Ita/5/2016 Of Pr. Commissioner Of Income Tax Gurgaon v. M/S Carrier Air Conditioning And Refrigeration Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.5 of 2016 (O&M)Date of decision: 25.4.2006 Principal Commissioner of Income Tax, Gurgaon .....- Appe M/s Carrier Air Conditioning and Refrigeration Limited .... Responde CORAM: HON’BLE MR. JUSTICK AJAY KUMAR MITTALHON’ BLE MR. JUSTICEK DARSHAN SINGH 1. Whether Reporters of local papers may be allowed to see thejudgment? 2. To be referred to the Reporters or not?YES3. Whether the judgment should be reported in the Digest? Present:Mr. Tajender K.Joshi, Advocate for the appellant. Ajay Kumar Mittal,J. 1.This appeal has been preferred by the revenue under section260A of the Income Tax Act, 1961 (in short, “the Act’) against theorder dated 12.6.2015, Annexure A.II passed by the Income TaxAppellate Tribunal, Delhi Bench ‘I’ Delhi (in short, “the Tribunal’’) i SA No.337/DEL/2015 (in ITA No.1126/DEL/2014) for the assessment ITA No.5 of 2016 (O&M) year 2009-10, claiming following substantial questions of law:- DD “1. Whether the Hon'ble ITAT has acted in contravention ofthe Second Proviso of Section 254(2A) of the Income TaxAct, 1961 as the combined period of stay has exceeded365 days?the Second Proviso of Section 254(2A) of the Income TaxAct, 1961 as the combined period of stay has exceeded365 days? 2. Whether the order of the [TAT be treated as void ab initioin the light of third proviso to section 254(2A) of theIncome Tax Act, 1961, which provides that stay ofdemand stands vacated after expiry of a period of 365days even 1f delay in disposal of appeal is not attributableto the assessee?”in the light of third proviso to section 254(2A) of theIncome Tax Act, 1961, which provides that stay ofdemand stands vacated after expiry of a period of 365days even 1f delay in disposal of appeal is not attributableto the assessee?” A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assesseefurnished its return of income for the assessment year 2009-10declaring income of254,20,34,020/- on 29.9.2009. The case wasselected for scrutiny by issuing notice under section 143(2) of the Actto the assessee. Reference was made to the Transfer Pricing Officer(TPO) to determine the Arm's Length Price (ALP). The TPO passedorder under section 92CA(3) of the Act on 26.11.2012 and determinedthe Transfer Pricing adjustment at=a$,50,26,/05/-. Draft order waspassed on 12.12.2013 after making addition ofLV8,90,26,/05/- onaccount of transfer pricing adjustments and disallowance of=5,51,000/- on account of amount spent towards lease holdimprovement. Against the draft order, the assessee moved before theDispute Resolution Panel III], New Delhi. On 26.11.2013, the DisputeResolution Panel had given directions under section 144C(5) of the Act ITA No.5 of 2016 (O&M) ITA No.5 of 2016 (O&M) and accordingly, final assessment order under section 143(3) of the Actread with section 144C(13) of the Act was passed by the AssessingOfficer on 19.12.2013, Annexure A.1l at a total income of =62,26,72,260/- which includes addition of<a7,56,79,236/- on accountof transfer pricing adjustments and net disallowance of=a:,%1,%)))7;on account of amount spent towards lease hold improvement as perdirection of the Dispute Resolution Panel. Accordingly. a demand of|=4,23,82,230/- was raised. Aggrieved by the order, the assessee filedappeal before the Tribunal alongwith stay application. The stay wasoriginally granted on 6.6.2014 and further this stay was extended videorder dated 27.11.2014 upto 5.6.2015 or till the disposal of the appeal.Thus, period of 365 days of stay expired on 5.6.2015. The Tribunalvide order dated 12.6.2015, Annexure A.II further extended the stay foranother period of six months or till the disposal of the appeal relyingupon the judgment of the Delhi High Court inPepst Foods Pyt.Limited ys. ACIT and another,2015-TIOL-1306 HC-DEL-IT|According to the appellant-revenue, the decision of the Tribunal is notin accordance with law as it is contrary to the second and third provisosto section 254(2A) of the Act. Hence the instant appeal by the revenue.3.We have heard learned counsel for the appellant-revenue.4.It would be expedient to reproduce the relevant statutoryprovision 1.e. Section 254(2A) of the Act including its provisos, whichreads as under:- oD S4(2A). In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a periodof four years from the end of the financial year in which suchappeal is filed under sub-section (1) or sub-section (2) orsub-section (2A) of|section 253 Providedthat the Appellate Tribunal may, after consideringthe merits of the application made by the assessee, pass anorder of stay in any proceedings relating to an appeal filedunder sub-section (1) of|section 253, for a period notexceeding one hundred and eighty days from the date of suchorder and the Appellate Tribunal shall dispose of the appealwithin the said period of stay specified 1n that order: Provided furtherthat where such appeal is not so disposedof within the said period of stay as specified in the order ofstay, the Appellate Tribunal may, on an application made inthis behalf by the assessee and on being satisfied that thedelay in disposing of the appeal is not attributable to theassessee, extend the period of stay, or pass an order of stayfor a further period or periods as it thinks fit; so, however,that the aggregate of the period originally allowed and theperiod or periods so extended or allowed shall not, in anycase, exceed three hundred and sixty-five days and theAppellate Tribunal shall dispose of the appeal within theperiod or periods of stay so extended or allowed; Provided alsothat 1f such appeal is not so disposed ofwithin the period allowed under the first proviso or theperiod or periods extended or allowed under the secondproviso, which shall not, in any case, exceed three hundredand sixty-five days, the order of stay shall stand vacated afterthe expiry of such period or periods, even if the delay indisposing of the appeal 1s not attributable to the assessee.” 4.While interpreting the provisions of Section 35C(2A) of the Central Excise Act, 1944 which is pari materia to section 254(2A) ofthe Act, this Court in STA No.15 of 2015)(Commissioner of Central Excise, Rohtak vs. M/s Voice Telesystem)decided on 20.11.2016 afterconsidering the relevant case law on the point concluded that whereverthe appeal could not be decided by the Iribunal due to pressure ofpendency of cases and delay in the disposal of the appeal is notattributable to the assessee 1n any manner, the interim protection cancontinue beyond 365 days 1n deserving cases and recorded as under:- 4.While interpreting the provisions of Section 35C(2A) of the Central Excise Act, 1944 which is pari materia to section 254(2A) ofthe Act, this Court in STA No.15 of 2015)(Commissioner of Central Excise, Rohtak vs. M/s Voice Telesystem)decided on 20.11.2016 afterconsidering the relevant case law on the point concluded that whereverthe appeal could not be decided by the Iribunal due to pressure ofpendency of cases and delay in the disposal of the appeal is notattributable to the assessee 1n any manner, the interim protection cancontinue beyond 365 days 1n deserving cases and recorded as under:- “15. [n |Pepsi Foods Pyt. Limited now merged withPepsicoIndia Holding Pvt. Limited vs. Assistant Commissioner ofIncome Tax and another,2015-TIOL-1306 HC-DEL-IT,the challenge was to the constitutional validity of thirdproviso to Section 254(2A) of the Income Tax Act, 1961which was amended to mean that the Tribunal could notgrant any further extension of the stay after expiry of 365days even though the appeals filed by the assessee before theTribunal were pending and the delay in the disposal of theappeals was not on account of any conduct attributable to theassessee. After considering the relevant statutory provisionsand the case law on the point, it was held that the Tribunalhas the power to grant extension of stay beyond 365 days indeserving cases. The relevant observations recorded readthus:-India Holding Pvt. Limited vs. Assistant Commissioner ofIncome Tax and another,2015-TIOL-1306 HC-DEL-IT,the challenge was to the constitutional validity of thirdproviso to Section 254(2A) of the Income Tax Act, 1961which was amended to mean that the Tribunal could notgrant any further extension of the stay after expiry of 365days even though the appeals filed by the assessee before theTribunal were pending and the delay in the disposal of theappeals was not on account of any conduct attributable to theassessee. After considering the relevant statutory provisionsand the case law on the point, it was held that the Tribunalhas the power to grant extension of stay beyond 365 days indeserving cases. The relevant observations recorded readthus:- *“23.Keeping in mind the principles set out by the SupremCourt 1nDr Subramanian Swamy(supra), [(2014) 8SCC 682 (SC)| we need to examine whether the presentchallenge to the validity of the third proviso to Section254(2A) can be sustained. This is not a case ofexcessive delegation of powers and, therefore, we neednot bother about the second dimension of Article 14 inits application to legislation. We are here concernedwith the question of discrimination, based on animpermissible or invalid classification. It 1s abundantlyCourt 1nDr Subramanian Swamy(supra), [(2014) 8SCC 682 (SC)| we need to examine whether the presentchallenge to the validity of the third proviso to Section254(2A) can be sustained. This is not a case ofexcessive delegation of powers and, therefore, we neednot bother about the second dimension of Article 14 inits application to legislation. We are here concernedwith the question of discrimination, based on animpermissible or invalid classification. It 1s abundantly clear that the power granted to the Tribunal to hear andentertain an appeal and to pass orders would include theancillary power of the Tribunal to grant a stay. Ofcourse, the exercise of that power can be subjected tocertain conditions. In the present case, we find thatthere are several conditions which have been stipulated,First of all, as per the first proviso to Section 254(2A),a stay order could be passed for a period not exceeding180 days and the Tribunal should dispose of the appealwithin that period. The second proviso stipulates that incase the appeal is not disposed of within the period of180 days, 1f the delay in disposing of the appeal 1s notattributable to the assessee, the Tribunal has the powerto extend the stay for a period not exceeding 365 daysIn aggregate. Once again, the Tribunal is directed todispose of the appeal within the said period of stay. Thethird proviso, as it stands today, stipulates that if theappeal is not disposed of within the period of 365 days,then the order of stay shall stand vacated, even if thedelay in disposing of the appeal is not attributable tothe assessee. While 1t could be argued that the conditionthat the stay order could be extended beyond a periodof 180 days only if the delay 1n disposing of the appealwas not attributable to the assessee was a reasonablecondition on the power of the Tribunal to the grant anorder of stay, it can, by no stretch of imagination, beargued that where the assessee 1s not responsible for thedelay in the disposal of the appeal, yet the Tribunal hasno power to extend the stay beyond the period of 365days. The intention of the legislature, which has beenmade explicit by insertion of the words — “even 1f thedelay in disposing of the appeal is not attributable tothe assessee’— renders the right of appeal granted to theassessee by the statute to be illusory for no fault on the part of the assessee. The stay, which was available tohim prior to the 365 days having passed, 1s snatchedaway simply because the Tribunal has, for whateverreason, not attributable to the assessee, been unable todispose of the appeal. Take the case of delay beingcaused in the disposal of the appeal on the part of therevenue. Even in that case, the stay would stand vacatedon the expiry of 365 days. This 1s despite the fact thatthe stay was granted by the Tribunal, in the firstinstance, upon considering the prima facie merits of thecase through a reasoned order, 24. Furthermore, the petitioners are correct in _ theisubmission that unequals have been treated equally.Assessees who, after having obtained stay orders and bytheir conduct delay the appeal proceedings, have beentreated in the same manner in which assessees, whohave not, in any way, delayed the proceedings in theappeal. The two classes of assessees are distinct andcannot be clubbed together. This clubbing together hasled to hostile discrimination against the assessees towhom the delay is not attributable. It is for this reasonthat we find that the insertion of the expression — ‘evenif the delay in disposing of the appeal 1s not attributableto the assessee’— by virtue of the Finance Act, 2008,violates the non-discrimination clause of Article 14 ofthe Constitution of India. The object that appeals shouldbe heard expeditiously and that assesses should notmisuse the stay orders granted in their favour byadopting delaying tactics 1s not at all achieved by theprovision as it stands. On the contrary, the clubbingtogether of “well behaved’ assesses and those who causedelay in the appeal proceedings 1s itself violative ofArticle 14 of the Constitution and has no nexus orconnection with the object sought to be achieved. The said expression introduced by the Finance Act, 2008 1s,therefore, struck down as being violative of Article 14of the Constitution of India. This would revert us to theposition of law as interpreted by the Bombay HighCourt 1n Narang Overseas(supra), |(2007) 295 ITR 22(Bom.)| with which we are in full agreement,Consequently, we hold that, where the delay indisposing of the appeal is not attributable to theassessee, the Tribunal has the power to grant extensionof stay beyond 365 days in deserving cases. The writpetitions are allowed as above.” 16. The Apex Court inCommissioner of Customs & CentralExcise, Ahmedabad vs. Kumar Cotton Mills Pvt. Limited,(2005) 180 ELT 434, interpreting sub section 2A of Section35C of the Act as introduced on 11.5.2002 had noticed asunder:-Excise, Ahmedabad vs. Kumar Cotton Mills Pvt. Limited,(2005) 180 ELT 434, interpreting sub section 2A of Section35C of the Act as introduced on 11.5.2002 had noticed asunder:- “6 The sub section which was introduced in terrorem|cannot be construed as punishing the assessees formatters which may be completely beyond their control.For example, many of the Tribunals are not constitutedand it 1s not possible for such Tribunals to dispose ofmatters. Occasionally by reason of other administrativeexigencies for which the assessee cannot be held lable,the stay applications are not disposed within the timespecified. The reasoning of the Tribunal expressed inthe impugned order and as expressed in the LargerBench matter namely IPCL vs. Commissioner of CentralExcise, Vadodara (supra) cannot be faulted. However,we should not be understood as holding that any latitudeis given to the Tribunal to extend the period of stayexcept on good cause and only if the Tribunal issatisfied that the matter could not be heard and disposedof by reason of the fault of the Tribunal for reasons notcannot be construed as punishing the assessees formatters which may be completely beyond their control.For example, many of the Tribunals are not constitutedand it 1s not possible for such Tribunals to dispose ofmatters. Occasionally by reason of other administrativeexigencies for which the assessee cannot be held lable,the stay applications are not disposed within the timespecified. The reasoning of the Tribunal expressed inthe impugned order and as expressed in the LargerBench matter namely IPCL vs. Commissioner of CentralExcise, Vadodara (supra) cannot be faulted. However,we should not be understood as holding that any latitudeis given to the Tribunal to extend the period of stayexcept on good cause and only if the Tribunal issatisfied that the matter could not be heard and disposedof by reason of the fault of the Tribunal for reasons not attributable to the assessee.’’ 17. In view of the above, the question posed in para 5 above isanswered in the affirmative. Accordingly, it would be concludedthat wherever the appeal could not be decided by the Tribunaldue to pressure of pendency of cases and the delay in disposalof the appeal is not attributable to the assessee in any manner,the interim protection can continue beyond 365 days indeserving cases.”answered in the affirmative. Accordingly, it would be concludedthat wherever the appeal could not be decided by the Tribunaldue to pressure of pendency of cases and the delay in disposalof the appeal is not attributable to the assessee in any manner,the interim protection can continue beyond 365 days indeserving cases.” 6.In view of the above position of law, we do not find anyerror in the order passed by the Tribunal. Thus, no substantial questionof law arises. The appeal stands dismissed. (Ajay Kumar Mittal) Judge April 25, 2016 (Darshan Singh)Judge