ORDER
1. By this petition, the assessee, a partnership firm, seeks stay of collection of outstanding demand of Rs. 52,98,772, pending disposal of the appeal.
2. The learned Counsel appearing on behalf of the assessee explained the brief facts of the case to submit that the balance of convenience is in favour of granting stay of collection of demand, and at the same time stressed the need to consider a legal issue raised for the first time with regard to the power of the Appellate Tribunal to grant stay on each occasion, in respect of a matter which arises out of the proceedings initiated by the Assessing Officer prior to 1.6.2001. It may be noticed that the statute confers power upon the Appellate Tribunal to grant stay of collection of outstanding demand under Section 254 of the Income Tax Act. Provisos to Section 254(2A) were inserted by the Finance Act 2001 with effect from 1.6.2001, whereby the power to grant stay, on each occasion, was restricted to a maximum period of 180 days, as upon the expiry of that period, the stay order shall stand automatically vacated. According to the learned Counsel, prior to insertion of the aforementioned provisos, the Tribunal enjoyed unbridled power to grant absolute stay. Clarifying the statement, the learned Counsel submitted that Section 253(6) was amended by the Finance Act, 1998 with effect from 1.10.1998, to enhance the appeal fee payable to the Tribunal at the time of filing of appeal, by an assessee, and the legislature used the following express language-
253.(1)…
(2) to (5)…
(6) an appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of October, 1998, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of .-
(a)to(d)…
Proviso….
(Emphasis supplied)
The legislature has expressly stated that the amendment should be applied to an appeal made on or after 1.10.1998, “irrespective of the date of initiation of the assessment proceedings. In the absence of such express retrospective operation and express reference to the date of initiation of the assessment proceedings in Section 254(2A), the restriction on the powers of the Tribunal to grant absolute stay comes into operation only in respect of appeals which arise out of assessment proceedings initiated after 1.6.2001. In the instant case, the assessment proceedings have commenced on 25.4.2001 i.e., the date on which the first hearing notice was issued by the Assessing Officer. The Tribunal, therefore, enjoyed power, in this case, to grant absolute and unconditional stay of outstanding demand.
3. The case of the assessee has a chequered history. A Stay Petition numbered as 17/Hyd/04 was filed by the assessee seeking stay of collection of outstanding demand pending disposal of the impugned appeal, namely, ITA No. 61/Hyd/04, and the Appellate Tribunal granted conditional stay, vide order dated 27.2.2004. Pursuant to the order passed therein, the assessee deposited an amount of Rs. 5-lakhs on 25th March, 2004. On a Miscellaneous Petition filed by the assessee, the Tribunal clarified that Rs. 5-lakhs is payable for both the assessment years, viz. Assessment Year 1999-2000 and 2000-01 put together (vide order dated 25.6.2004 in M.P.No. s 8 and 9/Hyd/04). Upon expiry of a period of 180 days from the date of passing of the order on the above Stay Petition, the assessee moved another Stay Petition, which was numbered as S.P.No. 181/Hyd/04. Vide order dated 20.12.2004, the Appellate Tribunal disposed of this Stay Petition, by directing the assessee to pay Rs. 10-lakhs on or before 31.12.2004, and the balance outstanding amount in instalments of Rs. 5-lakhs per month. Aggrieved by this order, the assessee filed a Writ Petition before the Hon’ble High Court of Andhra Pradesh. The said W.P. was numbered W.P.No. 24335 of 2004. The Hon’ble High Court, vide orders dated 28.12.2004, was pleased to reduce the first instalment (payable on or before 31.12.2004) from Rs. 10-lakhs to Rs. 5-lakh, but directed that the assessee should pay Rs. 5-lakhs per month starting from January, 2005 onwards, till the impugned appeal is disposed of. Thereafter, the assessee filed a separate Stay Petition, which was numbered as S.P.No. 74/Hyd/05, seeking absolute stay of collection of outstanding demand. The Tribunal vide order dated 16.5.2005, dismissed the said Stay petition, observing in paras 6 and 8 of its order as under-
6. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, we are of the considered opinion that once the Hon’ble High Court has modified the order of the Tribunal, directing the assessee to continue to pay instalment of Rs. 5-lakhs per month, it is no more open for this Bench to take contrary view and grant further relief to the assessee as the facts and circumstances of the case has not undergone a change. While the order of this Bench dated 20.12.2004 in S.P.No. l81/Hyd/2004 as modified by the Hon’ble A.P. High Court in 24335/2004 is in operation, we deem it fit not to interfere in the same, as it is not demonstrated before us that there is a change in the facts and circumstances between the date of the order of the Hon’ble A.P. High Court and today.
7…
8. On this factual position of the matter and especially in view of the judgment of the Hon’ble High Court of A.P. in W.P.No. 24335/2004, we dismiss this stay petition field by the assessee. We reiterate that the earlier order of the Tribunal as modified by the Hon’ble High Court would continue to remain in operation. Order accordingly.
At this juncture, the assessee filed a Miscellaneous Petition, being M.P.No. 69/Hyd/05, against the first order passed by the Appellate Tribunal (order dated 27.2.2004 in S.P.No. 17/Hyd/04), contending, inter alia, that the Appellate Tribunal has power to grant absolute stay, i.e. without restricting it to a time frame, and thus, the original order of the Tribunal stands. Assumption by the Tribunal that the order passed on 27.2.2004 gets vacated after a period of 180-days, gives rise to a mistake apparent from record. The Appellate Tribunal dismissed the said petition on the ground that there is no mistake apparent from record. Under these circumstances, the assessee filed the present stay petition, which is numbered as S. P. No. 105/Hyd/05.
4. The learned Counsel submitted that the order passed on 27.2.2004 and the terms of stay granted therein are still operational and valid and that order is not circumscribed by the time frame provided in the second proviso to Section 254(2A) of the Act, in view of the fact that the assessment proceedings in the instant case have commenced on 25-4-01, whereas second proviso was introduced with effect from 1.6.2001, and is applicable to those appeals in which assessment proceedings were commenced after 1.6.2001. It was only due to mistaken impression of the assessee, and its counsel, a second stay petition was filed, and the Appellate Tribunal was also led away by the same mistaken impression, that it has no power to grant stay beyond the period of 180 days, particularly in view of the fact that the assessee himself filed a Second Stay Petition. From the following extract taken from the written submissions of the learned Counsel for the assessee, the case of the assessee can be appreciated.
…The Supreme Court and the Andhra Pradesh High Court (the jurisdictional High Court) have held that any amendment relating to appeal procedure which works adversely against an assessee should be made applicable to an assessee in respect of appeals arising out of assessment proceedings initiated after the date of the amendment. In the present case the date on which the appeal provision was amended (to the detriment of the assessee) was 1.6.2001. The amendment operates adversely against the assessee because under the pre-amended law once a stay was granted by the tribunal under Section 254 (1) it never got vacated until the main appeal was disposed of. But according to the amendment made w.e.f. 1.6.2001 a stay order “shall stand vacated” after 180 days of the granting of the stay. This amendment is injurious to the assessee. This injurious amendment cannot be forced on an assessee who acquired a vested right to follow the un- amended appeal procedure. The right to make use of an existing appeal procedure which is favourable to an assessee is a substantive right (but not a procedural right). Such substantive right gets vested in a person as soon as “lis” (proceedings or litigation) starts in an inferior court. In the income tax context, The “lis ” starts as soon as an A.O. issues the first hearing notice under Section 143(2). If that dale of issue of the hearing notice issued by the A.O. is before 1.6.2001 then the pre-amended provisions of Section 254 will continue to apply to such an assessee. Even if an assessee files an appeal (before the tribunal) after 1.6.2001 or even if he files a stay petition after 1.6.2001, the two provisos to Section 254(2-A) cannot be applied to such an assessee and the tribunal will have no jurisdiction to invoke those two provisos. This legal provision is contained in the following judgment of the Supreme Court:
Hoosein Kasam Dada (India) Limited v. the State of Madhya Pradesh 1953 IV-STC-114 (SC):
In this landmark judgment the Supreme Court held that the right of appeal is not a mere matter of procedure. It is a substantive right which becomes vested in a party when proceedings are first initiated in an inferior court. This existing right of appeal continues to be available to a party filing any appeal and the amended appeal procedure cannot be forced on the appellant unless the legislature states in express words (or by necessary intendment) that the amendment should operate retrospectively (i.e. even in those cases where the proceedings were initiated in an inferior court before the date of this amendment).
In the case before the supreme court a sales tax assessee was entitled to file an appeal after paying only the admitted tax under the Central Provinces and the Bearer Sales Tax Act of 1947. This act was amended on 25.11.1949 and according to this amendment an assessee should pay both the disputed tax and undisputed tax before filing an appeal. The Assistant Commissioner of Sales Tax issued in this case his initial hearing notice to the assessee on 25.1.1949 which was before 25.11.1949, the date of the amendment. But he passed the assessment order itself on 18.4.1950 (after the dale of the amendment). Naturally the assessee filed his appeal also after the date of amendment. He filed the appeal on 5.10.1950 before the Sales Tax Commissioner. The Sales Tax Commissioner (the appellate authority), the Board of Revenue of Madhya Pradesh (M.P) and even the M.P. High Court held that the assessee had no right to file an appeal because of the amendment which came into force on 25.11.1949.
But the Supreme Court reversed the judgment of the M.P. High Court and held that since the initial hearing notice was issued by the Assistant Commissioner of Sales Tax on 25.1.1949 the amendment made on 25.11.1949 (subsequently) cannot affect the existing rights of appeal possessed by the assessee on 25.1.1949. An amendment to the appeal procedure which impairs or imperils the vested right which an assessee possesses at the time of the initiation of assessment proceedings cannot have retrospective effect. The appeal procedure existing as on the date of issue of the hearing notice by the A.O, continues to operate in spite of subsequent legislative amendments in the appeal procedures. See pages 120, 122, 123, and 124 of 1953 – IV – STC.
The supreme court staled at page 123 of the journal:
The pre-existing right of appeal is not destroyed by the amendment if the amendment is not retrospective by express words are necessary intendment. The fact that the preexisting right of appeal continues to exist, in its turn necessarily implies that the old law which created the right of appeal must also exist to support the continuation of that right. As the old law continues to exist for the purpose of supporting the pre-existing right of appeal, that old law must govern the exercise and enforcement of that right of appeal and there can then he no question of the amended provision preventing the exercise of that right.
In this case the supreme court held that the assessee need not pay the full tax for pursuing his appeal and it is enough if he pays only his admitted tax
Effect of any Supreme Court judgment:
A judgment of Supreme Court is the law of the land under Article 141 of Constitution of India and every authority, tribunal, and court should necessarily follow the ratio of the judgment of the Supreme Court.
No express provision in the amendment of Section 254 regarding retrospectivity, unlike in the amendment in Section 253 :
The legislature has stated that the first proviso and second proviso to Section 254 (2-A) come into force “w.e.f. 1:6.2000.
Section 84 of the Finance Act of 2001 stales as follows :
In Section 254 of the Income Tax Act, in Sub-section (2-A), the following provisos shall he inserted with effect from the 1st day of june, 2001″ vide 2001-249 – TTR – St. 37,77.
The Government clarified that this “amendment takes effect from Is’ dune, 2001 ” vide para 79.2 of circular No. 14 of 2001 issued by the Central Board of Direct Taxes (CBDT) reproduced in 2001-252 – TTR (St.) – 65, 120.
In contrast, when the legislature made an amendment to Section 253 through the Finance (No. 2) Act of 1998 “w.e.f. 1.10.1998” by substituting a pre-existing Sub-section 6 with a new Sub-section (6), enhancing the appeal fee payable to the tribunal at the time of filing of appeals by an assessee, the legislature used the following express language :
(6) an appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of October, 1998, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of–.
It may be noted that though this amendment deals with appeal procedure to he followed by the tribunal, the legislature expressly slated that this amendment should be applied to all appeals made on or after 1.10.1998 “irrespective of date of initiation of assessment proceedings relating thereto
Such express retrospective operation and express reference to the dale of initiation of the assessment proceedings are missing in the amendment made to Section 254(2-A)w.e.f 1.6.2001.
Hence, in the present case the initial stay granted by the tribunal on 27.2.2004 in S.P. 17 was the only valid stay order and it never got vacated. All the subsequent stay orders are non-existing in the eye of law..
K.M.S. Lakshmanier & Sons (Pvt.) Ltd. v. Sales Tax Appellate Tribunal 1967 -20-STC-103(A.P).
The Andhra Pradesh High Court in the case of K.M.S. Lakshmanier & Sons Pvt. Ltd. v. Sales Tax Appellate Tribunal, Hyderabad 1967-20-STC-103 (AP), relied on the Supreme Court judgment in the case of Hoosein, and came to a similar conclusion.
The legislature made an amendment w.e.f. 15.6.1957 according to Which the Sales Tax Appellate Tribunal should not entertain any appeal filed by an assessee-unless he has paid the full tax as determined after the first appeal was disposed of In this case the following was the chronology of the events:
Hearing notice issued by the AC) (i.e., the
Commercial Tax Officer)———— 14.03.1957
Assessment order dated————— 25.03.1957
Date of amendment—————————15.06.1957
First appellate order dated———- 09.04.1962
Sales Tax Appellate Tribunal’s (STAT’s)
notice to assessee asking the assessee to
pay full tax as determined by the first
appellate authority——————- 24.10.1962
The Andhra Pradesh High Court held that the new law, which came into force on 15.6.1957, is not applicable to the assessee as the AO issued his first hearing notice on 14.3.1957, three months before the date of the amendment. The High Court directed the STAT to entertain the appeal filed by the assessee without insisting on payment of full tax.
The High Court held that the STAT has no jurisdiction to give a notice to the assessee asking the assessee to pay the full tax (see page 107 of 20-STC).
State of Andhra Pradesh v. Hindustan Shipyard 1987 – 5 -APSTJ – 1(AP) :
Again the Andhra Pradesh High Court came to a similar conclusion in the case of State of Andhra Pradesh v. Hindustan Shipyard 1987-5-APSTJ-l (AP).
Though the High Court did not refer to the Supreme Court’s judgments, it independently came to the conclusion that an amendment which removes the power of stay of demand from the Tribunal cannot remove such power of the Tribunal in respect of accounting periods which have ended before the date of amendment.
The legislature, through an amendment effective from 1. 7.1985, removed the power of granting stay from the Sales Tax Appellate Tribunal and granted such power only to the Joint Commissioner of Sales Tax.
The High Court held that the STAT at Hyderabad continuous to possess the power to stay the disputed demand even after 1. 7.1985 in respect of accounting periods which ended before 1. 7.1985.
The High Court went a step further and held that even if the right of appeal to the Appellate Tribunal is removed by the legislature with effect from 1.7.1985, still the Tribunal can continue to entertain appeals relating to assessments pertaining to accounting periods which ended before 1.7.1985. (see page 4 of 5-APSTJ).
Raja Bahadur, Kamakhya Narayan Singh v. State of Bihar 1962 – 46 – 1TR -516 (Pat):
Relying on the judgment of the Supreme Court in Hoosein ‘s case, the Patna High Court held in the case of Raja Bahadur Kamakhya Narayan Singh v. State of Bihar, 1962-46-1TR-516 (Pat) that any change of conditions relating to appeals which adversely affect an assessee will apply only to those assessment proceedings which have been initiated on or after the date of the amendment.
The Bihar Agricultural Income Tax was amendment w.e.f 1.4.1951. According to this amendment unless an aggrieved assessee pays 12.5% of the full assessed tax (including disputed tax), no appeal can he filed.
For the accounting year 1949-50, the AO issued a notice calling for a return from Raja Bahadur on 04.7.1950 For the next accounting year 1950-51, the AO issued a similar notice on 12.6.1951 The High Court held that the new law is not applicable for the accounting year 1949-50, but it is applicable fur the next accounting year 1950-51. CIT v. Bengal Card Board Industries and Printers Pvt. Lid. 19S9 -176- 193 (Cal) :
The legislature inserted sub-Section (4) in Section 249ofthe IT Act with effect from 1.10.1975 and according to this amendment the first appellate authority cannot entertain an appeal unless the assessee has paid the full undisputed tax. The following are the relevant dates:
The AO issued a hearing notice under Section 143(2) before ----------------- 31.07.1975 The assessment under Section 143(3) was passed on 31.07.1975 Dale of amendment of Section 249-----------------01.10.1975 The assessee filed an appeal before the Appellate Assistant Commissioner (AAC) on -- 09.10.1975
The IT AT, Calcutta and the Calcutta High Court held that though the amendment came into force prior to the date of filing of the appeal, the law relating to appeals is the law prevailing on the date of issue of the hearing notice under Section 143(2) and hence the assessee need not pay even its undisputed tax before filing the appeal before the first appellate authority.
Any number of interlocutory orders can be passed in the same appeal as there is no resjudicata or estoppel in interlocutory matters.
An assessee can file any number of miscellaneous petitions and stay petitions before the Tribunal so long as the main appeal is pending before that Tribunal, vide:
UP Pollution Control Board v. Kanoria Industrial Limited 2003-259-1TR-321 (SC);
Municipal Corporation of Delhi v. Gurunam Kaur AIR-1989-SC-38;
Commissioner of Income Tax, Madras v. I.V. MR. P. Firm Muar AIR-1965-SC-1216.
According to the judgment of the Supreme Court (5 judges) in the case of The Sales Tax Officer v. Kanhaiya Lal Makund Lal Saraf AIR-1959-SC-135 (para 29) when both the parties to a dispute are labouring under a mistaken view of law, no party can be estopped from claiming his legal rights at any stage.
Doctrine of merger has no application when the initial order itself is void :
In the present case of ATE the assessee itself invited the tribunal to invoke the provisions of the second proviso to Section 254 (2-A) because of the erroneous view it has taken that this second proviso is applicable to its case (whereas the second -proviso should be considered as non-existing in the present case.)
That is why the assessee filed the second and subsequent stay petitions seeking extension of stay granted in the fist stay order No. S.P. 17. The tribunal and even High court entertained these subsequent petitions off the assessee and passed certain orders since neither the assessee nor the IT Department brought to the notice of the tribunal or the High Court that in the case of ATE neither the tribunal nor even the Hon’ble High Court has jurisdiction to invoke the second proviso in view of the binding nature of the Supreme Court judgment in the case of Hoosein.
Hence there is no legal validity for the stay orders No. S.P-181 and S.P.-74 passed by the tribunal.
This principle is laid down by the Supreme Court in the following case : Baradakanta Mishra v. High Court of Orissa AIR -1976- SC – 1899 :
In this case a High Court reduced the rank of an Additional District and Sessions Judge to that of an Additional District Magistrate (Judicial) and thereafter dismissed him from service. These orders were confirmed by the Governor of the Stale. However, under the conditions of the service of the Additional District & sessions Judge, only the Governor has the power to dismiss him or to reduce his rank. Since the High Court (instead of the Governor) has imposed these penalties the Supreme Court held that the order passed by the High court was void. It-held that the subsequent confirmation of that order by the Governor had no legal force. The apex court observed in para 25 of its order :
Further, the contention of the High Court that the orders of dismissal passed by the High court merged in the orders passed by the Governor cannot he accepted. If the order of the initial authority is void, an order of the appellate authority cannot make it valid.
Similarly in the present case of ATE the stay order No. SP- 181 of 2004 dt. 20.12.2004 passed by the tribunal (without jurisdiction) cannot be validated by the High court which passed the order No. WP 24335 dt. 28.12.2004.
Hyderabad Allwyn Metal Works Limited v. Collector of Central Excise 1978 AWR (The Andhra Weekly Reporter) – 528 (AP).
The same principle was reiterated by Andhra Pradesh High Court in the above case. In this case the A.O, levied a penalty under the Central Excise and Salt Act of 1944 beyond the period of limitation of six months. That penalty order was confirmed in an appeal. The assessee filed a writ petition before the Andhra Pradesh High Court. The High court held that when the original penalty order was void, any subsequent appellate order confirming such an order is equally void. At page 533 of AWR the High court observed :
the doctrine of merger has no application to orders which are void ab initio – there is no question of merger of the order passed by the original authority which is void. Therefore the doctrine of merger does not apply to a case where the order passed by the original authority is inherently void for want of jurisdiction.
Stay order No. SP-17 dt. 27.2.1004 was validly passed under Section 274 (1) : conditions for granting stay under Section 254 (1) :
From the foregoing discussion it is clear that the initial stay order No. SP-17 of 2004 dt. 27.2.2004 passed by the tribunal in the main appeal No. ITA-61 must be deemed to have been validly passed under Section 254 (1). It never stands vacated in the present case.
As the supreme court held in the case of ITO v. M.K. Mohammed Kunhi 1969 -71 – ITR – 815 (SC) the tribunal has inherent and ancillary power to grant stay. The stay granted by tribunal in SP No: 17 -was in accordance with the principles laid down by the Supreme Court in the case of Mohammed Kunhi and it does not call for any change until the main appeal is disposed of by the tribunal.
As the Supreme Court explained in paras 7 & 8 of its order in the case of Mohammed Kunhi every tribunal has an inherent power to grant stay so that the ultimately successful party will reap the fruits of his litigation and will not obtain merely a barren success.
In the present case, the rate of net profit estimated by the respondent is exorbitant. There is a prima facie chance that the assessee will get a huge refund if the tribunal disposes of the pending appeal.
If the net profit is estimated at 15% of the turnover (instead of 32.9% as estimated by the A. O) the assessee will get a refund of Rs. 14,04,443. Even if the Department estimates the net profit of 21.3% (which is the rate disclosed by the assessee for the earlier year) still there be arefund of Rs. 3, 70,419.
Thus there is no scope for altering the stay order already granted by the tribunal.
According to the judgment given by the Kerala High Court in the case of Gajanana Agency v. ITO 1999 – 210 – ITR – 865 (Ker) where there is optima facie case to stay the entire outstanding demand an assessee should not be directed to pay the outstanding demand even in instalments, since recovery through instalments is also a mode of collection.
According to CBDT’s circular No. 589 dt. 16.1.1991 the CBDT clarified that when an assessee is not financially sound he should not be forced to pay the disputed demand.
The assessee (ATE) closed down its business on 30- 6- 2003. It incurred a net loss of Rs. 50,589 for A.Y 2004- 2005 (its last A. Y). The bank balance of the firm is nil as on 31- 3- 2005. The balance is Rs. 301 for partner Sri Ch. Tirupali Rao as on 4- 5- 2005. It is Rs. 6,897 for the other partner Sri Ch. Srinivasa Rao as on 3- 12-.2004. The loss sustained in the fire accident on 9- 2- 2001 was about Rs. 2 crores.
B. Subhadra v. ITO 2005 – 272 – ITR (AT)- 100 (IIyd):
This Hon’ble Hyderabad tribunal itself held in this case that the introduction of the second proviso in Section 254 (2-A) did not take away the powers of the tribunal to grant stay any number of times under Sub-section 1 of Section 254. The present assessee submits that this is the correct legal position; however, in the case of Subhadra, neither the assessee nor the department raised the fundamental legal issue whether the second proviso comes into picture at all in a case where assessment proceedings were initiated before 1.6.2001 (the date of amendment of Section 254 (2-A).’
5. On the other hand, the learned Departmental Representative submitted that the first order passed in the Stay Petition stood automatically vacated upon expiry of 180- days from the date of order, and thus, it cannot hold the field today. At any rate, the order of the Tribunal got merged with the order of the Hon’ble High Court, (order dated 28.12.2004 in W.P.No. 24335 of 2004), and thus, no further petition can be entertained by the Appellate Tribunal on the issue of stay.
6. He has also relied upon the following decisions in support of his contention that Courts should not pass interim orders indiscriminately, affecting the collection of public revenue-
(a)Asstt. Collector of Central Excise v. Dunlop India Ltd. 154 ITR 172-SC
(b)Dunlop India Ltd. v. ACIT 183 ITR 532-Cal.
(c)Llama Prints and Anr. v. Union of India 189 ITR 174-Guj.
He has also adverted our attention to the decision of the ITAT Hyderabad Bench in the case of Andhra Pradesh State Civil Supplies Corporation Ltd. v. DCIT 83 ITD 398, wherein the Bench observed that the provisions of Section 254(2A) are prospective in nature, and operative on the stay granted by the Tribunal on or from 1.6.2001. He has also referred to the order dated 20.12.2004, passed in S.P.No. 181/Hyd/ 2004 in ITA INo. 61/Hyd/05, in the case of this very assessee, wherein the Bench categorically observed that the stay granted by its order dated 27.2.2004 got vacated due to operation of law under second proviso to Section 254(2A) of the Act. He also submitted that the case law relied upon by the learned Counsel are distinguishable on facts.
6. We have carefully considered the rival submissions and perused the records. At the outset, it must be noticed that in the case of this very assessee, in S.P.No. 181/Hyd/04, this Bench has observed in its order dated 20.12.2004 that the stay granted vide its order dated 27.2.2004 stood vacated due to operation of law. Unless the said order is reversed by a superior court, any comment on the order dated 27.2.22004 would amount to reviewing the said order. Since the power to review an earlier order, is not vested in the I.T.A.T., it is too late in the day to reconsider the matter to pronounce that the stay granted by the order dated 27.2.2004 survives only for a period of 180 days or beyond the said date. Similar view is expressed by the Tribunal in its subsequent order dated 16.5.2005 in S.P.No. 74/Hyd/2005. Though we have extracted relevant portions of the said order hereinabove, it is worthwhile to reproduce the same hereunder once again for ready reference-
6. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, we are of the considered opinion that once the Hon’ble High Court has modified the order of the Tribunal, directing the assessee to continue to pay instalment of Rs. 5-lakhs per month, it is no more open for this Bench to take contrary view and grant further relief to the assessee as the facts and circumstances of the case has not undergone a change. While the order of this Bench dated 20.12.2004 in S.P.No. 181/Hyd/2004 as modified by the Hon’ble A.P. High Court in 24335/2004 is in operation, we deem it fit not to interfere in the same, as it is not demonstrated before us that there is a change in the facts and circumstances between the date of the order of the Hon’ble A.P. High Court and today.
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8.On this factual position of the matter and especially in view of the judgment of the Hon’ble High Court of A.P. in W.P.No. 24335/2004, we dismiss this stay petition field by the assessee. We reiterate that the earlier order of the Tribunal as modified by the Hon’ble High Court would continue to remain in operation. Order accordingly.
Thus, the assessee is not entitled to any further relief in this Stay Petition, as it would amount to reviewing the order passed in S.P.No. 74/Hyd/05 also. To put it differently, the ITAT has inherent power to grant stay Under Section 254(1) itself but in every case where a stay is granted it cannot be assumed that it is an absolute stay till the disposal of the appeal. It all depends on the context & the terms of stay mentioned in the order. In other words, the Appellate Tribunal can grant ad interim stay, conditional stay-and absolute stay. If the written submissions of assessee’s counsel as well as the series of orders passed by this Bench in this case, in connection with the request for stay of collection of outstanding demand, are taken into consideration and read together, the only conclusion that can be reached is that in SP No. 17/Hyd/04 the Bench granted stay for a maximum period of six months only and thus it cannot be assumed, in the absence of specific mention in that regard, that the stay was intended to be absolute stay till the disposal of appeal; when the bench has discretion to grant stay in one of the various modes available to it, merely because a particular mode is beneficial to the assessee, it cannot be assumed that the bench intended to adopt such mode.
7. The case-law relied upon by the learned Counsel for the assessee are distinguishable on facts. In the case of Hoosein Kasam Dada(India)Ltd.(supra) the issue is whether a provision which is calculated to deprive an assessee of the unfettered right of appeal is a matter of procedure or affects substantive rights. Under the pre-amended provision, an aggrieved assessee was entitled to file an appeal, provided he paid admitted tax. By an amendment to the statute, it was made necessary that strict proof of payment of taxes, in respect of which the appeal has been preferred, has to accompany the appeal, and in that context, the issue arose as to whether the said amendment is retrospective in operation, i.e. whether it affects the right of an assessee, whose assessment proceedings commenced prior to the date of amendment. The Court observed that the right of appeal is not a matter of procedure, but a substantive right; a right vested in a party cannot be taken away by an amendment with retrospective effect, unless it is shown to be retrospective by express words or necessary intendment.
8. As observed by the Apex Court, a right of appeal is a substantive right and any amendment touching upon the right of appeal should not be treated as a matter of procedure. However, in the case before us the power to grant stay does not directly or indirectly affect the right of appeal, conferred upon the assessee by the statute. Under the Income Tax Act, the disputed tax need not be paid by an assessee in order to exercise his right of appeal. Even if the petition filed by the assessee seeking stay of collection of the outstanding demand is rejected, by an appellate authority, the right of appeal is not affected and, on the contrary, it is the duty of the Appellate Tribunal to dispose of the appeal on merits in accordance with law, as held by the Hon’ble Supreme Court in the case of CIT Madras v. S. Chennappa Mudaliar 74 ITR 41. Though Section 254 of the Income Tax Act has not specifically conferred a power upon the Appellate Tribunal to grant stay in an appropriate case, the Apex Court, in the case of ITO v. Mohammed Kunhi (M.K.) 71 ITR 815, held that such a power is inherent in exercise of the power to dispose of the appeal in accordance with law. Thus, the power is not taken away by the statute though the second proviso to Section 254(2A) has streamlined the procedure with regard to the period of operation of stay granted by the Tribunal. In the case of B. Subhadra v. ITO 272 ITR (AT) 100, Hyderabad Bench of the Tribunal held that the inherent power to grant stay of collection of the outstand demand is not curtailed by the second proviso and in an appropriate case, the Tribunal can grant fresh stay. Thus, insertion of second proviso to Section 254(2A), in our considered opinion, does not, in any way, affect the right of appeal. The procedure of granting stay underwent change as per the second proviso inserted with affect from 1.6.2001. The stay granted by the Appellate Tribunal shall stand vacated after the expiry of 180 days and in order to grant stay beyond the period of 180 days the matter again requires to be reconsidered by the Bench, in the event of an assessee moving a fresh petition. This is in consonance with the avowed objective of the legislature, i.e. to have a check/control on assessees obtaining stay orders without getting the appeal disposed of for unreasonably long period of time. In the present scheme of things, the question as to whether further stay needs to be granted or not comes up for review after the expiry of 180 days; if the assessee genuinely deserves it, and moves a fresh Stay Petition in that regard Appellate Tribunal is still vested with the power to grant stay from time to time, till the disposal of appeal. Under these circumstances, we hold that the second proviso does not affect the substantive right of appeal conferred on an assessee. Therefore, the decision of the Apex Court in Hoosein Kasam Dada (India) Ltd.(supra) has no application to the facts of the case.
9. In the case of K.M.S. Lakshmanier & Sons Pvt. Ltd. (supra), the Hon’ble High Court of Andhra Pradesh held that requirements of payment of tax is an onerous condition, which may, in a given case, prevent the exercise of right of appeal, and thus, the amendment cannot be made retrospective, except by express words or necessary intendment. Here also, the issue touches upon the vested right of appeal, and thus, the Court held that the condition of compulsory payment of taxis not a matter of procedure. Thus, this decision of the Hon’ble A.P. High Court is distinguishable on facts. The issues before the Patna High Court in Raj Bahadur Kamakya Narayan Sing v. State of Bihar 46 ITR 516; and before the Calcutta High Court in CIT v. Bengal Card Board Industries 176 ITR 193 also touch upon the right of appeal of an assessee, and as such, those decisions are also distinguishable on facts.
10. In the case of State of A.P. v. Hindustan Shipyard and Ors. (supra), the jurisdictional High Court observed that incidental/ancillary powers of the Tribunal to grant stay flows from the substantive power to entertain and hear the appeal conferred upon the Tribunal, and thus, it is not possible to separate these incidental powers from the substantive power. This decision hinges upon the logic that a quasi judicial authority cannot be completely ousted of the power to grant stay, which is a power incidental/ancillary to the main power of deciding the appeal. However, in the case before us, the right to grant stay was not taken away by virtue of insertion of second proviso to Section 254(2A). As has been stated earlier, the power to grant stay is only streamlined by fixing a time frame so that it can be reviewed, on fresh petition from the assessee, after the expiry of six months. This decision is also distinguishable on facts.
11. In the case of Agarwal Developers P. Ltd. v. ACIT 83 TTJ 375, the Delhi Bench of the Tribunal held that stay of recovery of the outstanding demand granted by the Tribunal vide its order dated 14th August 2000 continues to be in force since the date of order is prior to 1st June, 2001, on which date the second proviso to Section 254(2A) comes into operation. This case, far from supporting the stand of the assessee, supports the stand of the Revenue, in as much as, the Bench has not considered the retrospectivity with reference to the date of initiation of assessment proceedings, but only with regard to the date of the order of the Tribunal in a stay petition.
12. The learned Counsel has also argued that the theory of doctrine of merger has no application, when the initial order is not in accordance with law. It may be relevant to notice here that the order passed in S.P.No. 17/Hyd/2004 does not suffer from any infirmity, and thus, the case law cited by the learned Counsel for the assessee on this aspect, has no application to the facts of the case.
13. The assessee has also relied upon several decisions touching upon the doctrine of estoppel, etc. For the detailed reasons given by us hereinabove, we are of the considered opinion that the insertion of second proviso to Section 254(2A) does not affect either the right of appeal or the right of the Tribunal to grant stay in an appropriate case in any manner, and thus, it cannot be linked to the date of initiation of assessment proceedings. In other words, the second proviso comes into operation and becomes applicable in all cases where the stay petition comes up for consideration after 1.6.2001. With these observations, the Stay Petition filed by the assessee is dismissed.
14. In the result, Stay Petition filed by the assessee is dismissed.
