power of ITAT. Honourable ITAT held that;; When the Hnourable Supreme court held that ITAT has powers to…
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI „K‟ BENCH, MUMBAI [Coram: Pramod Kumar (Vice President), and Kavitha Rajagopal (Judicial Member)] SA No. 116/Mum/2022 In ITA No.: 2125/Mum/2022 Assessment year: 2018-19 Hindustan Lever Limited (as the legal successor of Glaxo SmithKline Consumer Healthcare Limited) .…………………………Appellant 24th and 25th floor, One Horizon Centre Golf Course Road, DLF Phase V Gurgaon 122 002 [PAN: AACCS0144E]

2. When this stay application was brought up for hearing, it was noticed that the taxpayer had not paid any part of the disputed tax demands impugned in the appeal before us. In response to our question, learned counsel submits that, in view of the peculiar facts of this case and given the balance of convenience, the assessee does not intend to make payment of any part of the impugned demands even now, as it is not, on the facts and in the circumstances of the case, required either. Learned counsel submits that his prayer is for a blanket stay and that he is not in a position to, nor does he think he is required to, make payment of any part of the disputed tax demands. It is submitted that on the majority of the issues in the appeal, the issues are covered,

in favour of the assessee, mostly by the binding judicial precedents in the assessee‟s cases or the cases of the assessee‟s sister concerns. It is submitted that these judicial precedents show that the assessee has a very strong prima facie case in favour of the assessee, and the balance of convenience is in favour of the collection/recovery of the disputed demands being stayed till the disposal of the related appeal. It was in this backdrop that the leaned counsel was asked to address us on the scope of proviso to Section 254(2A), and, how, given these legal provisions, a blanket stay can be granted to an appellant before us.

3. Learned counsel begins by taking us through the provisions of Section 254(1), which provide that “(t)he Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit”, and that, on these plains words of the statute, Hon‟ble Supreme Court has, in the landmark judgment in the case of ITO Vs M K Mohd Kunhi [(1969) 71 ITR 815 (SC)], categorically held that the Tribunal has inherent powers of granting a stay on collection/recovery of disputed tax and demands in fit and deserving cases, and that these powers are ancillary and incidental to the powers of disposing of an appeal. There is thus no reason to go beyond the scheme of Section 254(1) for examining the powers of the Tribunal of granting the stay. The powers granted to the Tribunal by Section 254(1) cannot be curtailed, diluted or otherwise narrowed down by a proviso to Section 254(2A), which has no bearing on the powers under section 254(1). It is then contended that there are several coordinate benches decisions which have granted blanked stay in fit and deserving cases. It is then pointed out that the issues in the appeal are squarely covered, by…

4. Learned Departmental Representative, on the other hand, vehemently opposes the stay petition, pointing out that the matter has been examined by the Assessing Officer as also the Dispute Resolution Panel, as also the fact that the assessee has not paid any part of the disputed demand, and submits that given this position, and given the inherent limitations of the powers of the Tribunal, we should decline to grant the stay in this case unless the taxpayer actually pays at least 20% of the outstanding disputed demands. It is submitted that once there is an amendment in the statute itself, and the powers of the Tribunal are restricted to granting a stay only upon satisfaction of a certain condition, it cannot be open to us to grant a blanket stay. It is also submitted that some of the issues which are said to be covered, by binding judicial precedents in favour of the assessee, are covered by decisions in cases other than that of the assessee, and, strictly speaking, therefore, these are not covered issues as visualised by the CDBT instructions.

Appellant / assessee submissions

2. When this stay application was brought up for hearing, it was noticed that the taxpayer had not paid any part of the disputed tax demands impugned in the appeal before us. In response to our question, learned counsel submits that, in view of the peculiar facts of this case and given the balance of convenience, the assessee does not intend to make payment of any part of the impugned demands even now, as it is not, on the facts and in the circumstances of the case, required either. Learned counsel submits that his prayer is for a blanket stay and that he is not in a position to, nor does he think he is required to, make payment of any part of the disputed tax demands. It is submitted that on the majority of the issues in the appeal, the issues are covered,

in favour of the assessee, mostly by the binding judicial precedents in the assessee‟s cases or the cases of the assessee‟s sister concerns. It is submitted that these judicial precedents show that the assessee has a very strong prima facie case in favour of the assessee, and the balance of convenience is in favour of the collection/recovery of the disputed demands being stayed till the disposal of the related appeal. It was in this backdrop that the leaned counsel was asked to address us on the scope of proviso to Section 254(2A), and, how, given these legal provisions, a blanket stay can be granted to an appellant before us.

3. Learned counsel begins by taking us through the provisions of Section 254(1), which provide that “(t)he Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit”, and that, on these plains words of the statute, Hon‟ble Supreme Court has, in the landmark judgment in the case of ITO Vs M K Mohd Kunhi [(1969) 71 ITR 815 (SC)], categorically held that the Tribunal has inherent powers of granting a stay on collection/recovery of disputed tax and demands in fit and deserving cases, and that these powers are ancillary and incidental to the powers of disposing of an appeal. There is thus no reason to go beyond the scheme of Section 254(1) for examining the powers of the Tribunal of granting the stay. The powers granted to the Tribunal by Section 254(1) cannot be curtailed, diluted or otherwise narrowed down by a proviso to Section 254(2A), which has no bearing on the powers under section 254(1). It is then contended that there are several coordinate benches decisions which have granted blanked stay in fit and deserving cases. It is then pointed out that the issues in the appeal are squarely covered, by…

4. Learned Departmental Representative, on the other hand, vehemently opposes the stay petition, pointing out that the matter has been examined by the Assessing Officer as also the Dispute Resolution Panel, as also the fact that the assessee has not paid any part of the disputed demand, and submits that given this position, and given the inherent limitations of the powers of the Tribunal, we should decline to grant the stay in this case unless the taxpayer actually pays at least 20% of the outstanding disputed demands. It is submitted that once there is an amendment in the statute itself, and the powers of the Tribunal are restricted to granting a stay only upon satisfaction of a certain condition, it cannot be open to us to grant a blanket stay. It is also submitted that some of the issues which are said to be covered, by binding judicial precedents in favour of the assessee, are covered by decisions in cases other than that of the assessee, and, strictly speaking, therefore, these are not covered issues as visualised by the CDBT instructions.

Revenue / respondent submissions

4. Learned Departmental Representative, on the other hand, vehemently opposes the stay petition, pointing out that the matter has been examined by the Assessing Officer as also the Dispute Resolution Panel, as also the fact that the assessee has not paid any part of the disputed demand, and submits that given this position, and given the inherent limitations of the powers of the Tribunal, we should decline to grant the stay in this case unless the taxpayer actually pays at least 20% of the outstanding disputed demands. It is submitted that once there is an amendment in the statute itself, and the powers of the Tribunal are restricted to granting a stay only upon satisfaction of a certain condition, it cannot be open to us to grant a blanket stay. It is also submitted that some of the issues which are said to be covered, by binding judicial precedents in favour of the assessee, are covered by decisions in cases other than that of the assessee, and, strictly speaking, therefore, these are not covered issues as visualised by the CDBT instructions.

6. We find that section 254(1) of the Act provides that “(t)he Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit". While explaining the scope of the powers of the Tribunal under section 254(1), Hon‟ble Supreme Court has indeed held, as rightly pointed out by the learned counsel, that “In our opinion, the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when section 220(6) deals expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It could well be said that when section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory”. Their Lordships, however, hastened to add that these…

8. Viewed thus, we should not interpret a provision of the law to make the other statutory provision within the same section ineffective and nugatory. However, that will precisely be the outcome if we are to hold that the Tribunal‟s powers of granting the stay, even after the enactment of the first proviso to Section 254(2A), are unfettered inasmuch as a stay can indeed be granted even in clear disharmony with the statutory conditions set out under the first proviso to Section 254(2A). The requirement with respect to the partial payment of demand or furnishing of security in respect thereof will thus be redundant. The law as it stood at the point of time when Mohd Kunhi‟s judgment was delivered has undergone significant change vis-à-vis the position prevailing as of now, and, therefore, the observations made by the Hon‟ble Supreme Court are now to be read in the light of the subsequent enactment of the law. Unlike the Hon‟ble Constitutional Courts above, it is not for this forum, i.e. the Income Tax Appellate Tribunal, to sit in judgment over the reasonableness of the legal provisions; the remedies lie elsewhere. We have to perform the role assigned to us within the framework of…

Court / Tribunal analysis and reasoning

5. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position.

6. We find that section 254(1) of the Act provides that “(t)he Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit". While explaining the scope of the powers of the Tribunal under section 254(1), Hon‟ble Supreme Court has indeed held, as rightly pointed out by the learned counsel, that “In our opinion, the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when section 220(6) deals expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It could well be said that when section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory”. Their Lordships, however, hastened to add that these…

Operative decision and relief

3. Learned counsel begins by taking us through the provisions of Section 254(1), which provide that “(t)he Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit”, and that, on these plains words of the statute, Hon‟ble Supreme Court has, in the landmark judgment in the case of ITO Vs M K Mohd Kunhi [(1969) 71 ITR 815 (SC)], categorically held that the Tribunal has inherent powers of granting a stay on collection/recovery of disputed tax and demands in fit and deserving cases, and that these powers are ancillary and incidental to the powers of disposing of an appeal. There is thus no reason to go beyond the scheme of Section 254(1) for examining the powers of the Tribunal of granting the stay. The powers granted to the Tribunal by Section 254(1) cannot be curtailed, diluted or otherwise narrowed down by a proviso to Section 254(2A), which has no bearing on the powers under section 254(1). It is then contended that there are several coordinate benches decisions which have granted blanked stay in fit and deserving cases. It is then pointed out that the issues in the appeal are squarely covered, by…

Ratio and legal principle

• The packaged judgment addresses S. 254(2A) : Appellate Tribunal-Stay-ITAT has power to grant stay only if the asseessee pays 20 % of the tax in dispute or furnishes equal amount of security of like amount. [S. 220(6), 253, 254(1)] The Assessee filed a stay application before ITAT against demand raised Assessee submitted that most issues were covered and hence blanket stay be granted. It argued that ITAT has powers to grant stay and submitted that new amendment of asking assessee to pay 20% of demand is not applicable as it runs down the power of ITAT. Honourable ITAT held that;; When the Hnourable Supreme court held that ITAT has powers to…. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with s. 254(2a) : appellate tribunal-stay-itat has power to grant stay only if the asseessee pays 20 % of the tax in dispute or furnishes equal amount of security of like amount. [s. 220(6), 253, 254(1)] the assessee filed a stay application before itat against demand raised assessee submitted that most issues were covered and hence blanket stay be granted. it argued that itat has powers to grant stay and submitted that new amendment of asking assessee to pay 20% of demand is not applicable as it runs down the power of itat. honourable itat held that;; when the hnourable supreme court held that itat has powers to… Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• 254(2A) - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• Rajesh R. Hemrajani v. ITAT - Bombay High Court
• Pujya Sindhi Panchayat Trust v. ITO(E) - ITAT Mumbai
• Annamma Samkutty v. ITO - ITAT Pune

Different outcome / possible distinction

• Pr. CIT (Central)-1 v. Surendra L. Hiranandani - Dismissed
• Pr. CIT v. Jas Trading Pvt. Ltd. - Operative order controls

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