Any assessee who has filed an appeal before the Tribunal and which is pending for disposal can approach the Tribunal for Stay of recovery of demand arising out of the additions that are challenged in the appeal. As such, normally, pendency of such appeal before the Tribunal is sine qua non for preferring Stay Application before the Tribunal. The appeal should be the one which is in relation to the order giving rise to the disputed demand.

What is the procedure to be followed and what are the documentation requirements for filing a Stay Application before ITAT?

Procedure:

Rule 35A of the Appellate Tribunal Rules, 1963 prescribes the manner in which Stay Application before the Tribunal is to be filed. For ready reference, the same is reproduced hereunder:

"Procedure for filing and disposal of Stay Petition.

Every Application for Stay of recovery of demand of tax, interest, penalty, fine, estate duty or any other sum shall be presented in triplicate by the applicant in person, or by his duly authorized agent, or sent by registered post to the Registrar or the Assistant Registrar, as the case may be, at the headquarters of a Bench or Benches having jurisdiction to hear the appeals in respect of which the Stay Application arises.

Separate Applications shall be filed for Stay of recovery of demands under different enactments.

Every Application shall be neatly typed on one side of the paper and shall be in English and shall set forth concisely short facts regarding demand of tax, etc.

the result of the appeal filed before the Appellate Assistant Commissioner, if any;

the exact amount of tax, etc. demanded;

the date of filing the appeal before the Tribunal and its number, if known;

whether any Application for Stay was made to the revenue authorities concerned, and if so the result thereof (copies of correspondence, if any, with the revenue authorities to be attached);

reasons in brief for seeking Stay;

whether the applicant is prepared to offer security, and if so, in what form;

the contents of the Application shall be supported by an affidavit sworn by the applicant or his duly authorised agent.

For administrative purpose, Form "xe" is prescribed. Generally, a Stay Application should contain:

The Form along with its annexure, if any:

This Form requires the assessee to give basic details, like, name and address of the applicant, break up of the demand; viz., tax, interest u/ss. 234A, 234B and 234C and interest u/s. 220, less tax already paid, etc., the details regarding the Applications, as well as their outcome, for Stay preferred before the lower authorities like A.O. / CIT, etc. The most important part of the Form is the column requiring to state the reasons for seeking Stay. Usually, this is given by way of a separate annexure. This separate annexure should contain, briefly, the facts regarding the applicant’s appeal before the Tribunal, touching upon, in brief, the merits of the case. The annexure should then narrate financial position of the applicant. Lastly, it should contain the reasons for seeking the Stay.

A copy of Stay Applications preferred before the lower authorities and their rejection letters, if any.

Documents highlighting the financial position of the applicant as on the date of the Application.

Any other document that may have relevance to the Stay Application.

Affidavit of the applicant in support of the Stay Application.

The challan evidencing payment of the prescribed fee of Rs. 500.

This Application is to be submitted in triplicate.

Is there any specific time limit within which:

(a) the Stay Application is to be preferred by the assessee before ITAT?

(b) the Stay Application is to be disposed of by the ITAT?

a.

There is no specific time limit within which a Stay Application is to be preferred by the assessee before the Tribunal. As long as the assessee satisfies the basic pre-conditions for invoking the jurisdiction of the Tribunal to intervene in the matter of recovery proceeding, he can approach to the Tribunal any time within that period. However, generally, an assessee approaches the Tribunal and prefers the Application only when coercive proceedings are initiated against him and he is left with no alternative but to approach the Tribunal to redress his grievances in the matter of recovery.

b.

There is no specific time limit even for disposing of a Stay Application filed by the assessee before the Tribunal. However, as the Stay Application is normally filed when coercive recovery proceedings are already launched against the assessee, the Applications are disposed of by the Tribunal as early as possible.

As far as the Mumbai Bench of the ITAT is concerned, normally, at the time of submission of Stay Application itself, the date of hearing is given. As per the latest policy, hearing on Stay Applications, normally, are kept on 1st Friday of each month. However, in exceptional circumstances, hearing for a Stay Application can be granted on any other normal working day, upon request so made by the applicant and upon the Tribunal being satisfied about the urgency.

What are the broad parameters that are to be considered by the ITAT while deciding a Stay Application?

In case of exercise of discretion while entertaining a Stay Application, the Tribunal is required to consider all aspects of the matter and is bound to apply its mind to all relevant factors and circumstances. Though there is plethora of judicial pronouncements on this aspect, it is suffice to refer to the recent decision of the Calcutta High Court in case of Golam Momen vs. Dy. CIT [(2002) 256 ITR 754 (Cal)] wherein the Court has summarised, in the context of discretion to be used under section 220(6), the following considerations which should form guidance while exercising the discretion: -

whether there is a prima facie case in favour of the assessee;

the amount of tax and penalty involved in the appeal;

the capacity of the assessee to pay the amount;

undue hardship to the assessee;

nature of security offered by the assessee.

While considering the above aspects, the authority must have also in mind the balance of convenience as well as the adverse effect that may ensue on the public revenue in case the Stay is granted, though, it may not be the primary concern. Similarly, the Bombay High Court in the case of KEC International Ltd. [(2001) 251 ITR 158] has laid down certain parameters to be followed while disposing of Stay Application. Though these parameters are laid down while dealing with a case of Stay Application before Commissioner of Income Tax, they, nonetheless, may have bearing while dealing with Stay Applications before Tribunal also. The parameters are:

While considering the Stay Application, the authority concerned will at least briefly set out the case of the assessee.

In cases where the assessed income under the impugned order exceeds returned income, the authority will consider whether the assessee has made out a case for unconditional Stay. If not, whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order.

In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit.

The authority concerned will also examine whether the time to prefer an appeal has expired. Generally, coercive measures may not be adopted during the period provided by the statute to go in appeal. However, if the authority concerned comes to the conclusion that the assessee is likely to defect the demand, it may take recourse to coercive action, which with brief reasons, may be indicated in the order.

We clarify that if the authority concerned complies with the above parameters while passing orders on the Stay Application, then the authorities on the administrative side of the department like respondent No. 2 herein need not once again give reasoned order.

The Hon’ble Court, however, clarified that the above parameters are not exhaustive and are only recommendatory in nature.

Departmental Circulars / Instructions:

The department has, from time to time, issued instructions, circulars, etc. on the aspects of exercise of the discretion by the assessing officer under section 220(6). Some of them are:

Instruction No. 96 (F.No. 1/6/69 – ITCC) dated 21-8-1969

Circular No. 530 dated 6-3-1989

Circular No. 589 dated 16-1-1991

Instruction No. 1914 – F. No. 404 / 72 / 93 – ITCC, dated 2-12-1993

There is also an assurance given by the Minister for Revenue and Expenditure on floor of Lok Sabha on 11-12-1970.

Various High Courts and Tribunals have, from time to time, taken judicial note of these instructions and circulars and, relying upon them, have granted suitable relief to the assessees concerned.

It should be noted that above parameters are applicable, unless the context otherwise requires, to the exercise of such power by all the authorities, that is, right from AO, through CIT to the Tribunal; though, in case of the latter authority, such authority being a judicial body, akin to a court, it is required to observe such parameters and judicial norms more strictly and diligently. This is because, even with respect of such discretionary power to be exercised by higher authorities, more or less similar sentiments are voiced by various courts. The bottom line that emerges from analysis of the judgments on this aspect is that the exercise of such discretion cannot be mechanical, stereotyped, arbitrary or capricious, exercised in a routine way, or as a matter of course. In fact, on the basis of the settled position on the aspect of exercise of discretion — that wherever a statute invests a discretionary power in the officer, it is normally for exercise in favour of the person concerned unless there is some sound and relevant reason to deny the benefit of the discretionary power —, in the matter of Stay it has been held that the statutory power under the Income-tax Act given to the appellate authority carries with it a duty, in proper cases, to make such orders for Staying recovery proceedings pending appeal as will prevent the appeal, if successful, from being rendered nugatory and to prevent the frustration and negation of the purpose of filing the appeal.

In view of this, the fact that the assessee is financially sound and is in the position to pay a demand cannot, by itself, be a ground for refusing to exercise the discretion in granting the Stay, if otherwise the assessee has made out a prima facie case in this regard. Similarly, the Tribunal cannot decline to exercise the discretion on merits on the ground that the concerned Commissioner has already granted a conditional Stay. Similarly, as held by the Punjab High Court in a case of Escorts Tractor Ltd. vs. Sales Tax Tribunal [(1995) 98 STC 24, 25 (Punj)], by fixing the date of hearing, on Application for interim Stay, subsequent to the last date by which the party is required to deposit the tax, the appellant authority/ Tribunal cannot render the appeal filed by the aggrieved party infructuous. The Court, in that case, observed that the appellate authority as well as the Tribunal should remember that they are quasi-judicial body and not the administrative authorities and their functioning must inspire confidence in the public.

It will not be inappropriate to end discussion on this aspect by reproducing an extract from the famous judgment of the Mumbai Tribunal in the case of RPG Enterprises Ltd. [(2001) 252 ITR (AT) 20], which was delivered while dealing with the power of the Tribunal vis-à-vis Stay Application:

"We are living in a democratic set up and the tax-payers deserve to be respected for their contribution in the national development. Public servants are expected to discharge their functions dutifully but not unreasonably. The officers are supposed to work diligently but not harassingly. It is absolutely necessary for the Department of Revenue to gain public trust and confidence by acting judiciously and avoiding undue harassment. We appreciate the scheme of rewarding honest and diligent officers of the Department but also feel that there is a necessity of identifying overzealous officers harassing the tax-payers by misusing their power."

ORDER, HOW TO BE PASSED

On this aspect, the position is very well settled. The order should be manifest and should ex-facie disclose the reasons if the concerned authority declines to grant Stay. The order must be a speaking order and it must be supported by reasons, so that the superior court is assured that it is in accordance with the law and the discretion is not exercised capriciously or with whims and fancy or on the basis of policy or expediency. Since the exercise of the discretion is by a quasi-judicial authority, the principles of natural justice also get attracted automatically and, therefore, an opportunity of being heard is also a necessary requirement.

What are the powers of ITAT and what are the types of relief that can be granted by ITAT while entertaining and disposing of a Stay Application?

Nature of the jurisdiction

It is now a very well settled legal position that powers conferred by an enabling statute include not only the powers as are expressly granted which are expressly granted but also, by implication, all powers which are reasonably necessary for the accomplishment of the objective intended to be secured. This is based on the firmly established rule that an express grant of statutory power carries with it, by necessary implication, the authority to use all reasonable means to make such grant effective. Where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to the execution is also accepted in India. [See, ITO vs. M. K. Mohammed Kunhi (1969) 71 ITR 815, 819 (SC)]. The Supreme Court, in the context of Customs, Excise and Gold (Control) Appellate Tribunal [CEGAT], has summarised the Indian view on this position very aptly in the case of Union of India vs. Paras Laminates Pvt. Ltd. [(1990) 186 ITR 722, 726 (SC)] by observing that certain powers are recognised as incidental and ancillary, not because they are inherent in the Tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned field of jurisdiction is efficaciously and meaningfully exercised. In fact, the Andhra Pradesh High Court in the case of State of A. P. vs. V.B.C. Fertilizers & Chemicals Ltd. [(1994) 95 STC 14, 15, 16 (AP)] has extended this logic and held that the power of the Tribunal is extended to pass interlocutory orders in the interest of justice, pending disposal of appeal before it, including the power to grant Stay of further proceeding, pursuant to the order of remand, under which the assessing authority has to take further proceeding. In view of this basic proposition on the inherent powers of appellate Tribunal, it has been held that grant of Stay or to give suitable directions is one of such ancillary and incidental powers of the Tribunal.

Types of order/relief

Stay of recovery

If a strong prima facie case is made out, the Tribunal may grant absolute Stay of recovery. However, more often than not, the Tribunal insists some payment subject to which the Stay would be granted. In some cases, the Tribunal may ask for adequate security. The Tribunal may also put some other conditions. In any case, whether to insist any further payment or security or not and, if yes, the amount of such payment or the nature of such security etc. are the matters that are at absolute discretion of the Tribunal, to be decided depending upon facts of each case. However, it should be appreciated that while granting conditional Stay, the conditions imposed cannot be onerous so as to defeat the very purpose of making the Stay Application. In other words, the terms should be reasonable and not harshly excessive. If Stay is granted (absolute or conditional), usually, the pending appeal of the applicant is fixed for hearing within two to three months. In the order of the Stay, either the date of the first hearing itself is mentioned or the month in which the hearing would be taken up is mentioned. In the both the cases, a formal Notice follows. It should be noted that as a matter of course, a condition is put that the applicant will not seek any adjournment for his appeal.

Stay of other proceedings

Generally, by "Stay proceedings", what is understood is Stay of recovery proceeding only. However, in exceptional cases, the Tribunal is not debarred from passing orders granting Stay of other proceedings also. For example, in a case where an appeal against revision order under section 263 is pending before it, the Tribunal may grant Stay of assessment proceeding that is taken up or likely to be taken up pursuant to the revision order. The Tribunal may, in such a case, though allow such assessment proceeding to continue, put a condition that no recovery proceeding would be taken up pursuant to such assessment order till the appeal against the revision order is disposed of. In such eventuality, the appeal is taken up for hearing on priority basis within 2/3 months to safeguard interest of the Revenue.

Early hearing

Many a times, the Tribunal may not be satisfied with the reasons canvassed before it by the applicant in support of his request to grant Stay of recovery proceeding. Nonetheless, looking at the facts and the circumstances of the case, the Tribunal may be inclined to grant "out of the turn hearing", that is, early hearing of the appeal without granting Stay. In other words, the appeal of the applicant is taken up for hearing within 2/3 months and the applicant need not wait for his appeal to be heard in normal course which, as at present, takes about 4 - 5 years to come up for hearing in case of appeals where assessed income is more than Rs. 5 lakhs. It should be noted here that even such order for early hearing cannot be got by mere asking. Even for this, a prima facie case is required to be made out. In such a case, since no Stay is granted by the Tribunal, technically, the Department is not debarred from going ahead with further recovery proceedings. However, it is left to the concerned Assessing Officer/Tax Recovery Officer/CIT to take into consideration this factor of hearing of the appeal of the assessee having been fixed within 2/3 months. Normally, it is expected that, pending such appeal, at least extreme measures of recovery, like auction of the attached properties or assets, are not taken.

Refund

In an extreme case, where it is shown that pending Stay Application before the Tribunal, the Department coercively recovered the money from the concerned assessee and such action was mala fide, the Tribunal, exercising its inherent jurisdiction, has power to undo the wrong done by the revenue authority. This includes power to order refund of the monies that were recovered by the Department coercively in arbitrary and mala fide exercise of the power. Reference in this regard can be made to the decision of the Mumbai Tribunal in the case of RPG Enterprises (supra) and the decision of the Madras Tribunal in the case of Western Agencies [(2003) 86 ITD 462 (Mad)].

Power for Extension

The Finance Act, 2001, with effect from 1-6-2001, has inserted a proviso to sub-section (2A) of sub-section 254 of the Act, providing that the Tribunal shall dispose of the appeal, in which Stay is granted, within 180 days from the date of such Stay order and if such appeal is not so disposed of within this period, then the Stay order shall stand vacated after expiry of this period. However, it should be noted that even after this proviso, there is no bar on the Tribunal to grant extension of the Stay or to grant a fresh Stay on expiry on this period, if the facts and the circumstances so demand. This proviso cannot be construed as curtailing the powers of the Tribunal to grant further or fresh Stay in a deserving case, where the delay was not due to any laches or neglect on the part of the assessee. Reference may be made to the Delhi Tribunal decision in the case of Center for Women’s Development Studies vs. Dy. Director of Income Tax [(2002) 257 ITR (AT) 60 (Del)]

In the event of non-fulfilment of any of the conditions attached to the Stay order, what are the consequences and what is the remedy available to the Assessee?

In the event of non-fulfilment of conditions attached to the Stay order, the Stay automatically gets vacated. This is because in such type of a case, what is granted is only a conditional Stay, that is, subject to fulfilment of the conditions.

As far as remedy is concerned, the concerned assessee can either again approach the Tribunal for relaxation/modification of the conditions imposed or can approach the High Court by way of Writ by invoking Article 226 of the Constitution. Though there is no express prohibition or bar in the Act against the Tribunal entertaining such request, the concerned assessee has to satisfy the Tribunal with strong reasons and cogent evidence for such request. As such, it is only in very exceptional case that the Tribunal may incline to vary the conditions. Even for invoking the jurisdiction of the High Court, which is to be invoked only in exceptional circumstances, the concerned assessee is required to justify, by strong evidences and cogent reason, the non-fulfilment of the conditions imposed by the Tribunal. In either of the cases, the Tribunal or the High Court, as the case may be, may reject such Application outright or may pass such order as it may deem fit.

At what point of time the Application for extension of Stay should be made?

In view of the specific language of the second proviso to sec. 254(2A), it is desirable that the Application for extension of Stay or granting fresh Stay is made well in time before the expiry of the six months period.

If appeals for more than one year are pending before ITAT, is the assessee required to make separate Stay Application for each year?

On a combined reading of the provisions of section 253 of the Act read with rule 35A(1) of the Appellate Rule, a view can be taken that there is no requirement, in so far as Stay petitions are concerned, for separate Application in respect of each appeal or assessment year. A single Application can be filed as long as the demands pertain to one and the same enactment. A useful reference can be made to the Mumbai Tribunal decision in the case of Chiranjilal S. Goenka vs. WTO [(2000) 66 TTJ (Mum) 728].

What is the remedy available to assessee in case of rejection of Stay or grant of conditional Stay by ITAT?

The remedies as discussed while answering Question 6, to the extent applicable, apply here also.

If the exercise of the discretion is found to be not in accordance with the well settled judicial norms and parameters, the High Court, in its inherent extraordinary jurisdiction under Article 226 of the Constitution, may intervene and correct the judicial lapse caused by such order and give appropriate relief and direction to meet the exigencies, including directing the concerned authority to pass a fresh order in accordance with such norms and parameters.

Can assessee directly approach ITAT with the Stay Application or is he required to first approach lower authorities with Stay Application before approaching the Tribunal?

As Tribunal has inherent jurisdiction to entertain Stay Application when an appeal is pending before it, it is irrelevant whether the applicant has exhausted the remedies at the lower stage or not. At the same time, there is no specific provision or bar in the Act or in the Rules putting any restriction on exercise of such inherent power without obtaining rejection letter of CIT. In fact, there are many decisions of High Courts and Tribunals which have gone to the extent of observing that the Tribunal having inherent power to grant Stay, it will be failing in its duty if it refuses to exercise this power till CIT is not approached.

However, as far as the Mumbai Bench of ITAT is concerned, in the case of RPG Enterprises (supra), the Bench, though recognised the unfettered powers of the Tribunal in the matter of entertaining Stay Applications and disposal thereof, has opined that obtaining rejection letter from CIT has been a recognised practice for two reasons:

A.

B.

As such, as far as Mumbai Bench of ITAT is concerned, normally, rejection letter of the CIT is insisted upon before a Stay Application is taken up for hearing. However, in exceptional circumstances, such Stay Application can be taken up for hearing without waiting for rejection letter from CIT if, for example, the department is not responding to the urgency and, at the same time, is going ahead with coercive recovery proceedings. In such a situation, either the Tribunal can go ahead with the Stay Application filed before it or it can direct the concerned CIT to dispose of the Stay Application filed by the applicant before it and, pending that, the Tribunal may grant interim Stay.

Whether the CIT (A) has power to grant Stay of recovery? If yes, do they exercise this power in actual practice?

It is now a firmly laid down legal position that right of appeal granted to a subject is to be constructed liberally and is required to be given liberal interpretation since it is remedial in nature. In view of this, though mere filing or pendency of an appeal does not constitute an automatic Stay of the order under challenge or of recovery of the tax under dispute in such appeal, the first appellate authority has inherent and incidental power, for effective exercise of the appellate power, to grant Stay of collection of tax pending disposal of the appeal before him.

This is an independent and inherent power to grant Stay pending the appeal, independent of the power of the assessing authority under section 220(6) to treat the assessee as not in default pending the appeal. This position is based on the reasoning that the appellate jurisdiction conferred to the first appellate authority u/s. 251 of the Act impliedly grants power of doing all such acts or employing such means as are essentially necessary for its effective exercise and such statutory conferment of the appellate power carries with it the duty and the obligation as well, in proper cases, to make or grant orders for Stay of the order under challenge in appeal or Staying of any or all further proceedings pursuant to the said order, pending disposal of the appeal before the said appellate authority. The fact that the powers have been conferred on the Assessing Officer under section 220(6) and / or on the Tax Recovery Officer under section 225(1) is no substitute to the power of Stay vested in the appellate authority, which power is a necessary adjunct to the very powers of the appellate authority. Some of the judicial pronouncements on this issue are:

1. Prem Prakash Tripathi vs. CIT [(1994) 208 ITR 461, 463- 64 (All)]

2. Paulsons Litho Works vs. ITO [(1994) 208 ITR 676, 689 (Mad)]

3. Tin Mfg. Co. of India vs. CIT [(1995) 212 ITR 451, 452 (All)]

4. Bongaigaon Refinery vs. CIT [(1999) 239 ITR 871, 873 (Gauh)]

Unfortunately, it seems that this well-settled legal position, approved and accepted by many courts, is not recognized or respected by the first appellate authorities as one hardly comes across a case where such power is exercised by a first appellate authority.