M/S.royal Sundaram General Insurance Co. Ltd., Chennai-2 v. The Deputy Commissioner Of Income Tax, Large Tax Payer Unit-1, Chennai-34

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 26.7.2019 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAM The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.494 & 498 to 500 of 2019 &CMP.Nos.15353, 15366, 15368, 15379 & 15382 to 15384 of 2019 M/s.Royal Sundaram GeneralInsurance Co. Ltd., Chennai-2...Appellant/ Petitioner VsThe Deputy Commissioner of Income Tax, Large Tax Payer Unit-1, Chennai-34....Respondent/ Respondent APPEALS under Section 260A of the Income Tax Act, 1961to set aside the common order dated 08.2.2019 maderespectively in MA.Nos.61, 62, 63 and 58/Chny/2018 on thefile of the Income Tax Appellate Tribunal, Chennai 'D'Bench for the assessment years 2012-13, 2013-14, 2014-15and 2010-11 respectively. Against the order dated 12.01.2018 these stay Petitionsare filed by the Appellant made in ITA.NOs.86 TO 89&90 TO93/mds/2018 for the AYS 2008-09 TO 2011-2012&2011-2012 TO2014-15 on the file of the Deputy Commissioner of IncomeTax,Lage Tax Payer Unit I,in PAN.AABCR 7106 G. COMMON JUDGMENT(Judgment was delivered by T.S.Sivagnanam,J) These appeals, filed by the assessee under Section 260Aof the Income Tax Act, 1961 (for short, the Act), aredirected against the common order dated 08.2.2019 made https://hcservices.ecourts.gov.in/hcservices/ respectively in MA.Nos.61, 62, 63 and 58/ Chny/2018 on thefile of the Income Tax Appellate Tribunal, Chennai 'D'Bench for the assessment years 2012-13, 2013-14, 2014-15and 2010-11 respectively. The said miscellaneousapplications were filed by the assessee to modify the stayorder passed by the Tribunal in S.P.Nos.1 to 8/Mds/2018dated 12.1.2018.2. The assessee challenged the assessments for the years2008-09 to 2014-15 after having been unsuccessful beforethe Commissioner of Income Tax (Appeals). Before theTribunal, along with the appeals, the assessee filedpetitions praying for stay of the demand for all theassessment years. 3. To substantiate a prima facie case before theTribunal, the assessee contended that substantial portionof the disallowance was on the payments made to motorvehicle dealers, that the demand itself is nearly to anextent of Rs.200 Crores for all the seven assessment yearsand that the assessee has got an excellent case on meritsin the main appeals. The assessee relied upon certaindecisions of this Court rendered in respect of otherinsurance companies carrying on identical business, which,according to the assessee, had attained finality, as theRevenue did not file any appeals before the Hon'ble SupremeCourt. Thus, it was contended that the balance ofconvenience was in favour of the assessee and if an orderof stay of the demand was not granted, the assessee wouldbe put to irreparable hardship. 4. The Tribunal, after hearing the assessee, granted aconditional order of stay on 12.1.2018 directing theassessee to pay a sum of Rs.7 Crores per month and first ofsuch instalment was directed to be made on or before16.1.2018. The assessee, after complying with the conditionby paying three instalments as directed by the Tribunal,filed a petition under Section 254(2) of the Act contendingthat they were facing hardship in running the business andthat the condition for payment of Rs.7 Crores was onerousand prayed that the condition may be modified and that theoutstanding demand be stayed till the disposal of theappeals with a further prayer to hear the appeals at theearliest. 4. The Tribunal, after hearing the assessee, granted aconditional order of stay on 12.1.2018 directing theassessee to pay a sum of Rs.7 Crores per month and first ofsuch instalment was directed to be made on or before16.1.2018. The assessee, after complying with the conditionby paying three instalments as directed by the Tribunal,filed a petition under Section 254(2) of the Act contendingthat they were facing hardship in running the business andthat the condition for payment of Rs.7 Crores was onerousand prayed that the condition may be modified and that theoutstanding demand be stayed till the disposal of theappeals with a further prayer to hear the appeals at theearliest. 5. The petitions filed under Section 254(2) of the Actwere pending before the Tribunal since April 2018. In themeanwhile, the assessee filed fresh stay petitions beforethe Tribunal and they were dismissed by the Tribunal by acommon order dated 26.10.2018. Challenging the common orderdated 26.10.2018, the assessee filed writ petitions inW.P.No.29564 of 2018 etc. cases. Those writ petitions wereheard by a Division Bench of this Court, to which, one ofus (TSSJ) was a party and by a common order dated 12.11.2018, the said writ petitions were dismissed on theground that the assessee had abruptly stopped complyingwith the conditional stay order passed by the Tribunaldated 12.1.2018 and that their conduct in filing fresh staypetitions was not appreciated. 6. During the course of hearing of the said writpetitions, it was brought to the notice of this Court thatthe assessee filed petitions for modification of the orderdated 12.1.2018 and that the same were pending before theTribunal. While refraining from making any observations,this Court left it open to the assessee to pursue theirclaim before the Tribunal. Thus, it appears that theassessee went before the Tribunal and sought for orders inthe petitions filed under Section 254(2) of the Act, whichwere pending since April 2018. However, the Tribunal, bythe impugned common order dated 08.2.2019, dismissed thepetitions on the ground that there was no error pointed outin the order of the Tribunal dated 12.1.2018 and that thestay order not being passed under Section 254(1) of theAct, the petitions for modification/rectification underSection 254(2) of the Act would not lie. 7. The assessee has filed these appeals raising thefollowing substantial questions of law : “i. Whether the Tribunal was rightin law in holding that stay order isnot an order passed under Section 254(1) of the Income Tax Act, 1961 and themiscellaneous application under Section254(2) does not lie in respect of anorder in respect of stay petition ?ii. Whether the Tribunal ought tohave appreciated that the order of staypassed by it is an order of theTribunal and therefore, ought to haveheld that the Tribunal had the inherentpower to rectify/alter/modify its ownorder and consequently entertained themiscellaneous application and pass asuitable order of stay of collection oftax ? Andiii. On the facts and circumstancesof the case and the decision of theCoordinate Bench/High Court in respectof the issues and the quantum ofpayment made by the assessee, whetherthe Tribunal ought to have held thatbalance of convenience is in favour ofthe appellant and therefore, shouldhave granted stay of collection of tax till the disposal of the appeal? ” 8. We have elaborately heard Mr.Vijayaraghavan, learnedcounsel appearing for the appellant and Mr.M.Swaminathan,learned Senior Standing Counsel and Mrs.V.Pushpa, learnedStanding Counsel accepting notice for the respondent andcarefully perused the materials on record. 9. The issue to be considered is as to whether theTribunal was right in rejecting the applications filed bythe assessee under Section 254(2) of the Act as notmaintainable. till the disposal of the appeal? ” 8. We have elaborately heard Mr.Vijayaraghavan, learnedcounsel appearing for the appellant and Mr.M.Swaminathan,learned Senior Standing Counsel and Mrs.V.Pushpa, learnedStanding Counsel accepting notice for the respondent andcarefully perused the materials on record. 9. The issue to be considered is as to whether theTribunal was right in rejecting the applications filed bythe assessee under Section 254(2) of the Act as notmaintainable. 10. We need not labour much to take a decision on thesaid issue, as we are guided by the decision in the case ofITO Vs. M.K.Mohammed Kunhi [reported in (1969) 71 ITR0815], in which, the Hon'ble Supreme Court dealt with thepowers of the Tribunal under Sections 254 and 255 of theAct and held as follows : “It may also be that as a matter ofpractice prevailing in the departmentthe Commissioner or the InspectingAssistant Commissioner in exercise ofadministrative powers can give thenecessary relief of staying recovery tothe assessee but that can hardly be putat par with a statutory power as iscontained in Section 220(6) which isconfined only to the stage of pendencyof an appeal before the AppellateAssistant Commissioner. The argumentadvanced on behalf of the appellantbefore us that in the absence of anyexpress provisions in Sections 254 and255 of the Act relating to stay ofrecovery during the pendency of anappeal it must be held that no suchpower can be exercised by the Tribunal,suffers from a fundamental infirmityinasmuch as it assumes and proceeds onthe premise that the statute conferssuch a power on the Income-tax Officerwho can give the necessary relief to anassessee. The right of appeal is asubstantive right and the questions offact and law are at large and are opento review by the Appellate Tribunal.Indeed the Tribunal has been given verywide powers under Section 254(1) for itmay pass such orders as it thinks fitafter giving full hearing to both theparties to the appeal. If the Income-taxOfficer and the Appellate Assistant Commissioner have made assessments orimposed penalties raising very largedemands and if the Appellate Tribunal isentirely helpless in the matter of stayor recovery the entire purpose of theappeal can be defeated if ultimately theorders of the departmental authoritiesare set aside. It is difficult toconceive that the Legislature shouldhave left the entire matter to theadministrative authorities to make suchorders as they choose to pass inexercise of unfettered discretion. Theassessee, as has been pointed outbefore, has no right to even move anapplication when an appeal is pendingbefore the Appellate Tribunal underSection 220(6) and it is only at theearlier stage of appeal before theAppellate Assistant Commissioner thatthe statute provides for such a matterbeing dealt with by the Income-taxOfficer. It is a firmly established rulethat an express grant of statutory.power carries with it by necessaryimplication the authority to use allreasonable means to make such granteffective(SutherlandStatutoryConstruction, Third Edition, Arts. 5401and 5402). The powers which have beenconferred by Section 254 on theAppellate Tribunal with widest possibleamplitude must carry with them bynecessary implication all powers andduties incidental and necessary to makethe exercise of those powers, fullyeffective.” 11. As held in the said decision, the powers, which havebeen conferred on the Tribunal under Section 254 of the Actshould be interpreted in the widest possible amplitude andit has to be held that by necessary implication, all powersand duties incidental and necessary to make the exercise ofthose powers fully effective, are conferred on theTribunal. Therefore, we do not agree with the finding ofthe Tribunal that it has no jurisdiction to consider therelief sought for by the assessee. 11. As held in the said decision, the powers, which havebeen conferred on the Tribunal under Section 254 of the Actshould be interpreted in the widest possible amplitude andit has to be held that by necessary implication, all powersand duties incidental and necessary to make the exercise ofthose powers fully effective, are conferred on theTribunal. Therefore, we do not agree with the finding ofthe Tribunal that it has no jurisdiction to consider therelief sought for by the assessee. 12. Under normal circumstances, we would have been welljustified in interfering with the order impugned before usand remanding the matter to the Tribunal for a decision onmerits. However, the subsequent events, which have take place post April 2018 and after the common order dated12.11.2018 in W.P.No.29564 of 2018 etc. cases, preclude usfrom doing so and we propose to dispose of the appeals. 13. It is brought to our notice by the learned counselfor the appellant that after the said writ petitions weredismissed by a common order dated 12.11.2018, the assesseecomplied with the direction issued by the Tribunal in itsorder dated 12.1.2018, though not within the timestipulated therein. As of now, the entire demand of taxnamely Rs.22,305.89 lakhs for all the seven assessmentyears has been paid. 14. The learned Senior Standing Counsel for the Revenuepoints out that though the assessee claims to have paid theentire demand of tax, the interest amount still remainsunpaid. 15. It is true that the demand for interest and thedemand for payment of penalty cannot be placed on the samepedestal, as, in several Statutes, payment of interestwould be automatic. However, considering the fact that theentire demand of tax has been paid by the assessee postNovember 2018, we are of the considered view that thebalance of demand should remain stayed till the appeals areheard and disposed of by the Tribunal. 16. In order to establish a good case on merits in themain appeals, the learned counsel appearing for theassessee has referred to a communication sent by theChairman of the Insurance Regulatory and DevelopmentAuthority of India to the Chairperson, Central Board ofExcise and Customs dated 12.8.2015. He has submitted that aDivision Bench of this Court, in a case arising undersimilar circumstances in respect of another insurancecompany, had given relief to the assessee, that certaindecisions fully support the case of the assessee and thatthe assessee has got a fair chance of success before theTribunal in the main appeals. 17. Considering the fact that the demand of tax andinterest is substantial and the fact that the assesseecomplied with the direction issued by the Tribunal, we areof the view that the balance amount as demanded for theseven assessment years shall remain stayed. For the abovereasons, we are also of the view that the common orderpassed by the Tribunal calls for interference. 18. In the result, the above tax case appeals areallowed, the common order passed by the Tribunal is setaside and there will be an order of stay of the remainingamount as demanded from the assessee in respect of all theseven assessment years. The substantial questions of laware answered in favour of the assessee. No costs.Consequently, the connected CMPs are closed. 19. We are informed that the main appeals are listed before the Tribunal during September 2019. 20. As observed by us earlier, since the demand issubstantial and since the assessee has paid the entire taxand claims that there are two decisions in their favour andin view of the fact that the issue raised by the AssessingOfficer being a recurrent issue, we request the Tribunal toconsider and dispose of the main appeals at the earliest. Sd/- Assistant Registrar(CS) //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Madras 'D' Bench. 19. We are informed that the main appeals are listed before the Tribunal during September 2019. 20. As observed by us earlier, since the demand issubstantial and since the assessee has paid the entire taxand claims that there are two decisions in their favour andin view of the fact that the issue raised by the AssessingOfficer being a recurrent issue, we request the Tribunal toconsider and dispose of the main appeals at the earliest. Sd/- Assistant Registrar(CS) //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Madras 'D' Bench. 2.The Deputy Commissioner of Income Tax, Large Tax PayerUnit-1, Chennai-34. +1cc to Mr.Subbraya Aiyar Padmanabahan , Advocate SR.No.64147 +1cc to Mr.M.Swaminathan , Advocate SR.No. 64102 TCA.Nos.494 & 498 to 500/2019 &CMP.Nos.15353, 15366, 15368, 15379 & 15382 to 15384/2019 A.SK(22/10/2019)