ITAT can not stay show cause notice of prosecution: P&H HC

By | December 2, 2015

IN THE HIGH COURT OF PUNJAB AND HARYANA

AT CHANDIGARH

Pr. Commissioner of Income Tax, Aayakar Bhawan, Sector-14, Hisar.

Versus

Income Tax Appellate Tribunal, Delhi Bench, New Delhi and another.

Civil Writ Petition No.15239 of 2015

Date of Decision: 31stOctober, 2015

Facts of the case are

Appeal is filed before Appellate Tribunal by Assessee for :-

  1.  Challenging an order passed under Section 263 of the Act,
  2. a quantum appeal against an assessment order, passed pursuant to the order passed under Section 263 of the Act,
  3. An order imposing penalty.

In the meanwhile ,revenue has served a notice upon the assessee to show cause why prosecution be not launched.

Assessee appealed to the tribunal that this show cause notice of prosecution should be kept in abeyance .

Tribunal Order

Tribunal has recorded a finding, while directing the revenue to keep consideration of the show cause notice re-prosecution in abeyance  that it is empowered by Section 254(1) to pass such an order.

Issue 

“a) Whether Section 254 of the Income Tax Act, 1961 empowers the Income Tax Appellate Tribunal to interfere in prosecution proceedings either at the stage of show cause notice or at any other stage?

b) Whether pendency of quantum appeals by the assessee and the revenue, appeals against penalty and appeals challenging orders passed consequent to an order passed under Section 263 of the Income Tax Act, would confer power/jurisdiction upon the Tribunal to stay a show cause notice calling upon the assessee to show cause why prosecution be not launched?”

Held

Section 254(1) confers the power to decide an appeal and “pass such orders thereon as it thinks fit” and when read along with the proviso includes the power to pass interim orders, “in any proceeding relating to an appeal”, thereby indicating that the stay order so passed must relate to proceedings in the appeal pending before the Tribunal.

we cannot read into Section 254 of the Act, any power in the Income Tax Appellate Tribunal to interfere in a prosecution under the Act, either at the stage of a show cause notice or at any other stage.

The pendency of appeals regarding quantum and penalty and an appeal challenging an order passed under Section 263 would not, in our considered opinion, confer power upon the Tribunal to stay consideration of a show cause notice calling upon the assessee to show cause why prosecution be not launched.

New Issue ?

whether Tribunal has power to stay proceedings or orders, which are not appealable or appealed against during pendency of an appeal but are likely to be affected by the outcome of the appeal. ?

Held

The power of a Tribunal, to pass an interim order in relation to matters pending before the Tribunal and at best to matters that are so intrinsically linked to the list pending before the Tribunal, as to be inseparable. The exercise of power must be confined to matters that are directly and substantially in issue or matters that flow directly and substantially from the order impugned before the Tribunal but cannot be extended to matters in which the Tribunal has no jurisdiction even, though, these matters may be incidentally affected by the outcome of the appeal.

This apart once it is accepted that proceedings for prosecution are independent of assessment and penalty, and the Tribunal is neither the appellate nor the revisional authority in a case where prosecution is launched, the mere fact that the decision in the appeal may have an impact on the prosecution, in our considered opinion, cannot be used to read into the expressions “pass such orders thereon as it thinks fit” or “any proceedings relating to an appeal”, a ”, a power in the Tribunal to direct that prosecution or a show cause notice shall be kept in abeyance.

There is another aspect of the case, namely, if such a power, as has been canvassed by the assessee, were available to the Tribunal, prosecution would have to await the final outcome of proceedings up to the Supreme Court.

We are unable to discern any legislative intent or power as would confer upon the Tribunal power to stay consideration of a show cause notice proposing to initiate prosecution, by reading into Section 254, the power to stay independent proceedings merely because they may be affected by the decision of a pending appeal.

All that the revenue has initiated is a notice to show cause why prosecution be not launched. Admittedly, the Tribunal is neither the appellate nor the revisional forum against a prosecution. A prayer for stay of prosecution or stay of the show cause would, therefore, have to be made by resort to other remedies provided under law and not by praying for a stay before the Tribunal. It would also be appropriate to point out that the notice to show cause why prosecution be not initiated is a purely administrative act and it is only after consideration upon the notice and the reply reaches fruition, may the assessee seek his legal remedies in accordance with law

Complete judgement Jindal-Prosection-ITAT-Stay-Power (1)

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