Tribunal can stay proceedings even without an outstanding tax demand to ensure appeals are not rendered ineffective.
In a significant ruling, the Jammu and Kashmir High Court has reinstated the powers of the Income Tax Appellate Tribunal, Amritsar Bench, to stay proceedings during the pendency of an appeal, even in the absence of an outstanding tax demand. The court's decision came in response to a writ petition filed by the J&K Yateem Foundation, challenging the Tribunal's earlier refusal to grant a stay on the cancellation of its registration under Section 12A of the Income Tax Act, 1961.
The case centers on the J&K Yateem Foundation, a society registered under the Societies Registration Act, which had its registration under the Income Tax Act cancelled by the Commissioner of Income-tax (Exemptions), Chandigarh. Aggrieved by this cancellation, the Foundation appealed to the Income Tax Appellate Tribunal and sought a stay on the cancellation order during the appeal's pendency. However, the Tribunal dismissed the stay application, citing a lack of outstanding tax demand.
The High Court bench, comprising Justices Sindhu Sharma and Shahzad Azeem, examined whether the Tribunal has the jurisdiction to stay the operation of an order under appeal when no tax demand exists. The court referenced past judgments, notably the Supreme Court's ruling in "Income-tax Officer v. M.K. Mohammed Kunhi," which established that appellate authorities possess inherent powers to pass interim orders to ensure appeals are not rendered nugatory.
The court concluded that the Tribunal erred in its interpretation of its jurisdictional powers under Section 254 of the Income Tax Act. It emphasized that the Tribunal's ability to grant a stay is an incidental and ancillary power essential for the effective exercise of its appellate jurisdiction. The ruling underscored the necessity of such powers to prevent the multiplicity of proceedings and ensure that successful appeals are not rendered ineffective.
Consequently, the High Court set aside the Tribunal's order from April 2025 and remitted the matter back to the Tribunal for reconsideration of the stay application in alignment with the legal principles established. The court clarified that it had not assessed the merits of the stay application or the appeal, leaving all issues open for the Tribunal's independent consideration.
This judgment reaffirms the Tribunal's role in safeguarding the efficacy of appellate remedies and provides clarity on the scope of its powers, ensuring that parties are not unjustly burdened while awaiting the resolution of their appeals.
Bottom Line:
Income Tax Appellate Tribunal has the incidental and ancillary powers to grant stay of proceedings during the pendency of appeal under Section 254 of the Income-tax Act, 1961, even in absence of an outstanding tax demand, to ensure that the appeal is not rendered nugatory.
Statutory provision(s): Income Tax Act, 1961 Sections 12A, 253, 254
