JUDGMENT
Tarun Chatterjee, J.
1. This is to consider an application for stay of all further penalty proceedings initiated pursuant to a notice dated March 20, 2000, under Section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) in respect of the assessment year 1995-96 till the disposal of the instant appeal. The appellant-assessee carries on, inter alia, the business of housing finance leasing. In the usual course of its business, in December, 1995, it purchased a bio-gas plant (in short “plant”) from Western Paques (India) Limited (in short “W.P.I.L”) and also had the plant duly insured. The appellant duly paid the purchase price of Rs. 14.5 crores of the plant to W.P.I.L. By a deed of lease dated December 30, 1994, the appellant leased out the plant to W.P.I.L. for a period of 96 months from the date of commencement of the lease. In the return for the assessment year 1995-96, the appellant claimed depreciation for the plant. Although the rental income of the plant was assessed in the hands of the appellant, the claim for depreciation was, however, disallowed by the Assessing Officer. The appellant filed an appeal and ultimately the Income-tax Appellate Tribunal (in short “the Tribunal”) dismissed the appeal of the appellant. Feeling aggrieved by the order of the Tribunal, the instant second appeal has been filed by the appellant and by an order dated June 19, 2000, of a Division Bench of this court, this second appeal has been admitted and an order of stay of realisation of the demand was granted for a period of four weeks from the date of passing that order with liberty to the parties to apply for extension, variation, and modification of the interim order in the presence of the other side. Before proceeding further, we may keep it on record that at the time of taking up for hearing of the instant application, Mr. Bajoria, appearing for the appellant, has submitted that as the dues in terms of the order of assessment has already been realised by the authorities, the application for stay shall not be proceeded with any further. That being the stand taken by the appellant, the application for stay of realisation of the payment of demand has now become infructuous and, therefore, the same is being disposed of as infructuous by treating the said application as on the “day’s list”.
2. Let us now consider the application filed by the appellant for stay of all further penalty proceedings, as noted herein earlier, till the disposal of this appeal. On the entertainability of this application for stay, Mr. Mullick, appearing for the Revenue raised a preliminary objection. According to Mr. Mullick, since the penalty proceeding has not arisen out of the assessment order for the assessment year 1995-96 and as the penalty proceeding initiated under Section 27(1)(c) of the Act is a distinct and separate proceeding and in view of the fact that this appeal shall be decided by this court only on the grounds formulated by it, the penalty proceeding which has no nexus with the pending appeal cannot be stayed pending disposal of the appeal. This submission of Mr. Mullick was hotly contested by Mr. Bajoria for the appellant/petitioner.
3. On the question whether the preliminary objection as to the entertain-ability of the application for stay of the penalty proceeding in the pending appeal by this court can be sustained, we have heard Mr. Bajoria, appearing for the assessee/appellant, and Mr. Mullick, for the Revenue. After hearing learned senior counsel for the parties and after considering the scope and ambit of Section 260A of the Act, we are of the view that the High Court under Section 260A of the Act has been duly conferred with power to stay a penalty proceeding which has been initiated pursuant to the assessment order out of which the present instant appeal arises in this court till the disposal of this appeal. Before we proceed further, we must keep it on record that from the assessment order for the assessment year 1995-96, it is evident that the Assessing Officer passed a direction for initiating a penalty proceeding against the assessee-appellant under Section 271(1)(c) of the Act. From the aforesaid assessment order, it is revealed that:
“Issue penalty notice under Section 271(1)(c) of the Act on the point of leased plant and machinery.”
4. Before we proceed further, let us now consider the relevant provisions for filing appeals under the Act. Chapter XX deals with appeals. Section 246 and Section 246A of the Act deal with appeals filed before the appropriate authority if the assessee is aggrieved by an order of the Assessing Officer named therein. Section 249 deals with the form of appeal and limitation. Section 260 of the Act confers power on the High Court or the Supreme Court to decide question of law raised on the case stated in pursuance of the order passed under Sections 256(1) and 256(2) of the Act. Sub-section (1) of Section 260 of the Act says that the High Court or the Supreme Court upon hearing any such case shall decide the questions of law raised therein and shall deliver its judgment thereon containing the grounds on which such decision is founded and a copy of the judgment shall be sent under the seal of the court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. Sub-section (1A) of Section 260 has been introduced by an amendment in view of coming into force of Section 260A of the Act. In Sub-section (1A) of Section 260 of the Act, it has been made clear that where the High Court delivers judgment in an appeal filed before it under Section 260A, effect shall be given to the order passed on the appeal by the Assessing Officer on the basis of a certitied copy of the judgment. In this case, we are concerned with the power of the High Court to deal with appeals from every order passed in appeal by the Appellate Tribunal and also the scope and ambit of the High Court to deal with such appeals and applications filed therein. By the introduction of Section 260A of the Act as indicated herein earlier, the High Court has now been conferred with power to entertain a second appeal against every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law. Sub-section (3) of Section 260A says that where the High Court is satisfied about substantial question of law involved in any case, it shall formulate that question. Sub-section (4) of Section 260A says that the appeal shall be heard only on the questions so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question. Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. Sub-section (5) of Section 260A confers powers on the High Court to decide question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such costs as it deems fit. Sub-section (6) of Section 260A confers power on the High Court which may determine any issue which (a) has not been determined by the Appellate Tribunal or (b) has been wrongly determined by the Appellate Tribunal by reason of a decision on such question of law as is referred to in Sub-section (1). By a further amendment of Section 260A a new sub-section has been introduced by the Legislature in the form of Sub-section (7) of Section 260A of the Act which runs as follows :
“Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court, shall, as fur as may be, apply in the case of appeals under this section.” At this stage, we may keep it on record that Mr. Mullick, appearing for the Revenue, could not dispute that the scope of reference and the scope of entertaining a second appeal under Section 260A of the Act are completely different. So far as Section 260A is concerned, a regular appeal shall lie to the High Court against every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law as noted herein earlier. From Sub-section (6) of Section 260A it is pellucid that Sub-section (6) of Section 260A of the Act has duly conferred power on the High Court to determine any issue which has not been determined by the Appellate Tribunal or has been wrongly determined by the Appellate Tribunal by reason of a decision on such question of law as is referred to Sub-section (1) of Section 260A. From a careful comparison of the language used in Section 260A of the Act and the language
used in Section 100of the Code of Civil Procedure, it cannot be disputed that the language used in Section 260A of the Act is similar to the language used in Section 100 of the Code of Civil Procedure. Similarly, Sub-section (6) of Section 260A of the Act is somewhat similar to Section 103 of the Code of Civil Procedure. Keeping these provisions in mind, let us now, therefore, consider whether the High Court, while exercising power under Section 260A of the Act is conferred with power to exercise Order 41, Rule 5 of the Code of Civil Procedure and is also conferred with inherent power under Section 151 of the Code of Civil Procedure for the purpose of granting or refusing to grant an order of injunction or stay of the penalty proceeding pending disposal of a second appeal.
5. Before we go into this question, we may also take note of Chapter XXI of the Act which deals with penalties imposable. Section 275 of the Act under this Chapter deals with bar of limitation for imposing penalties. For the purpose of deciding the issue at hand, we feel that only the Explanation to Section 275 of the Act would he required to be reiterated which is as follows :
“Explanation.–In computing the period of limitation for the purposes of this section,–
(i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to Section 129 ;
(it) any period during which the immunity granted under Section 245H remained in force ; and
(iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court,
shall be excluded.”
(emphasis’ added).
6. After a plain reading of the provisions contained in Sub-section (7) of Section 260A of the Act, as noted hereinabove, there cannot be any doubt in our mind to hold that the provisions of the Code of Civil Procedure shall apply in the case of an appeal filed under Section 260A of the Act. Order 41, Rule 5 of the Code of Civil Procedure confers powers on the High Court as well as to the appellate court to stay proceedings under a decree or order. Therefore, ordinarily in view of Sub-section (7) of Section 260A of the Act, the provisions of Order 41, Rule 5 of the Code of Civil Procedure would be readily applicable to an appeal filed under Section 260A of the Act and the High Court is conferred with power to stay a proceeding for recovery of demand arising out of the assessment order pending disposal of the appeal under Section 260A of the Act. This position in law was also not disputed by Mr. Mullick, appearing for the Revenue. However, Mr. Mullick sought to argue that since a penalty proceeding was a distinct and separate proceeding and as in the appeal filed under Section 260A of the Act, questions relating to the assessment order can only be decided by this
court and furthermore the appeal shall be decided only on the questions formulated by it, there was no question of granting an order of injunction and/or stay of the penalty proceeding in the appeal pending under Section 260A of the Act as the High Court would only decide the questions formulated by it for decision and no other question. Therefore, Mr. Mullick contended that the provisions of Order 41, Rule 5 of the Code of Civil Procedure in spite of applicability of such a provision in view of Sub-section (7) of Section 260A of the Act cannot be applied to the facts and circumstances of this case. We are unable to accept this submission of Mr. Mullick. From the facts stated herein earlier, it is clear that the penalty proceeding in fact, has been initiated against the assesses from the assessment order itself. The Assessing Officer, while assessing the income-tax dues of the assessee, had passed direction for initiating a penalty proceeding against the assessee. Therefore, it can be easily said that the penalty proceeding has been initiated pursuant to the order of assessment passed by the Assessing Officer. Accordingly, in our view, it cannot be said that the penalty proceeding is a distinct and separate proceeding from the appeal pending under Section 260A of the Act in this court. It is true while deciding this appeal on the substantial questions of law, formulated by us for decision, this court shall decide the same only on the questions formulated but in view of the proviso to Sub-section (4) of Section 260A of the Act, it can always be open to the High Court to decide any other substantial question of law not formulated earlier by this court, if this court is satisfied that the case involves such question. Accordingly, the question whether the direction to initiate a penalty proceeding in the assessment order may be raised for decision by this court. Therefore, it cannot be said that only because no question has been formulated regarding the direction to initiate a penalty proceeding against the assessee, it is not open to this court to decide a question as to whether the direction given by the Assessing Officer in the assessment order to initiate a penalty proceeding pursuant to the order of assessment was liable to be set aside. Therefore, in our view, there cannot be any difficulty to hold that since the assessment order contains direction to initiate a penalty proceeding against the assessee, the provisions of Order 41, Rule 5 of the Code of Civil Procedure can very well be applied to stay a penalty proceeding as well. Assuming the provisions of Order 41, Rule 5 of the Code of Civil Procedure cannot be pressed into action, even then, we are of the view that in view of inherent power of the court under Section 151 of the Code of Civil Procedure, the High Court being a “court” is entitled either to pass an order of injunction restraining the respondents from proceeding with the penalty proceeding or to stay further penalty proceedings pending disposal of the appeal. As noted herein earlier, in view of Sub-section (7) of Section 260A of the Act which clearly says that the provisions of the Code of Civil Procedure
would be applicable also in an appeal filed under Section 260A of the Act there is no doubt that by virtue of the inherent power conferred on the court under Section 151 of the Code of Civil Procedure an order of injunction can be passed by this court to stay the penalty proceeding pending disposal of this appeal under Section 260A of the Act as there cannot be any dispute that the High Court, while exercising the power under Section 260A of the Act is a “court” within the meaning of “court” under Section 151 of the Code of Civil Procedure. The law is well settled that where the provisions of Order 41. Rule 5 of the Code of Civil Procedure cannot be applied in a given case, the court can exercise the inherent power conferred under Section 151 of the Code of Civil Procedure as there is no specific provisions in the Code to grant such an order of stay or injunction. Therefore, even assuming that Order 41, Rule 5 of the Code of Civil Procedure cannot be applied in the present case, in our view, the High Court being a “court” is entitled to exercise the inherent power under Section 151 of the Code of Civil Procedure to grant stay or to pass an order of injunction restraining the respondents from proceeding with the penalty proceeding during the pendency of the appeal. In the case of Mrs. Kavita Trehan v. Balsara Hygiene Products Ltd., , the Supreme Court while dealing with restitution under Section 144of the Code of Civil Procedure clearly laid down the principles as follows (page 447) :
“The jurisdiction to make, restitution is inherent in every court and will be exercised whenever the justice of the case demands, it will be exercised under inherent powers where the case did not strictly fall within the ambit of Section 144. Section 144 opens with the words ‘where and in so far as a decree or an order is varied or reversed in any appeal revision or other proceeding or is set aside or modified in any suit instituted for the purpose . . .’ The instant case may not strictly fall within the terms of Section 144 ; but the aggrieved party in such a case can appeal to the larger and general powers of restitution inherent in every court.” (emphasis’ added)
7. Applying the principles laid down in the aforesaid decision of the Supreme Court, we are of the view that the High Court being a “court” within the meaning of Section 151 of the Code of Civil Procedure and also within the meaning of Section 260A of the Act, the High Court is entitled to exercise inherent power under Section 151 of the Code of Civil Procedure. That being the position, even if we hold that the provisions of Order 41, Rule 5 of the Code of Civil Procedure would not be applicable in the facts and circumstances of the case in its strict term, then also the power to grant stay of the penalty proceeding pending disposal of this second appeal can be exercised by this court under Section 151 of the Code of Civil Procedure.
8. There is another aspect of the matter. For the purpose of coming to the aforesaid conclusion, one more section of the Act would be relevant for appreciating the above submission. The section that immediately comes to our mind is Section 275 of the Act. If we read Sub-section (7) of Section 260A of the Act and Section 275 of the Act together, it would be clear that the High Court in an appeal filed under Section 260A of the Act retains power to grant stay or injunction in respect of the penalty proceeding in question. From a plain reading of Section 275 of the Act together with Sub-section (7) of Section 260A, it would be clear that in computing the period of limitation for the purpose of Section 275 of the Act, any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded. In view of this Explanation (iii) although it relates to computation of limitation, we are of the view that Explanation (iii) to Section 275 makes it clear that the period of limitation should be excluded when any period during which the proceeding for the levy of penalty is stayed by an order or injunction of any court. From the above, an analogy can be easily drawn by us that in an appropriate situation, the High Court is not powerless to grant stay or pass an order of injunction for the purpose of staying the penalty proceeding during the pendency of the appeal.
9. For the reasons aforesaid, we dispose of the instant application by the following directions :
(a) All further penalty proceedings initiated pursuant to the notice dated March 20, 2000, shall remain stayed till the disposal of this appeal.
(b) Let the hearing of the appeal be expedited. Since the Revenue has already entered appearance, service of notice of appeal be dispensed with. Let the requisite number of paper books be filed. If no such direction for filing the same has not yet been made, the same may be filed within six weeks from this date in default, put up “for orders”. The appeal shall be listed within a period of two months from this date. The application for stay is thus disposed of in the manner indicated above.
10. As we have already disposed of the original application for stay on the stand taken by learned senior counsel for the assessee and as we have already noted that the application for stay has now become infructuous, we dispose of the said application also as it has become infructuous.
11. There will be no order as to costs.
S. N. Bhattacharjee, J.
12. I agree.