By TIOL News Service

MUMBAI, APRIL 06, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether commencement of final hearing of appeal by CIT(A) will prevent him from taking up the stay application and passing an order thereon. YES IS THE VERDICT.

Facts of the case:

The Assessee-trust, devoted towards development of Shirdi village, had preferred the present petition challenging the method and the procedure adopted by CIT(A) in dealing with the Assessee's appeal filed u/s 246A. The said appeal was filed from the order dated 31st December, 2017 of the DCIT(E), in respect of AY 2015-16. The Assessee contended that the CIT(A) after having finally heard the Assessee on the merits of its appeal, instead of disposing of the appeal, sought to set the clock back and pass an order on the Assessee's stay application. The said action on the part of the CIT(A) was without any basis in law, particularly, in the absence of any statutory requirement under the Act, of the tax demanded being paid or pre-deposited before the appeal could be entertained or considered on merits.

High Court held that,

++ the allegations with regard to the CIT(A) mentioning of incorrect dates in the order sheet and the office of the CIT[E] threatening to attach the Assessee's bank account and reopen assessments for the last two years in case it fails to deposit the amount of Rs. 20 Crores before 31st March, 2018, is, indeed very serious, particularly, when the AO/CIT[E] could have dealt with the request of deposit by passing an order on the application u/s 220(6) filed by the Assessee. In the absence of denial on affidavit by the CIT(A) and CIT[E], the allegations in the petition cannot be discarded. Although in effect, the Counsel for the Revenue has disputed the allegations by stating that if the date was wrongly mentioned there was no compulsion to sign the same. This Court could have asked for a response from the CIT(A) and CIT[E] to the allegations in the petition. However, it would be best if the CBDT carry out the necessary investigation on the said allegations and if there is truth in it, it would take corrective action on the same. This is particularly because this conduct alleged on the part of the CIT(A) and the office of the CIT[E] appears to be an aberration, as normally this Court have noted that the officers Revenue do administer the Act with fairness and with loyalty to the Act. Therefore, if the allegation in the petition are correct, then such failures on the part of its Officers needs to be corrected by the CBDT before it becomes the norm;

++ in terms of Sec. 246A any person aggrieved by an order passed in regular assessment proceedings u/s 143(3), is entitled to challenge it before the CIT(A). This challenge in appeal is not circumscribed by any requirement to predeposit and/or paying the amounts demanded, as a consequence of the order. Therefore, the CIT(A) is obliged to entertain and dispose of the appeal before him on merits without any regard to the fact that the amounts demanded have been paid/deposited or not paid/deposited by the Assessee before him. Admittedly no order u/s 220(6) has been passed by the AO or by the CIT[E]. There is no power bestowed upon the CIT(A) under the Act to stay the demand arising consequent to the order in appeal before him. In fact the power to stay such a demand has been bestowed upon the AO u/s 220(6) by not treating the Assessee in default where an appeal is awaiting final disposal before the CIT(A) on such conditions as the facts and circumstances of the case may warrant. Nevertheless, the CIT(A) as an appellate authority, has inherent powers of an Appellate Authority to do all things necessary to make the appellate powers effective. This would includes a power to stay the effect of the said order before the appellate authority till the disposal of the appeal before it. However, this necessity of exercising inherent power of staying the order challenged before the appellate authority comes to an end, when the appellant has been heard finally on merits of its appeal;

++ the Assessee had filed an appeal to the CIT(A) in addition to an application for stay seeking exercise of inherent powers of the CIT(A), as the order was contrary to the binding decisions of the Tribunal. In response, the Assessee received a communication from the office of CIT(A) that the hearing of the appeal is fixed. Consequent to the same, the Assessee attended the hearing and made submission and at the conclusion of hearing, an order sheet was also signed indicating that the hearing of the appeal was completed. However, inspite of the conclusion of hearing of the appeal, the CIT(A) sought to hear the Assessee on its stay application leading to a conditional stay on certain amounts being paid to the Revenue. Once the hearing on the appeal is concluded, then the stay application as filed becomes infructuous as the appeal itself would stand disposed of by an appropriate order of the CIT(A). The submission on behalf of the Revenue that mere commencement of final hearing of the appeal by the CIT(A) will not prevent him from taking up the stay application and passing an order thereon is in the present facts without merit. In the present facts, it is only the case of application of law and no factual investigation is felt necessary by the CIT(A) which would justify his taking up the stay application for hearing after having concluded the hearing on the merits of the Assessee's appeal;

++ the entire exercise of taking up stay application, even after the appeal was heard, was only done so as to collect some revenue before 31st March, 2018. Therefore, this appears to be a blatant attempt to retrace his steps by the CIT(A) only to collect revenue before 31st March, 2018. In fact, even if an order is passed on the appeal by the CIT(A) finding the submission of the Assessee not acceptable, either wholly or partly, it would result in the demand being sustained wholly or in part, which could then be collected in accordance with law. But the entire exercise, here, appears to be only to assist the Revenue to collect some amount of taxes prior to 31st. March 2018. This is certainly not expected of an Appellate Authority such as the CIT(A) who adjudicates disputes between the Revenue and the Assessee on a regular basis. The CIT(A) must not only be fair but appear to be so, in a country governed by Rule of law. In the absence of the same, the alternative remedy provided under the Act would be illusory leading to entertaining writ petitions by this Court, even if an alternative remedy is provided under the Act.

(See 2018-TIOL-627-HC-MUM-IT)