Principal Commissioner Of Income Tax Central I v. M/S.kishanlal & Sons (Huf)

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.07.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.444 of 2019 Principal Commissioner of Income Tax Central I,No.108, Mahatma Gandhi Road,Chennai-600 034. .. Appellant/Respondent -vs- M/s.Kishanlal & Sons (HUF),No.41/23, Kutchery Road,Mylapore, Chennai-600 004.PAN: AAKPK 7263K.. Respondent/Appellant Appeal under Section 260A of the Income-tax Act, 1961against the order dated 14.09.2018 in S.P.No.276/Chny/2018 inI.T.A.No.2932/Chny/2017 on the file of the Income Tax AppellateTribunal 'C' Bench, Chennai, for the assessment year 2006-07,against the S.P.No.187/Chny/2018 dated 11.05.2018 SP No.333 &334 dated 22.12.17 agains the order of the Commissioner ofIncome Tax(Appeals) -19, Chennai-34 dated 11.10.17 in ITA No.88-14-15 against the order of the Deputy Commissioner of Income,Tax, Central Circle III (3), Chennai-34 dated 27.03.2014. This appeal by the Revenue, filed under Section 260A of theIncome-tax Act, 1961 (hereinafter referred to as “the Act”), isdirected against the order dated 14.09.2018, in a stay petitionfiled by the respondent/assessee in S.P.No.276/Chny/2018 in https://hcservices.ecourts.gov.in/hcservices/ I.T.A.No.2932/Chny/2017 on the file of the Income Tax AppellateTribunal 'C' Bench, Chennai (for brevity, “the Tribunal”), forthe assessment year 2006-07. 2.The Revenue has raised the following substantial questionsof law:-“i. Whether on the facts and in thecircumstances of the case, the ITAT was right inlaw in granting stay of recovery, till the debtdue to the assessee from his creditor is fullyrecovered by the department in satisfaction of itsarrear demand, which would have the effect of theITAT granting stay exceeding 180 days at astretch, is in violation of the first proviso toSec.254(2A) of the I.T.Act?ii. Whether the Appellate Tribunal was rightin directing the department to recover its duesfrom Shri. Dharmendra Bafna, when the said dues isunder litigation in a civil suit filed by himagainst the assessee is pending before the Hon'bleMadras High Court? iii. Whether the ITAT was legally justified indismissing the earlier two stay petitions filed bythe assessee, but by this impugned order grantingstay would amount reviewing its own order, whenthe ITAT is not vested with the authority toreview its own decision? iv. Whether the ITAT was correct in law indirecting the Revenue to lift the bank attachment,when as per the provisions of Sec.254(2A), theITAT has been endowed with the power only to grantstay?” 3.We have heard Mr.T.R.Senthil Kumar, learned SeniorStanding Counsel for the appellant/Revenue and Mr.R.Sivaraman,learned counsel accepting notice on behalf of therespondent/assessee. 4.It is submitted by Mr.T.R.Senthil Kumar, that the mainappeal,whichwasfiledbeforetheTribunalinI.T.A.No.2932/Chny/2017 along with other connected appeals wereallowed in favour of the respondent/assessee and by order dated20.12.2018, all the matters were remanded to the AssessingOfficer for fresh consideration/verification. As against thesaid order, the Revenue has filed T.C.A.No.365 of 2019, whichwas admitted by this Court on 17.06.2019. 5.It is further submitted that in respect of the otherappeals which pertain to one Shri C.Kishanlal, which were alsoallowed by the Tribunal, viz., I.T.A.Nos.2928, 2929, 2930 and https://hcservices.ecourts.gov.in/hcservices/ 2931/Chny/2017, for the assessment years 2006-07, 2006-07, 2006-07 and 2012-13 respectively, the Revenue has filed an appealbefore this Court against the order in I.T.A.No.2928/Chny/2017and the same is in the process of being numbered. Insofar asthe other appeals are concerned, those pertain to the orderspassed in the stay petitions. 5.It is further submitted that in respect of the otherappeals which pertain to one Shri C.Kishanlal, which were alsoallowed by the Tribunal, viz., I.T.A.Nos.2928, 2929, 2930 and https://hcservices.ecourts.gov.in/hcservices/ 2931/Chny/2017, for the assessment years 2006-07, 2006-07, 2006-07 and 2012-13 respectively, the Revenue has filed an appealbefore this Court against the order in I.T.A.No.2928/Chny/2017and the same is in the process of being numbered. Insofar asthe other appeals are concerned, those pertain to the orderspassed in the stay petitions. 6.In the light of the above submission, nothing furthersurvives to be adjudicated in this appeal rather the appealitself has become infructuous. Under normal circumstances, wewould have closed the appeal, but the manner in which theTribunal has passed the impugned order does not convince us todo so. 7.To be noted that the order impugned, before us in thisappeal, is an order passed by the Tribunal in the third staypetition filed by the assessee. The first stay petition wasdismissed by order dated 22.12.2017. The second stay petitionwas dismissed on 11.05.2018 and thereafter, the assessee filedthe third stay petition in S.P.No.276/Chny/2018. In the saidstay petition, the Tribunal by the impugned order granted stayof recovery of the disputed tax from the assessee grantingliberty to the Revenue to proceed with recovery of the disputedtax in respect of the assessee from the hands of the assessee'sdebtor Mr.Darmendra Bafna of M/s.Surana Corporation Ltd. 8.Mr.T.R.Senthil Kumar, pointed out that the Tribunal failedto note that the address of the debtor, viz., Mr.Darmendra Bafnaof M/s.Surana Corporation Ltd., furnished by the assessee is anincorrect address, as the notice sent under Section 226(3) ofthe Act returned with the postal endorsement “no such name inthis address” and the notice sent to the alternate address ofM/s.Surana Corporation Ltd., was returned with the postalendorsement “left”. Therefore, it is submitted that theassessee has misled the Tribunal in passing the impugned order. 9.We are rather surprised the manner in which the Tribunalhas issued directions in the stay petition, when the Tribunal ontwo earlier occasions, rejected the assessee's stay petitions onthe ground that the assessee has not shown any financialdifficulty to discharge the disputed tax liability, nor theassessee has shown a prima facie case in their favour. 10.The cardinal principle that should have been borne inmind by the Tribunal while granting an interim order is that theassessee should have made out a prima facie case; the balance ofconvenience should have been in his favour; and if stay is not https://hcservices.ecourts.gov.in/hcservices/ granted in favour of the assessee, he will be put to irreparablehardship. Unfortunately, the Tribunal did not address any ofthese grounds, which are mandatorily required to be addressed,while granting an interim order. That apart, the Tribunal didnot take note of its earlier orders wherein, the Tribunal hasspecifically recorded that the assessee has not shown anyfinancial difficulty, nor the assessee has made out a primafacie case. That apart, the Tribunal could not have directedrecovery of tax from Mr.Darmendra Bafna, who was not a party tothe proceedings before the Tribunal. If for any reason, theTribunal was of the view that the debt has to be recovered froma third party, it should have issued a notice to the thirdparty, heard the third party and then taken a decision. Thus,the procedure adopted by the Tribunal is wholly unknown to lawand is clearly illegal. 11.To say the least, the order is utterly perverse.Earlier, we have tested the correctness of conditional orders ofstay passed by the Tribunal at the instance of the assessees andmore often the Tribunal imposes conditions, at times veryonerous conditions, this Court had interfered in several cases.Surprisingly, the Tribunal in the impugned order took adifferent stand and directed recovery of the disputed tax from athird party who was not heard in the matter. Though the presentappeal has become infructuous, as the main appeal itself hasbeen disposed of by the Tribunal, we thought fit to make theabove observation so that the Tribunal in future, does notresort to passing such arbitrary and illegal orders. 12.Further, we note that the Tribunal while passing theimpugned order directed that the recoveries be effected from thethird party, till such time, the debt due to the assessee fromMr.Darmendra Bafna has not been fully recovered as against thedisputed demand against the assessee directing that there can beno enforcement or encashment of the assets of the assessee bythe Department. 13.As rightly contended by Mr.T.R.Senthil Kumar, thisdirection issued by the Tribunal goes beyond the time limitprescribed under the first proviso in Section 254(2A). Thiswill also make the impugned order as illegal. As we haveobserved that the appeal has become infructuous, butnevertheless, the impugned order can never be treated as aprecedent, nor such procedure can be resorted to by the Tribunalin any other matter. 14.With the above observations, this appeal stands closedand the substantial questions of law are left open. No costs. Sd/-Assistant Registrar(CCC)//True copy//Sub Assistant RegistrarabrTo1.The Deputy Commissioner of Income-tax, Central Circle III(3), Chennai.2.The Commissioner of Income-tax (Appeals)-19, 108, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034.3.The Income Tax Appellate Tribunal 'C' Bench, Chennai.+1cc to Mr.R.Sivaraman, Advocate SR.No.59876+1cc to Mr.T.R.Senthil Kumar, Advocate SR.No.59037T.C.A.No.444 of 2019PPA(CO)GMY(13/08/2019)