AMIT BAJAJ ADVOCATE

1. The important question which requires consideration in the present case is as to whether the first appellate authority, namely, Commissioner of the Income-tax (Appeals) or Deputy Commissioner (Appeals) under Income-tax Act, 1961, (for short hereinafter referred to as 'Act') have power to grant stay and decide the stay application filed along-with appeal/s filed before them under Section 246/246A of Act respectively or not. The concomitant question, which would arise is whether the power of the Assessing Officer under Section 220(6) of the Act of 1961 to grant stay is there with the Assessing Authority during the pendency of the appeal before the appellate authority; and how such powers of 'treating the assessee as not being in default in respect of amount in dispute in the appeal', have to be exercised by such Assessing Officer under Section 220(6) of the Act.

2. Before coming the provisions of the Act and interpretation thereof, a brief look at the facts in which the present writ petition arises would be necessary.

3. The petitioner-assessee, M/s. Maheshwari Agro Industries, Jodhpur, engaged in the business of manufacturing and trading of oils, for assessment year 2008-09, as a partnership firm filed its return of income through e-filing system on 30.09.2008 declaring the income of Rs. 3,48,140/-. Initially, the case was processed under Section 143(1) of the Act on 22.04.2009 on refund, however, the case of the assessee was selected for scrutiny, since a survey was conducted on 18.03.2007 at the business place of the petitioner under Section 133A of the Act, his case was fixed for assessment upon scrutiny, and accordingly, a notice under Section 143 (2) of the Act was issued to him on 24.04.2009. The assessee produced relevant record and Books of Account before the Assessing Authority and the Assessing Authority ultimately passed the impugned assessment order Annex-1 for the said Assessment Year 2008-09 on 20.12.2010 and making additions in the declared income of Rs. 3,48,140/-, the total income assessed by the Assessing Authority was to the tune of Rs. 1,44,42,320/-. The interest under the provisions of Sections 234A, 234B, 234C, 244A (3) and 234D was charged separately, and also penalty proceedings under Section 271 (1) (c) of the Act for concealment of income were initiated separately. The nature of the additions in the declared income was briefly likely this:

 4. The main addition of Rs. 1,21,17,057/- appears to be on account of trading additions on the ground that rejecting regular Books of Account of the assessee under Section 145(3) of the Act, the learned ITO applied the GP rate (Gross Profit Rate) of 20.20%, which the assessee declared in the Assessment Year 2006-07 and the same GP rate was applied for the present Assessment Year 2008-09 also; even though the assessee has declared GP rate of only 9.79% in the present assessment year. The comparative GP rates based on turnover of the assessee for three assessment years was noticed by the Assessing Authority in the impugned order itself and the same is also as under:

 5. As against the turnover of Rs. 58,36,980/- in the Assessment Year 2006-07, in which the GP rate of 20.20% was declared, the assessee declared GP rate of 9.79% on the ten fold increased turnover in Assessment Year 2008-09 onRs. 5.46 crores. In the middle year Assessment Year 2007-08, on the turnover of Rs. 1.89 crore, the GP rate of 9.90% was declared. It is not in dispute that the assessee was liable to tax audit also, as per provisions of Section 44AB of the Act, and such audit reports were also produced before the Assessing Authority. Drawing the inference of concealment of income on the basis of such difference in GP rates, the learned Assessing Authority applying the higher GP rate of 20.20%, the Assessing Authority made the addition of Rs. 1.21 crore and assessed the assessee's declared of Rs.3,48,140/- at Rs. 1.44 crores. This resulted in issuance of the impugned demand for recovery to the tune of Rs. 58 lacs vide Annex-5 dated 21.01.2011 after some rectification of the arithmetical errors by the Assessing Authority.

6. The petitioner-assessee preferred first appeal under Section 246A of the Act before the learned Commissioner of Income Tax (Appeals) against the said assessment order dated 24.12.2010 on 31.12.2010 vide Annex-2 and shortly thereafter filed an application before the CIT (Appeals) vide Annex-3 alleging therein that the demand created by the learned I.T.O. is arbitrary and since he is pressing hard for recovery and may take coercive steps for such recovery, the appeal may be heard as early as possible. The assessee also appears to have filed an application for rectification of the order under Section 154 of the Act vide Annex-4 on 20.01.2011 upon which Annex-5 order for rectification was passed by the learned I.T.O. on 21.01.2011. The formal notice for demand vide Annex-6 was issued to the assessee on 21.01.2011 for Rs. 58,48,697/-.

7. The petitioner-assessee filed also an application under Section 220 (3) and 220 (6) of the Act for stay of entire disputed demand before the Assessing Authority I.T.O. Ward-I (3) Jodhpur himself on 20.01.2011 and raised various grounds for seeking the stay of entire disputed demand in the said application relying upon several case laws.

8. The said application came to be rejected by the Assessing Authority vide order Annex 8 dated 28.01.2011 stating therein that "... As the AR of the assessee himself stated in the stay petition that the business of the assessee is already closed. As business of the assessee is already close and to protect the interest of revenue it is not possible to linger on recovery on demand. On examination of all the facts and circumstances of the case I am of the opinion that the stay of demand application deserves to be rejected and the same is hereby rejected. The demand outstanding is to be deposited forthwith. Any failure on the part of the assessee for payment of outstanding demand will be treated as the assessee in default and coercive majors will be taken as provided in the Income tax Act, 1961".

9. It appears that the I.T.O. thereafter initiated coercive process by undertaking garnishee proceedings under Section 226 (3) of the Act, and in this regard, a notice was sent to bankers of the petitioner-assessee vide Annex-9 dated 02.02.2011, addressed to Branch Manager, ICICI Bank Ltd. Jodhpur for attachment of bank account of the petitioner-assessee. Similar notices were also sent to other bankers of the petitioner-firm and also to the Rajasthan Financial Corporation. It appears that the petitioner also approached the learned Commissioner of Income Tax-I, Jodhpur vide Annex-14 dated 03.02.2011 in the matter on administrative side; and thereafter the present writ petition appears to have been filed in this Court on 09.02.2011. With the additional affidavit, the petitioner has also produced copy of order dated 17.02.2011 passed by learned CIT-I, Jodhpur directing the assessee to pay Rs. 30 lacs in three instalments (Rs. 10 lacs each), payable on or before 25.02.2011, 12.03.2011 and 25.03.2011 respectively; and the demand of balance amount of Rs. 28,46,637/- was stayed till the disposal of the first appeal or 30.09.2011, whichever is earlier.

10. The assessee appears to have failed in making this payment of instalments also and the learned counsel for the petitioner informed the Court that in March, 2011, a sum of Rs. 5 lacs against the disputed demand was paid by the petitioner-assessee. He further submitted that vide communication dated 22.02.2011 even the order passed by the learned CIT (Appeals) on 17.02.2011 has been withdrawn. The communication dated 22.02.2011 Annex-18 has been produced along-with additional affidavit, which the petitioner filed on 01.03.2011.

11. The respondent- Income Tax Department has filed reply to the writ petition and has justified the impugned orders passed in the present matter.

12. The arguments were heard at length and shorn of unnecessary details, this Court feels persuaded to interpret the relevant powers of the authorities under the Act to grant stay and to interpret the scope of application under Section 220(3)/220 (6) of the Act and to pass consequential directions thereafter.

13. Learned counsel for the petitioner, Mr. Dinesh Mehta, submitted that in the present case, apparently a very high pitched assessment has been made by the learned Assessing Authority for AY 2008-09 and high GP rate of 20.20%, which was declared by the assessee for the AY 2006-07 could not have been applied as a thumb rule for present AY 2008-09 also, and on a ten fold increase in turnover, the lower GP rate of 9.79% declared by the assessee was correct and genuine. The audited books of account and return of income as filed by the assessee could not have been brushed aside by the Assessing Authority and applying such high GP rate mechanically, the impugned demand of Rs. 58 lacs has been raised by the Assessing Authority, which could not be recovered from the petitioner-assessee and such recovery would frustrate the very purpose of filing appeal before the learned C.I.T. (Appeals), which is yet not decided.

14. Learned counsel for the petitioner further urged that even though the provisions of Sections 246, 246A, Section 250 and 251 of the Act do not confer any specific power on such first appellate authority to grant stay against the recovery of disputed demand, such a power should be read as 'inherent powers' and the stay applications filed before such appellate authorities should be decided on merits touching upon the relevant factors for grant of stay like prima facie case, irreparable injury, balance of convenience and nature of demand, so also, hardship likely to be caused to the assessee from such recovery etc. He relied upon the decision of Hon'ble Supreme Court in the case of Income Tax Officer v. M.K. Mohammed Kunhi reported in [1969] 71 ITR 815 (SC) : AIR 1969 SC 430, wherein the Hon'ble Supreme Court dealing with the powers of Income Tax Appellate Tribunal under Section 254 of the Act, in which provision also at that point of time, there was no specific power available to the Income Tax Appellate Tribunal to grant any stay against the demand of tax raised by the Assessing Authority, the Hon'ble Apex Court held that such power to grant stay was inherent and was liable to be read into powers deciding the appeal itself; and therefore, such appellate Tribunal was bound to decide the stay application on merits. He also relied upon subsequent judgments of some of other High Courts to support his contentions that even the first appellate authority like CIT (Appeals) or Dy. Commissioner (Appeals) should be deemed to have such inherent powers to decide the stay applications even though there is no specific power conferred by the statute under Section 246/264A of the Act in this regard.

15. Secondly, he relied upon a decision of Division Bench of Allahabad High Court in the case of Prem Prakash Tripathi v. Commissioner of Income Tax  reported in [1994] 208 ITR 461 (All) : [1994] 121 CTR (All) 77 and subsequent decision of Allahabad High Court in the case of Smita Agrawal (Ind.) v. Commissioner of Income-tax reported in [2010] 230 CTR (All) 173. He also placed reliance on the decision of Valvoline Cummins Ltd. v. Deputy Commissioner of Income-tax reported in [2008] 307 ITR 103 (Delhi) and Rajasthan High Court decision in the case of Maharana Shri Bhagwat Singhji of Mewar v. Income-Tax Appellate Tribunal, Jaipur Bench, Jaipur reported in [1997] 223 ITR 192 (Raj.). He also referred the Instruction No. 95 [F. No.1/6/69-IT(C)] dated 21.08.1969 issued by the Central Board of Direct Taxes, New Delhi, wherein referring to observations made by the then Dy. Prime Minister, the CBDT had issued instructions to subordinate authorities that where the income determined on assessment was substantially higher than the returned income viz. twice the later amount or more, the collection of the taxes in dispute to be held in abeyance till the decision of the appeals provided there was no fault on the part of the assessee.

16. Learned counsel for the petitioner-assessee, therefore, urged that entire disputed demand should be kept in abeyance till the first appeal filed by the assessee is decided on merits, which he submitted that was likely to succeed in toto as the trading additions made by the learned Assessing Authority were not justified at all. He however, further submitted that till such appeal is decided and if no stay is granted against such recovery, the very purpose of filing of the appeal would be frustrated.

17. Explaining the scheme of Act in this regard contained in the relevant provision of Sections, 220, 246, 246A, 250, 253, 254 and 255 of the Act, he submitted that while the Income Tax Appellate Tribunal, the second appellate forum, and the highest fact finding body created under the Income-tax Act, now has such powers to grant stay against the recovery of the disputed demand itself though such power is limited as far as period of operation of such stay order, if any, granted by the ITAT is concerned; and that being of 180 days in the first instance, extendable to 365 days as an outer limit of period, even though the appeal filed before the ITAT can be decided within a period of four years from the end of the financial year in which such appeal is filed. He further submitted that no such similar powers are conferred upon the first appellate authority, namely, Deputy Commissioner (Appeals) or CIT (Appeals) under Sections 246 and 246A of the Act. Firstly, the learned counsel for the assessee urged that such power to grant stay should be inferred in these relevant appellate provisions also relying upon the Supreme Court decision in the case of M.K. Mohammed Kunhi (supra). In the alternative, learned counsel for the petitioner urged that the powers conferred upon the Assessing Authority in this regard under Section 220(6) of the Act not to treat the assessee in default, have to be exercised in consonance with Instruction No. 95 dated 21.08.1969, which still holds the field and where the demand is substantially higher, namely, twice the declared or admitted tax liability, it should be completely stayed during the pendency of the first appeal. He also submitted that while various other fiscal statutes like Central Excise Act, Customs Act and various Sales Tax laws of the State, contain the provision for pre-deposit of certain portion of disputed demand of tax raised by the Assessing Authority, no such provision has been made in the Income-tax Act, 1961. Therefore, by necessary implication, the provisions of Section 220(6) of the Act should be construed to mean that recovery of the disputed demand during the pendency of first appeal, shall automatically remain stayed and the assessee cannot be treated in default entailing the consequences of interest under Section 220(2) of the Act and penalty under Section of the Act.

18. Learned counsel for the petitioner also urged that provisions contained in Section 220 of the Act, in Chapter XXVII bearing the heading "Collection and Recovery" of taxes in Part D of Chapter XXVII, cannot be equated with the power to grant stay and it is a negative power or a discretion given to the Assessing Authority in negative terms, empowering him to not to treat the assessee in default, subject to certain conditions, which he may impose, as long as such appeal remains undisposed of. Drawing the attention of the Court towards use of word "246 or 246A only" in Section 220(6) of the Act and not Section 254 relating to powers of ITAT, learned counsel for the petitioner sought to distinguish the two powers at two different stages of the appellate forums and submitted that during pendency of the first appeals, normally, assessee cannot be treated in default at all unless there are over-riding reasons like assessee having not cooperated in the assessment proceedings or is likely to fly away from the scene etc.

19. Learned counsel for the petitioner was at pains to explain that if high pitched assessments are made by the Assessing Authority arbitrarily, the very purpose of filing of first appeal for redressal of grievance, can be rendered nugatory and infructuous, if upon a harmonious reading of various provisions in the scheme of the Act they are not construed to mean that during the pendency of first appeal normally demand at least under the high pitched assessment orders should be kept in abeyance especially in view of CBDT Instruction No. 95 dated 21.08.1969. He submitted that present case is an outstanding and glaring example of such circumstances, which is repeated in numerous cases and, therefore a fair, reasonable and harmonious interpretation of these provisions deserves to be made.

20. On the other hand, Mr. K.K. Bissa, learned counsel appearing for the Revenue vehemently submitted that in the absence of any specific provision conferring power to grant stay upon the first appellate authority, namely, Deputy Commissioner (Appeals) and Commissioner of Income Tax (Appeals), such powers cannot be inferred and in view of later amendment in Section 254 of the Act, conferring such powers only on Income Tax Appellate Tribunal, by necessary implication on the other hand, it should be construed that Parliament deliberately did not want to confer any such power upon the first appellate authority and, therefore, despite decision of the Hon'ble Supreme Court in the case of M.K. Mohammed Kunhi (supra) no such inherent power can be inferred from the provisions of the Act available with the first appellate authority. He, therefore, submitted that power under Section 220 (6) of the Act has enough protection for the assessee in case where first appeals are pending and for the given reasons, the Assessing Authority himself can treat the assessee as not in default, saving him from the interest and penal consequence subject to such conditions, as may be imposed, by the Assessing Authority; and in the present writ petition, looking to the huge demand, in the interest of Revenue, the learned Assessing Authority was justified in rejecting the application of the petitioner under Section 220 (3) and 220 (6) of the Act.

21. Learned counsel for the Revenue further submitted that in fact the assessee has not filed any separate stay application before the learned Commissioner of Income Tax (Appeals) in the present matter and, therefore, there is no question for such authority to decide any such stay application even though such power was to be assumed as being available with him. Learned counsel for the Revenue also submitted that on administrative side, the higher authority, namely, Commissioner of Income Tax-I, Jodhpur also dealt with the matter of stay in the case of the petitioner-assessee. Although, initially while granting stay in favour of petitioner-assessee, the petitioner was allowed to make payment of disputed demand to the extent of Rs. 30 lacs in instalments of a sum of Rs. 10 lacs each against the total demand of Rs. 58 lacs, vide order Annex-15 dated 17.02.2011, since the assessee failed to comply with the said condition, the learned C.I.T. withdrew the said order on 22.02.2011. He, therefore, submitted that C.I.T. (Appeals) may decide the pending appeal of the assessee in accordance with law, however, as far as the stay application is considered, the matter stands decided at the hands of the departmental authorities and the said orders being valid, they cannot be interfered with in the present case. Learned counsel for the Revenue also justified the impugned assessment order and raising of demand on the basis of trading additions on account of GP rate difference in the present case and tried to justify the recovery proceedings.

22. I have heard learned counsel for the parties at length, perused the record and judgments cited at bar and relevant provisions.

23. The relevant provisions, referred to above, are reproduced herein below for ready reference to the extent relevant.

"Section 220-When tax payable and when assessee deemed in default.

(1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under Section 156 shall be paid within [thirty] days of the service of the notice at the place and to the person mentioned in the notice :

Provided that, where the [Assessing] Officer has any reason to believe that it will be detrimental to revenue if the full period of [thirty] days aforesaid is allowed, he may, with the previous approval of the [Joint Commissioner], direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of [thirty] days aforesaid, as may be specified by him in the notice of demand.

(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at [one per cent] for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid :

[Provided that, where as a result of an order under section 154, or Section 155, or section 250, or Section 254, or section 260, or section 262, or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded :]

[Provided further that in respect of any period commencing on or before the 31st day of March, 1989 and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month.]

[(2A) Notwithstanding anything contained in sub-section (2), [the [Chief Commissioner or Commissioner] may] reduce or waive the amount of interest [paid or] payable by an assessee under the said sub-section if [he is satisfied] that-

  (i)  payment of such amount [has caused or] would cause genuine hardship to the assessee ;

 (ii)  default in the payment of the amount on which interest [has been paid or] was payable under the said sub-section was due to circumstances beyond the control of the assessee ; and

(iii)  the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.]

(3) Without prejudice to the provisions contained in sub-section (2), on an application made by the assessee before the expiry of the due date under sub-section (1), the [Assessing] Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.

(4) If the amount is not paid within the time limited under sub-section (1) or extended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default.

(5) If, in a case where payment by instalments is allowed under sub-section (3), the assessee commits default in paying any one of the instalments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default.

(6) Where an assessee has presented an appeal under section 246 or Section 246A, the Assessing Officer may, in this discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of."

(7) Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the [Assessing] Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed.

Explanation: For the purposes of this section, income shall be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form.

Section 246 - Appealable orders

(1) Subject to the provisions of sub-section (2), any assessee aggrieved by any of the following orders of an Assessing Officer (other than the [Joint Commissioner]) may appeal to the Deputy Commissioner (Appeals) [before the 1st day of June, 2000] against such order –

(a)  an order against the assessee, where the assessee denies his liability to be assessed under this Act, or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making of adjustments, or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;

(b)  an order of assessment, reassessment or recomputation under section 147 or section 150;

Section 246A - Appealable orders before Commissioner (Appeals)

(1) Any assessee aggrieved by any of the following orders (whether made before or after the appointed day) may appeal to the Commissioner (Appeals) against -

(a) [an order passed by a Joint Commissioner under clause (ii) of sub-section (3) of section 115VP or an order against the assessee] where the assessee denies his liability to be assessed under this Act or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making of adjustments, or any order of assessment [under sub-section (3) of section 143 except an order passed in pursuance of directions of Dispute Resolution Panel] or section 144, to the income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;

[(1A) Every appeal filed by an assessee in default against an order under section 201 on or after the 1st day of October, 1998 but before the 1st day of June, 2000 shall be deemed to have been filed under this section.]

[(1B) Every appeal filed by an assessee in default against an order under sub-section (6A) of section 206C on or after the 1st day of April, 2007 but before the 1st day of June, 2007 shall be deemed to have been filed under this section.]

(2) Notwithstanding anything contained in sub-section (1) of section 246 every appeal under this Act which is pending immediately before the appointed day, before the Deputy Commissioner (Appeals) and any matter arising out of or connected with such appeals and which is so pending shall stand transferred on that date to the Commissioner (Appeals) and the Commissioner (Appeals) may proceed with such appeal or matter from the stage at which it was on that day:

Provided that the appellant may demand that before proceeding further with the appeal or matter, the previous proceeding or any part thereof be reopened or that he be reheard.

Explanation: For the purposes of this section, "appointed day" means the day appointed by the Central Government by notification in the Official Gazette.

Section 250 - Procedure in appeal

(6A)- In every appeal, the Commissioner (Appeals), where it is possible, may hear and decide such appeal within a period of one year from the end of the financial year in which such appeal is filed before him under sub-section (1) of Section 246A.

Section 251 - Powers of the Commissioner (Appeals)

(1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers -

(a) In an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment [***];

[(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;]

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) in any other case, he may pass such orders in the appeal as he thinks fit.

(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Section 253 - Appeals to the Appellate Tribunal

(1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order -

(a) an order passed by a Deputy Commissioner (Appeals)] [before the 1st day of October, 1998] or, as the case may be, a Commissioner (Appeals)] under section 154, Section 250, section 271, section 271A or section 272A; or

(b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997 ; or

 Section 254 - Orders of Appellate Tribunal

(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.

(2) The Appellate Tribunal may, at any time, within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer:

Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard.

Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.

(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2)] of section 253.

Provides that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of Section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:

Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed:

Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.

Section 255 - Procedure of Appellate Tribunal

(1) The powers and functions of the Appellate Tribunal may be exercised and discharged by Benches constituted by the President of the Appellate Tribunal from among the members thereof.

 (5) Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its power or of the discharge of its functions, including the places at which the Benches shall hold their sittings.

24. The relevant Circulars issued under Section 220(6) of the Act & Instructions are also reproduced hereunder for ready reference:-

24.1 Minutes of the 8th Meeting of the Informal Consultative Committee held on 13th May, 1969- Implementation of Assurance given regarding stay of recovery in certain cases - Item 1 (vi)

One of the points that came up for consideration in the 8th Meeting of the Informal Consultative Committee was that Income-tax assessments were often arbitrarily pitched at high figures and that the collection of disputed demand as a result thereof was also not stayed in spite of the specific provision in the matter in section 220(6) of the Income-tax Act, 1961.

2. The then Deputy Prime Minister had observed as under: -

"where the income determined on assessment was substantially higher than the returned income, say twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeal provided there were no lapses on the part of the assessee."

3. The Board desire that the above observations may be brought to the notice of all the Income-tax Officers working under you and the powers of stay of recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/ Commissioner of Income-tax."

Board's F. No. 1/6/69-ITCC, dated 21 August, 1969."

24.2. Undisputed tax-Recovery of- Instructions regarding

Under section 220(6) of the Income-tax Act, 1961, when an assessee has presented an appeal before the Appellate Assistant Commissioner under section 246, the Income-tax Officer may, in his discretion treat the assessee as not being in default in respect of the amount in dispute in appeal during the period of the pendency of the appeal. The Board would like to emphasise that the discretionary powers given by section 220(6) are to be exercised in respect of disputed taxes only. Similarly, the instructions contained in the Board's letter F. No. 1/6/69-ITCC, dated 21st August, 1969 (Instruction No.95) also refer to disputed demand only.

2. The Board desire that all possible steps should be taken for the recovery of undisputed taxes by the Income-tax Officers and the assessee should not be allowed to withhold payment of the undisputed demand merely because they have filed appeals before the Appellate Assistant Commissioner of Income-tax. While reviewing the arrears of taxes, the Commissioners of Income-tax, Inspecting Assistant Commissioners should ensure that these instructions are being scrupulously followed by the Income-tax Officers.

Board's Letter F. No. 404/132/70-ITCC, dated 14 September, 1970.

Source: PAC's 25th Report (Fifth Lok Sabha), Page 35.

24.3 CBDT's clarification on instructions on Stay of Demand

Letter [F.No. 404/10/2009-ITCC], dated 1-12-2009

Many queries have been received regarding the applicability of Instruction No. 95, dated 21.8.1969 vis-à-vis Instruction No. 1914, dated 2.12.1993. Many assessees are taking the plea that Instruction No. 1914 does not supercede Instruction No. 95, dated 21.8.1969.

2. Instruction No. 95, dated 22.8.1969 was an assurance given by the then Deputy Prime Minister during the 8th Meeting of the Informal Consultative Committee held on 13th May, 1969. The observations made by the Deputy Prime Minister were as under:-

"Where the income determined on assessment was substantially higher than the returned income, say twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeal provided there were no lapses on the part of the assessees."

The above observations were circulated to the field officers by the Board as Instruction No. 95, dated 21.8.1969.

2. The matter has been considered by the Board and the decision of the Board has been approved by the Finance Minister. It is hereby clarified that subsequent to Instruction No. 95 following Instructions/clarifications on the stay of demand were issued till 15th October 1980:-

 (i)  Clarification to Instruction No. 95 was issued on 14/9/1970 stating that it relates to disputed demands only.

(ii)  Instruction No. 635 was issued on 12/11/1973 stating that stay should be granted only in those cases where demands are attributable to substantial points of dispute.

(iii)  Clarification to Instruction No. 95 dated 13/07/1976 held that the Instruction becomes operative only in cases where there are no lapses on the part of the assessee.

(iv)  Instruction No. 1067 dated 21/06/1977 held that the ITO can pass the necessary orders u/s 220 (6) in all cases except cases under section 144A or 144B where the approval of IAC is required.

(v)  Instruction No. 1158, dated 27th March, 1978 held that in suitable cases the assessee may be allowed to furnish security.

(vi)  Instruction No. 1282, dated 4th October, 1979 held that requests should be made to CIT(A) and ITAT for early disposal of appeals and constant watch should be kept on progress of appeals.

(v)  Instruction No. 1362 was issued on 15/10/1980 in supersession of all the earlier Instructions. It was an Instruction covering the issue in detail and in para 4 of the same there was a clear reference to the proposition laid down in Instruction No. 95 which is as follows:-

In exercising this discretion, the Income-tax Officer should take into account factors such as: whether the points in dispute relate to facts; whether they arise from different interpretations of law; whether the additions have been made as a result of detailed investigation; whether the additions are based on materials gathered through enquiry/survey/search and seizure operations; whether the disputed addition to income has been assessed elsewhere by way of protective assessment and the tax thereon has been paid by such person etc. The magnitude of addition to income returned cannot be the sole determinant in this regard. Each disputed addition will need to be considered to arrive at the quantum of tax that may need to be stayed

3. It is clear that the substance of the assurance as laid down in Instruction No. 95, dated 21.8.1969 was submerged in the Instruction No. 1362, dated 15/10/1980 which was issued in supersession of all earlier Instructions on the subject. Instruction No. 1914, dated 2.12.1993 was issued subsequently in supersession of all the earlier Instructions on the subject and the said Instruction also covers unreasonably high pitched assessment order and genuine hardship cases.

4. It is therefore clarified that there is no separate existence of the Instruction No. 95, dated 21.8.1969. Instruction No. 95, and all subsequent Instructions on the issue ceased to exist from the date Instruction No. 1362 came into operation. In turn Instruction No. 1362 and all subsequent Instructions on the issue also ceased to exist the day Instruction No. 1914 came into operation i.e. 2/12/1993.The Instruction No. 1914 holds the field currently and a copy of Instruction No. 1914 is enclosed for reference.

Recovery of Outstanding tax Demands

[Instruction No. 1914 F. No. 404/72/93 ITCC, dated 2-12-1993 from CBDT]

(Quoted in extenso in para No.46 below)

24.4 Circular No.119

Capital gains-Payment of tax on capital gains included in the income-tax return claimed to be exempt within the meaning of ss. 54, 54B and 54D

26/09/1973

Capital Gains, Return of Income, Recovery Sections 54, 54B, 54D, 140A, 220,

Sec. 45 of the IT Act, 1961, provides for the taxation of capital gains arising on the transfer of capital assets. Secs. 54,54B and 54D grant exemption in respect of capital gains arising on transfer of property used for self-residence, land used for agricultural purposes and compulsory acquisition of lands and buildings under any law, provided the conditions laid down in the three sections are satisfied. These sections, inter alia, provide investment of the capital gains in the house building and land, as the case may be, within the stipulated period, which is 2 to 3 years. If the assessee is able to do so between the date of the transfer and that of filing the return of income, there is no difficulty. But, if he is not able to do so but wishes to avail of the exemption in the subsequent years, he will have to disclose the capital gain, in the return of income of the relevant year.

2. The question of payment of the tax on self-assessment and regular assessment in cases where the capital gains have not been invested before filing the return although he proposes to do so later has been considered, and I am directed to convey the following instructions :-

 (a)  in cases where the assessee has received the sale proceeds of the capital asset transferred, the time for payment of tax under ss. 140A and 220 need not be extended as the assessee has the necessary funds to pay the taxes ;

 (b)  in cases where sale proceeds of the asset transferred have not been received for any reason the ITO may not formally extend time for payment under ss. 140A and 220 but may not impose penalty for non-payment of the tax in view of the special circumstances due to which the assessee is prevented from paying the tax. However, as soon as the sale proceeds are received the collection may be enforced and failure to pay the taxes may be visited with penalty.

Source : [F.No. 207/5/73—ITA–II, reported in [1973] 92 ITR (St.) 4]

24.5 Circular No. 530 DT: 6 March, 1989

Exercise of discretion under section 220(6) of the Income-tax Act, 1961 to treat the assessee as not being in default in respect of the amounts disputed in first appeal pending before DC(Appeals)/ CIT(Appeals).

Under section 220(6) of the Income-tax Act, 1961, where an assessee has presented an appeal under section 246 of the Act before the Deputy Commissioner (Appeals) or the Commissioner (Appeals), the Assessing Officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired as long as such appeal remains undisposed of.

2. Having regard to the proper and efficient management of the work of collection of revenue, the Board has considered it necessary and expedient to order that on an application being filed by the assessee in this behalf, the Assessing Officer will exercise his discretion under section 220(6) of the Act (subject to such conditions as he may think fit to impose) so as to treat the assessee as not being in default in respect of the amount in dispute in the appeal in the following situations:

 (i)  the demand in dispute has arisen because the Assessing Officer had adopted an interpretation of law in respect of which there exists conflicting decisions of one or more High Courts or the High Court of jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment, or

(ii)  the demand in dispute relates to issues that have been decided in favour of the assessee in an earlier order by an appellate authority or court in the assessee's own case.

3. It is clarified that in the situations mentioned in para 2 above, the assessee will be treated as not in default only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the situation referred to in para 2 above, the Assessing Officer will no longer be bound by these instructions and will exercise his discretion independently.

4. In respect of other cases not covered by para 2 above, the Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of a speaking order. While exercising discretion under this provision, the financial capacity of the assessee to pay the demand will not be relevant.

5. The Chief Commissioners and Directors-General of Income-tax may please bring these guidelines to the notice of all officers in their regions. The guidelines will apply, mutatis mutandis, to the demands created under other Direct Tax Laws also.]

Circular No.530, dated 6 March, 1989. Para 4 was substituted by Circular No.589, dated 16 January, 1991.

24.6 Circular No. 589 Dated 16/1/1991

Reference is invited to Board's Circular No. 530 (F.No.404/ 82/88-ITCC) dated March 6, 1989 (see [1989] 176 ITR (St.) 240), regarding the above mentioned subject.

2. According to paragraph 2 of the said Circular, the Assessing Officer is, in the two situations referred to in that paragraph, bound to treat the assessee as not in default in respect of the amount in dispute in appeal. In respect of other cases, the Circular stated in paragraph 4-

"In respect of other cases, not covered by para 2 above, the Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of a speaking order. While exercising discretion under this provision, the financial capacity of the assessee to pay the demand will not be relevant."

3. Representations have been received by the Board that the exclusion of financial capacity of the assessee to pay the demand, from the factors relevant for exercise of Assessing Officer's discretion under section 220(6) of the Income-tax Act, is prejudicial to those assessees who are not financially sound.

4. The matter has been reconsidered by the Board. It has been decided to substitute paragraph 4 of the Circular No. 530 ([1989] 176 ITR (St.) 240), by the following paragraph--

"In respect of other cases not covered by paragraph 2 above, the Assessing Officer, while considering the situation for treating the assessee to be not in default, would consider all relevant factors having a bearing on the demand raised and communicate his decision to the assessee in the form of a speaking order."

(Sd.) V.K. Mangotra,

Secretary,

Central Board of Direct Taxes."

25. The Income Tax Act, 1961 is a self-contained and comprehensive code in itself. The direct tax, namely, income tax on various types of assessee/s including the body corporates, is required to be paid as per charging provisions of the Act after computing the total income under Chapter IV of the Act, which provides for computation of the total income under six different heads like income from salary, income from house property, profits and gains of business or profession, capital gains and income from other sources. The Chapter relating to deductions to be made from the total income in Chapter-VI (A) comprises Section 80A to 80 VV of the Act which provide for various kinds of deductions from such income to various classes of assessees in different circumstances. Chapter XXIII of the Act, defines income tax authorities and their powers comprising of Sections 116 to 136 of the Act including the powers of search and seizure, survey, inspection etc. The procedure for assessment contained in Sections 139 to 158 of the Act. The Chapter XXIV of the Act deals with procedure of filing returns, enquiry before assessment, assessment under Section 143, best judgment assessment under Section 144, re-assessment under Section 147 etc. The special procedure for assessment of search cases are contained in Chapter comprise of Sections 158 to 158B(I) of the Act. Proceeding further, the scheme of the Act in Chapter XXVII deals with collection of recovery of tax, which is divided in six parts, viz. A to F. Chapter heading of Chapter XXVII is 'collection and recovery of tax' and we are presently concerned with Part D of the said Chapter and more particularly Section 220 and 220 (6), reproduced above. Skipping the provisions relating to settlement of cases under Chapter XX, which provides for appellate forums to the assessee. Chapter XX comprising of Sections 246 to 269 of the Act provides for appeals and revisions at various levels including appeals to first appellate authority like Deputy Commissioner (Appeals) under Section 246 up to 1.6.2000 and to C.I.T. (Appeals) under Section 246A, second appeal to Appellate Tribunal under Section 250, appeals on substantial question of law to High Courts under Section 260A of the Act, appeals to Supreme Court under Section 261 of the Act, revision by the Commissioner under Sections 263 and 264 of the Act. The remaining provisions afterwards are not readily relevant, hence, are not referred. The provisions of Sections 246, 246A, 250 & 251 for first appellate authorities and Sections 253 to 255 for Appellate Tribunal for the second appeal being the final fact finding authority created under the Act, are relevant for this case and they have also been quoted above.

26. The main crux of the matter is as to whether in the scheme of the Act specially after amendment of Section 254 of the Act conferring powers of granting stay upon the appellate Tribunal after insertion of sub-Sections (2A) and (2B) in Section 254 of the Act by Finance Act, 1999 with effect from 01.06.1999 and further first proviso substituted by Finance Act, 2007 with effect from 01.06.2007 extending period of stay granted by the ITAT in the first instance for 180 days then extendable up to 365 days in second proviso, and this amendment purportedly having been brought on the statute book in pursuance of decision of the Hon'ble Supreme Court in the case of M.K. Mohammed Kunhi (supra), the question is as to whether such powers to grant stay can still be implied as inherent power of the first appellate authority, namely, CIT (Appeals) and Dy. Commissioner (Appeals) or not.

27. The answer to this question, in the opinion of this Court, has to be given in affirmative. The reasons are not far to seek. The powers of the appellate authorities are indisputably concurrent and co-extensive with that of the Assessing Authority but wider and superior in nature. Section 251 of the Act clearly stipulates that in disposing of an appeal, the CIT (Appeals) can confirm, reduce, enhance or annul the assessment. Section 251(1)(c) of the Act further provides that in other cases, he may pass such orders in appeal as he thinks fit. These words harmoniously read, definitely mean that powers of appellate authorities under the Act are wide enough. Such powers could not be intended to be drained out or rendered meaningless, if the power to grant stay against the recovery of disputed demand is to be taken away from the first appellate authority. Such implied, necessary and inherent power must necessarily be read into these provisions conferring the powers upon the appellate authority to modify the impugned assessment order in any manner. In specific terms, the first appellate authority can even enhance the taxable income, while he has the power to reduce or completely set at naught the assessment. The words "as he thinks fit" in Section 251(1)(C) are not redundant, as no such redundancy can be attributed to the Parliament. Therefore, mere absence of words "power to grant stay" in Section 251 of the Act cannot mean that such powers are specifically excluded from the jurisdiction of the first appellate authority.

28. The Hon'ble Supreme Court in the case of Institute of Chartered Accountants of India v. L.K. Ratna reported in AIR 1987 SC 71 held as under:

"16. It is next pointed out on behalf of appellant that while Regulation 15 requires the Council, when it proceeds to act under S. 21 (4), to furnish to the member a copy of the report of the Disciplinary Committee, no such requirement is incorporated in regulation 14 which prescribes what the Council will do when it receives the report of the Disciplinary Committee. That, it is said, envisages that the member has no right to make a representation before the Council against the report of the Disciplinary Committee. The contention can be disposed of shortly. There is not in Regulation 14 which excludes the operation of the principle of natural justice entitling the member to be heard by the Council when it proceeds to render its finding. The principles of natural justice must be read into the unoccupied interstices of the statute unless there is a clear mandate to the contrary."

29. As similar analogy was already applied by the Division Bench of Allahabad High Court in the case of Prem Prakash Tripathi (supra) while extending the ratio of the Apex Court judgment in the case of M.K. Mohammed Kunhi (supra) to the powers of first appellate authority in the following terms: -

"4. This is how the petitioner has come up to this court. It is submitted by learned counsel for the petitioner that no power is vested in the Commissioner of Income Tax (Appeals) to grant stay order under the Income Tax Act, 1961 (briefly, "the Act") , and, therefore, the petitioner has resorted to Article 226 of the Constitution. It is, no doubt, true that there is no specific provision in the Act or the Rules framed thereunder conferring power to grant stay on the Commissioner of Income Tax (Appeals). Ordinarily, such power should be vested in an appellate authority. The appeal is nothing but a continuation of assessment proceedings. If in the absence of power to grant stay the recovery is made during the pendency of the appeal and if the appeal is allowed in course of time, then that would cause avoidable inconvenience to the assessee. For effective adjudication of the matters and to obviate unnecessary inconvenience to the assessees, it is nothing but appropriate to confer power of granting stay on the appellate authorities. Not only in the case of Commissioner of Income Tax (Appeals), power to grant stay was not conferred even on the Appellate Tribunal prior to February 12, 1970. However, Sub-section (6) of Section 220 of the Act states that where an assessee has presented an appeal under Section 246, the Assessing Officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired as long as such appeal remains undisposed of. The rationale of this provision is that an assessee should not be unnecessarily inconvenienced during the pendency of the appeal and, therefore, Sub-section (6) says that the assessee will not be treated as in default while the appeal is pending against the assessment orders. Law does not require that once the assessment is made, recovery of tax should be made immediately, notwithstanding the remedy of appeal having been provided in the Act. Rather, Sub-section (6) of Section 220 clearly provides that the assessee against whom an assessment is made should not be treated as in default so long as his appeal remains undisposed of. If such is the intention of law, then it can hardly be said that the Commissioner of Income Tax (Appeals) is not vested with the powers of granting stay order, which is not only necessary but expedient for effective adjudication of appeals. If an assessee establishes his, prima facie case in appeal, then the appellate authority should be competent to grant stay order, otherwise the assessee would be put to a serious loss, which in certain cases may be even irreparable. What is the use of remedy of appeal, if irreparable loss is caused? The remedy of appeal is always provided to alleviate the sufferings and not to augment them and if the provisions of appeal are read in that spirit, then the only conclusion that can be reached is that the appellate authority does possess power to grant stay order, even if it is not specifically conferred by any statutory provision. But the position will be different if such power is specifically taken away from the appellate authority by any statutory provision. The right of appeal is not procedural, but a substantive right and that right can be conferred by a given statute with or without imposing limitations. Unless there is an exclusionary provision, power to grant stay will ordinarily be deemed to have been conferred on the appellate authorities.

7. When the Appellate Tribunal was held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction, we see no reason why the same legal position should not follow in the case of the Commissioner of Income Tax (Appeals), who is also an appellate authority like the Appellate Tribunal. In this situation, what holds good in the case of the Appellate Tribunal equally applies to the Commissioner of Income Tax (Appeals). Following this authority, we hold that the Commissioner of Income Tax (Appeals) must be held to have the power to grant stay, which is incidental or ancillary to its appellate jurisdiction."

30. Following the Division Bench decision in the case of Prem Prakash Tripathi's case, the Allahabad High Court, Division Bench, in the later decision in the case of Smita Agrawal (Ind.) (supra) actually felt constrained that the High Courts are being flooded with avoidable litigation arising in such circumstances by not conferring such powers upon the CIT (Appeals), and the Division Bench in Smita Agrawal's case went on to direct the Central Board of Direct Taxes to issue necessary circulars to all the appellate authorities for directing them to dispose of such stay applications and so long as the stay application is not disposed of, the Assessing Officer must be slow or reluctant in initiating the recovery process. The relevant extract of paras 4 and 5 quoted below:

"4. ..... So far as the power of stay of CIT(A) is concerned, in our view, the law laid down by the Apex Court in the case of M.K. Mohammed Kunhi (supra) and a Division Bench of this Court in Prem Prakash Tripathi's case (supra), clinches the issue in favour of the proposition advanced by the petitioner. We have no manner of doubt that the stay application is maintainable and CIT(A) do possess power to pass an interim order which he has to consider judiciously in accordance with law. We, therefore, dispose of the writ petition with the direction to the Appellate Authority concerned to hear the stay application and dispose of the same within a period of 15 days from this date. However, it is expected that no coercive action will be taken against the petitioner meanwhile.

5. Before parting we may observe herein that of late, we have experienced a flood of such writ petitions, where the petitioner having filed appeal along with the stay application before the authority concerned have waited for sometime but the appellate authority has failed to pass any order whatsoever on the stay application and in the meantime the assessing authority had proceeded to make recovery which causes in filing of a number of writ petitions before this Court. This can be avoided by the authorities concerned showing more concern to their duties and by disposing of such stay applications expeditiously and in any case within a reasonable time. For inaction of the authorities, this Court is being flooded with avoidable litigation which is causing more harm to public at large who is awaiting for dispensation of justice within a reasonable time from the highest Constitutional Court in the State. This Court is already burdened with lakhs of cases awaiting their turn for disposal. The constraint in which this Court is functioning is being added by this inaction of the authorities and is causing delay in disposal of huge number of cases. We do not propose to make this order an occasion to illustrate the various reasons for delay but we will be failing in our duty if we refrain from showing our concern to such callousness on the part of the revenue authorities in sitting tight over the stay application compelling the assessee to run to the High Court by filing writ petition simply to get an order for expeditious disposal of the application for interim order. If they have some justification for not deciding the stay application for sometime, it would be in the fitness of things that in such cases, the assessing authority, if it has received the information that the assessee has approached the appellate authority by filing appeal along with the stay application which is pending, must await the recovery till the decision is taken by the appellate authority on such stay application. We, therefore, direct the Central Board of Direct Taxes, New Delhi to look into this aspect of the matter and, if necessary, to issue a circular to all the appellate authorities directing them to dispose of stay applications expeditiously and so long the stay application is not disposed of the Assessing Officer must be slow or reluctant in initiating recovery process. Let a copy of this order be supplied to the Chairman, Central Board of Direct Taxes, New Delhi for information and necessary action."

31. In the land mark decision delivered on 11.03.1968, the three Judges bench of Hon'ble Supreme Court in the case of M.K. Mohammed Kunhi (supra), in unanimous opinion authored by Grover, J, dealing with words "as he may think fit", which were available to the ITAT also while deciding appeals before it and in the face of absence of clear provisions for grant of stay against the disputed demand of tax, the Apex Court held that such power is inherent in the appellate powers and the Tribunal should be deemed to have such power under Section 254 of the Act. Quoting from Domat's Civil Law Cushing's Edition, Vol. 1 at page 88, the Hon'ble Supreme Court noted the following quotation: "It is the duty of the judges to apply the laws, not only to what appears to be regulated by their express dispositions, but to all the cases where a just application of them may be made, and which appear to be comprehended either within the consequences that may be gathered from it."

Further relying on the Maxim "Cui jurisdiction date est, ea quoque concessa essee videntur, sine quibus jurisdictio explicari non potuit", which means "where an inferior court is empowered to grant an injunction, the power of punishing disobedience to it by commitment is impliedly conveyed by the enactment, for the power would be useless if it could not be enforced."

Noticing that in some of the earlier judgments, the court expressed the difficulty that appellate tribunal did not possess the power to stay the recovery during the pendency of the appeal, with reference to the judgment in the case of Vetcha Sreeramamurthy v. Income-tax Officer, [1956] 30 ITR 252 (AP) and relying upon Halsbury's Laws of England, third edition, volume 20, page 705, wherein it is stated that no tax is payable while the assessment is the subject-matter of an appeal, except such part of the tax assessed as appears to the Commissioners seized of the appeal not to be in dispute. Ultimately, relying upon the provision of Section 255(5) of the Act, which empowers the appellate Tribunal to regulate its own procedure, the Court proceeded to hold that appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. The conclusions of the Hon'ble Supreme Court in paras 13 and 14 of Mohd. Kunhi's judgment are quoted below for ready reference: -

"13. Section 255 (5) of the Act does empower the Appellate Tribunal to regulate its own procedure, but it is very doubtful if the power of stay can be spelt out from that provision. In our opinion the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when section 220(6) deals expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It could well be said that when section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its executions and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory.

14. A certain apprehension may legitimately arise in the minds of the authorities administering the Act that, if the Appellate Tribunal proceed to stay recovery of taxes or penalties payable by or imposed on the assessee as a matter of course, the revenue will be put to grant loss because of the inordinate delay in the disposal of appeals by the Appellate Tribunal. It is needless to point out that the power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the Tribunal will consider whether to stay the recovery proceedings and on what conditions, and the stay will be granted in most deserving and appropriate cases where the Tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal."

32. A reference of few more land mark precedents on the interpretation of statutes, specially taxing statutes is considered apposite here.

33. In Principles of Statutory Interpretation by Justice G.P. Singh (12 Edn. 2010), the learned Author has stated as under:

"In selecting out of different interpretations 'the court will adopt that which is just, reasonable and sensible rather than that which is none of those things' ...A construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the statute purports to regulate has to be rejected and preference should be given to that construction which avoids such results."

34. In Directorate of Enforcement v. Deepak Mahajan [1994] 3 SCC 440, this Court held as under:

"24. .... Though the function of the courts is only to expound the law and not to legislate, nonetheless the legislature cannot be asked to sit to resolve the difficulties in the implementation of its intention and the spirit of the law. In such circumstances, it is the duty of the court to mould or creatively interpret the legislation by liberally interpreting the statute.

25. In Maxwell on Interpretation of Statutes, Tenth Edn. at page 229, the following passage is found:

'Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence.'

31. .. but to winch up the legislative intent, it is permissible for courts to take into account of the ostensible purpose and object and the real legislative intent. Otherwise, a bare mechanical interpretation of the words and application of the legislative intent devoid of concept of purpose and object will render the legislative inane.

35. Therefore, an interpretation having a social justice mandate is required. The statutory provision is to be read in a manner so as to do justice to all the parties. Any construction leading to confusion and absurdity must be avoided. The Court has to find out the legislative intent and eschew the construction which will lead to absurdity and give rise to practical inconvenience or make the provision of the existing law nugatory. The construction that results in hardship, serious inconvenience or anomaly or gives unworkable and impracticable results, should be avoided. (Vide: Corporation Bank v. Saraswati Abharansala [2009] 1 SCC 540; and Sonic Surgical v. National Insurance Co. Ltd. [2010] 1 SCC 135]

36. A reasonable construction agreeable to justice and reason is to be preferred to an irrational construction. The Court has to prefer a more reasonable and just interpretation for the reason that there is always a presumption against the law maker intending injustice and unreasonability/ irrationality, as opposed to a literal one and which does not fit in with the scheme of the Act. In case the natural meaning leads to mischievous consequences, it must be avoided by accepting the alternative construction. (Vide: Bihar State Council of Ayurvedic and Unani Medicine v. State of Bihar - [2007] 12 SCC 728 and Mahmadhusen Abdulrahim Kalota Shaikh v. Union of India (2009) 2 SCC 1]

37. The Court has not only to take a pragmatic view while interpreting a statutory provision, but must also consider the practical aspect of it. (Vide: Union of India v. Ranbaxy Laboratories Ltd. [2008] 7 SCC 502)

38. In Narashimaha Murthy v. Susheelabai [1996] 3 SCC 644, the Court held as under:-

"20. ... The purpose of the law is to prevent brooding sense of injustice. It is not the words of the law but the spirit and eternal sense of it that makes the law meaningful.

39. In Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate AIR 1958 SC 353, it has been held thus:

"9. ... the definition clause must be read in the context of the subject matter and scheme of the Act, and consistently with the objects and other provisions of the Act.

40. In Sheikh Gulfan v. Sanat Kumar Ganguli AIR 1965 SC 1839 it has been held as follows:

19. …Often enough, in interpreting a statutory provision, it becomes necessary to have regard to the subject matter of the statute and the object which it is intended to achieve. That is why in deciding the true scope and effect of the relevant words in any statutory provision, the context in which the words occur, the object of the statute in which the provision is included, and the policy underlying the statute assume relevance and become material….

41. Any interpretation which eludes or frustrates the recipient of justice is not to be followed. Justice means justice between both the parties. Justice is the virtue, by which the Court gives to a man what is his due. Justice is an act of rendering what is right and equitable towards one who has suffered a wrong. The underlying idea is of balance. It means to give to each his right. Therefore, while tempering the justice with mercy, the Court has to be very conscious that it has to do justice in exact conformity with the statutory requirements.

42. Thus, it is evident from the above referred law, that the Court has to interpret a provision giving it a construction agreeable to reason and justice to all parties concerned, avoiding injustice, irrationality and mischievous consequences. The interpretation so made must not produce unworkable and impracticable results or cause unnecessary hardship, serious inconvenience or anomaly. The court also has to keep in mind the object of the legislation.

43. In a recent decision, the Division Bench of Delhi High Court in the case of Valvoline Cummins Ltd. (supra) has held that even the application under Section 220(6) of the Act where two authorities, namely, Additional Commissioner acting as Assessing Officer directed the assessee to approach his subordinate authority-Deputy Commissioner for stay under Section 220(6) of the Act, the Court disapproved of such a direction and held that even if two authorities had concurrent jurisdiction in the matter, the first authority, namely, Additional Commissioner ought to have decided the application on merits and once the Additional Commissioner had exercised jurisdiction as an Assessing Officer, he was required to continue to exercise the power till his jurisdiction in that matter was over. Thereafter, the Court referred to Instruction No.95 dated 21.08.1969 & the Division Bench of Delhi High Court directed the Addl. Commissioner to decide the stay application and granted absolute stay against the recovery, even though the Deputy Commissioner had directed payment of 15% of the disputed demand. In the case before the Delhi High Court, the income assessed was 8 times of the income declared by the assessee and relying upon the Instruction No. 95, the Court held as under: -

"It may be recalled that the returned income of the assessee was Rs. 7.25 crores, but the assessed income is Rs. 58.68 crores, which is almost 8 times the returned income. In this regard, learned counsel has drawn our attention to Instruction No. 95 dated August, 21, 1969 issued by the Central Board of Direct Taxes, which deals with the framing of an assessment which is substantially higher than the returned income. The relevant portion of the Instruction reads as follows:

"1222. Income determined on assessment was substantially higher than returned income. -Whether collection of tax in dispute is to be held in abeyance till decision on appeal.

1. One of the points that came up for consideration in the 8th meeting of the Informal Consultative Committee was that income-tax assessments were arbitrarily pitched at high figures and that the collection of disputed demands as a result thereof was also not stayed in spite of specific provision in the matter in Section 220(6).

2. The then Deputy Prime Minister had observed as under:

' ... where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapse on the part of the assessee'.

3. The Board desire that the above observations may be brought to the notice of all the Income-tax Officers working under you and the powers of stay or recovery in such cases up to the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/ Commissioner of Income-tax.

A perusal of paragraph 2 of the aforesaid extract would show that where the income determined is substantially higher than the returned income, that is, twice the latter amount or more, then the collection of tax in dispute should be held in abeyance till the decision on the appeal is taken. In this case, as we have noted above, the assessment is almost 8 times the returned income. Clearly, the above extract from Instruction No. 95 dated August 21, 1969 would be applicable to the facts of the case.

Learned counsel for the assessee has drawn our attention to several decision of various High Courts which have interpreted the aforesaid Instruction in the way that we have read it. Some of these decisions are N. Rajan Nair v. ITO [1987] 165 ITR 650 (Ker), Mr. R. Mani Goyal v. CIT [1996] 217 ITR 641 (All), and I.V.R. Constructions Ltd. v. Asstt. CIT [1998] 231 ITR 519 (AP).

Under the circumstances, we are of the view that the assessee would, in the normal course, be entitled to an absolute stay of the demand on the basis of the above Instruction."

44. Similarly, the learned Single Judge of Madras High Court in the case of M.G.M. Transport (Madras) P. Ltd. v. Income-tax Officer [2008] 303 ITR 115 (Mad) again referred to Instruction No.95 dated 21.08.1969 held as under: -

"The petitioner had filed a return for the assessment year 2004-05 disclosing a loss. The Assessing Officer however passed an assessment order raising a huge demand for Rs. 1,40,25,762. The petitioner applied for a stay of demand. On a writ petition against rejection of the application:

Held, that Central Board of Direct Taxes Instruction No. 95, dated August 21, 1969, would squarely apply to the case of the petitioner. The mere statement in the order without any factual foundation that "no valid reason has been stated for stay of demand" by the Assessing Officer was not sufficient. The order was not valid. The petitioner was entitled to stay of collection till orders were passed in the appeal, subject to making certain payment."

45. The learned Single Judge of Rajasthan High Court in the case of Maharana Shri Bhagwat Singhji of Mewar (Late His Highness) v. Income-Tax Appellate Tribunal, Jaipur Bench, Jaipur [1997] 223 ITR 192 (Raj.) also held in the matter relating to estate duty and applying the same Instruction No.95 dated 21.08.1969 granted absolute stay till the appeal is decided by ITAT and relying upon the decision of Kerala High Court and MP High Court, directed the Tribunal to decided the appeals and till then granting absolute stay, directed the Assessing Authority not to insist on payment of 25% of the impugned demand. The relevant extract from the said judgment is also quoted hereinbelow for reference.

".... Learned counsel for the petitioner also places reliance on a judgment of K.P. Varghese v. ITO [1981] 131 ITR 597, in which the apex court had taken a view that circulars of the Central Board of Direct Taxes dated July 7, 1964, and January 14, 1974, are binding on the Department. Therefore, in view of the law laid down by the apex court, the Kerala High Court, the Madhya Pradesh High Court and this court, this proposition cannot be disputed that the circulars issued by the Central Board of Direct Taxes are binding on the authorities exercising the powers under the taxing statute and have sufficient force of law.

"43. Under the circumstances, we are of the view that the Assessee would, in normal course, be entitled to an absolute stay of the demand on the basis of the above Instruction."

Mr. Jolly, who appeared on behalf of the respondent, submits that Instruction No. 95 which formed the basis of the decision of this Court in Valvoline Cummins Ltd.'s case now stands superseded by Instruction No. 1914 of 1993 dated 2.12.1993. Mr. Jolly handed over a copy of the said instruction. The relevant portion of the said instruction reads as under:

(Hon'ble Delhi High Court has quoted only relevant portion of Instruction 1914 dt: 2/12/1993, however, for ready reference, full text of the said Instruction 1914 is reproduced)

A. Responsibility

 (i)  It shall be the responsibility of the Assessing Officers and the TRO to collect every demand that has been raised, except the following:

(a)  Demand which has not fallen due;

(b)  Demand which has been stayed by a Court or ITAT or Settlement Commission;

(c)  Demand for which a proper proposal for write off has been submitted;

(d)  Demand stayed in accordance with paras B and C below:

(ii)  Where demand in respect of which a Recovery Certificate has been issued or a statement has been drawn, the primary responsibility for the collection of tax shall rest with the TRO.

(iii)  It would be the responsibility of the supervisory authorities to ensure that the Assessing Officers and the TROs take all such measures, as are necessary to collect the demand. It must be understood that mere issue of a show cause notice with no follow up is not to be regarded as adequate effort to recover taxes.

B. Stay petitions

 (i)  Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the taxpayer. The assessee must be intimated of the decision without delay.

(ii)  Where stay petitions are made to the authorities higher than the Assessing Officer (DC/CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately.

(iii)  The decision in the matter of stay of demand should normally be taken by Assessing Officer/TRO and his immediate superior. A higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances e.g., where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee. The higher authorities should discourage the assessee from filing review petitions before them as a matter of routine or in a frivolous manner to gain time for withholding payment of taxes.

C. Guidelines for staying demand

A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are :

 (i)  It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to such disputed points. Further where it is subsequently found that the assessee has not cooperated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive.

(ii)  In granting stay, the Assessing Officer may impose such conditions as he may think fit. Thus he may - a. require the assessee to offer suitable security to safeguard the interest of revenue; b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in instalments; c. require an undertaking from the assessee that he will co-operate in the early disposal of appeal failing which the stay order will be cancelled; d. reserve the right to review the order passed after expiry of a reasonable period, say up to 6 months, or if the assessee has not co-operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; e. reserve a right to adjust refunds arising, if any, against the demand.

(iii)  Payment by instalments may be liberally allowed so as to collect the entire demand within a reasonable period not exceeding 18 months.

(iv)  Since the phrase "stay of demand" does not occur in section 220(6) of the Income-tax Act, the Assessing Officer should always use in any order passed under section 220(6) [or under section 220(3) or section 220(7)], the expression that occurs in the section viz., that he agrees to treat the assessee as not being default in respect of the amount specified, subject to such conditions as he deems fit to impose.

(v)  While considering an application under section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order.

D. Miscellaneous:

 (i)  Even where recovery of demand has been stayed, the Assessing Officer will continue to review the situation to ensure that the conditions imposed are fulfilled by the assessee failing which the stay order would need to be withdrawn.

(ii)  Where the assessee seeks stay of demand from the Tribunal, it should be strongly opposed. If the assessee presses his application, the CIT should direct the departmental representative to request that the appeal be posted within a month so that Tribunal's order on the appeal can be known within two months.

(iii)  Appeal effects will have to be given within 2 weeks from the receipt of the appellate order. Similarly, rectification application should be decided within 2 weeks of the receipt thereof. Instances where there is undue delay in giving effect to appellate orders, or in deciding rectification applications, should be dealt with very strictly by the CCITs/CITs.

3. The Board desires that appropriate action is taken in the matter of recovery in accordance with the above procedure. The Assessing Officer or the TRO, as the case may be, and his immediate superior officer shall be held responsible for ensuring compliance with these instructions.

4. This procedure would apply mutatis mutandis to demands created under other Direct Taxes enactments also."

Relying upon the said Instruction No. 1914 of 1993, Mr. Jolly submitted that all previous instructions stood superseded which included the supersession of said Instruction No. 95. He further submitted that paragraph No. 2(C), which deals with guidelines for staying demand, specifically requires that a demand be stayed only if there are valid reasons for doing so and that a mere filing of an appeal against the assessment order will not be a sufficient reason for staying recovery of a demand.

Having considered the arguments advanced by the learned Counsel for the parties, we are of the view that although Instruction No. 1914 of 1993 specifically states that it is in supersession of all earlier instructions, the position obtaining after the decision of this Court in Valvoline Cummins Ltd. (supra) is not altered at all. This is so because paragraph No. 2(A) which speaks of responsibility specifically indicates that it shall be the responsibility of the Assessing Officer and the TRO to collect every demand that has been raised "except the following", which includes ("d) demand stayed in accordance with the paras B and C below". Para B relates to stay petitions. As extracted above, Sub-clause (iii) of para B clearly indicates that a higher/superior authority could interfere with the decision of the Assessing Officer/TRO only in exceptional circumstances. The exceptional circumstances have been indicated as-"where the assessment order appears to be unreasonably high pitched or where genuine hardship is likely to be caused to the assessee". The very question as to what would constitute the assessment order as being reasonably high pitched in consideration under the said Instruction No. 95 and, there, it has been noted by way of illustration that assessment at twice the amount of the returned income would amount to being substantially higher or high pitched. In the case before this Court in Valvoline Cummins Ltd. (supra) the assessee's income was about eight (8) times the returned income. This Court was of the view that was high pitched. In the present case, the assessed income is approximately 74 times the returned income and obviously, this would fall within the expression "unreasonably high pitched". (emphasis supplied)

The aforesaid issue is thus no more res integra and thus the impugned order is not sustainable. A figure of 8 times and 74 times has been classified as "unreasonably high pitched". In the present case it is 350 times and so falls under the same nomenclature.

Consequently, the operation of the impugned order is stayed till the disposal of the writ petition. The natural consequence would be that any attachment order issued in pursuance to the impugned order would not have any effect.

The views expressed, of course, are only prima facie in nature.

The application stands disposed of."

47. In the case of Bharat Heavy Electrics Ltd. v. State of Karnataka [2006] 147 STC 638 (Karn) (FB), the Karnataka High Court has held as under:

"Sub-section (6) of Section 23 does not relate to the power of High Court to pass interim orders during the pendency of revision. It does not bar or prohibit, granting of stay, pending disposal of the revision petition. It only requires the dealer to pay the tax in regard to the assessment made irrespective of the fact that a revision petition has been filed against the order of the Appellate Tribunal, under Section 23 (1). The effect of it is that where that revision is by the State, the dealer cannot postpone payment of tax, merely on the ground that the order of the Tribunal is challenged by the State itself. Similarly, where the dealer has challenged the order of the Tribunal in a revision petition, he cannot postpone the payment of tax merely on the ground that a revision petition filed by him is pending. In other words, the effect of sub-section (6) is that mere filing of a revision does not act as an automatic stay of recovery of tax. But that does not mean that sub-section (6) can be construed as barring the High Court from granting stay. The Legislature has not made any express provision regarding stay. Nor is there any express prohibition regarding granting of stay pending disposal of the revision petition. In the absence of an express bar, the principle is that the express grant of statutory power of revision or appeal carries with it by necessary implication, the implied power to make such grant of revisional/appellate power effective, and such implied power includes the power to grant stay pending decision.

The proviso to sub-section (3) of Section 13 specifically provides that where a dealer or other person has applied for revision of an order made under the Act and has complied with the conditions of any order made by the revising authority in regard to payment of tax, no proceedings for recovery under section 13 (3) shall be taken or continued until the disposal of such revision petition. It follows that section 13 (3) impliedly recognizes the power of the High Court to grant stay or pass other interim orders in regard to the amount due, in proceedings under Section 23. Thus, the inherent or incidental power of the High Court with reference to the revisional jurisdiction under Section 23 or the appellate jurisdiction under section 24 will include the power to grant stay pending disposal of the revision or the appeal, as the case may be."

48. In the case of National Thermal Power Co. Ltd. v. Commissioner of Income Tax [1998] 229 ITR 383, the Hon'ble Supreme Court has held as under:

"Under Section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal."

49. In the case of Rajan Nair v. ITO [1987] 165 ITR 650 (Ker), the Kerala High Court has held that in exercise of power under Section 220 (6) of the Act, the ITO should not act as a mere tax gatherer but as a quasi-judicial authority vested with the power of mitigating hardship to the assessee. More so, in the case of Gajanand Agencies v. ITO [1994] 121 CTR (Ker), it was held that ITO directing payment of demand instalments is only another mode of recovery and cannot be treated as on order under Section 220 (6). A prima facie being made out, the order of ITO and CIT was set aside and the payment of demand was stayed till decision of first appeal. The CIT (A) was directed to dispose off the appeal within three months.

50. The Hon'ble Supreme Court in the case of Union of India v. Umesh Dhaimode 1998 (98) E.L.T. 584 (SC) held as under:-

"2. As the order under appeal itself notes, the aforesaid provision vested the appellate authority with powers to pass such order as it deemed fit confirming, modifying or annulling the decision appealed against. An order of remand necessarily annuls the decision which is under appeal before the appellate authority. The appellate authority is also invested with the power to pass such order as it deems fit. Both these portions of the aforesaid provision, read together, necessarily imply that the appellate authority has the power to set aside the decision which is under appeal before it and to remand the matter to the authority below for fresh decision."

51. In view of aforesaid legal position culled out from different judgments & there being no contrary view available before this Court cited from the side of Revenue or otherwise, this Court is inclined to hold that first appellate authority, namely; Deputy Commission of Income Tax (Appeals) or Commissioner of Income Tax (Appeals) have inherent, implied and ancillary powers to grant stay against the recovery of disputed demand of tax while seized of the appeal filed before them in accordance with Section 246 or 246A of the Act. There is yet another reason for holding so, and such inherent powers have to be inferred even in the absence of any specific statutory provision conferring the power to grant stay upon such authorities under the Act.

52. The powers of Assessing Officer under Section 220 (6) of the Act, cannot be said to be power to grant stay against the recovery of disputed demand. The said provisions as quoted above, only give discretion to the Assessing Authority, not to treat the assessee in default subject to such conditions as he may think fit, to impose in the circumstances of the case, so long as such appeal filed under Section 246 or 246A of the Act is pending, so as to save the assessee from the consequences, which would otherwise follow, if the assessee is to be treated as 'assessee in default', namely, payment of interest under Section 220(2) and penalty under Section 221 of the Act. Section 220(3) of the Act empowers the Assessing Officer to extend the time for payment or allow payment by instalments, while Section 220 (3) of the Act gives power to Chief Commissioner or Commissioner to reduce or waive the amount of interest paid or payable by the assessee subject to three conditions, as enumerated thereunder. Sub-Section (7) of Section 220 makes a departure from sub-Section (6), and in cases where assessee has been assessed in respect of income arising outside India in the country, the laws of which prohibit or restrict the remittance of money to India, the Assessing Officer shall (as against words 'may' used in S.220 (6), here it is mandatory) not treat the assessee as in default of respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed. The words used in sub-Section (6) are "may" whereas the words used in sub-Section (7) are "shall".

Where on account of prohibition in law against the remittance of money to India results in automatic protection and sub-Section (7) mandates the Assessing Officer not to treat the assessee in default, the mere use of word 'may' in sub-Section (6), which normally give a discretion to the Assessing Officer, cannot be construed to mean that except the type of cases covered under sub-Section (7), the Assessing Officer cannot use such discretion, normally in favour of assessee, particularly where high pitched assessments are made and it results into situation like the demand of tax being more than twice or still higher than the declared tax liability, in the spirit of Instruction No.95 dated 21.08.1969 to grant such stay or to treat the assessee not in default in all such cases. The last words of sub-Section (6), "as long as such appeal remains undisposed of" are not without significance. The mandate of Parliament in sub-Section (6) seems to be that the lower Assessing Officer should abide by and being bound by the decision of the appellate authority, should normally wait for the fate of such appeal filed by the assessee. Therefore, his discretion of not treating the assessee in default, conferred under sub-Section (6) should ordinarily be exercised in favour of assessee, unless the overriding and overwhelming reasons are there to reject the application of the assessee under Section 220 (6) of the Act. The application under Section 220 (6) of the Act cannot normally be rejected merely describing it to be against the interest of Revenue if recovery is not made, if tax demanded is twice or more of the declared tax liability. The very purpose of filing of appeal, which provides an effective remedy to the assessee is likely to be frustrated, if such a discretion was always to be exercised in favour of revenue rather than assessee.

53. The tendency of making high-pitched assessments by the Assessing Officers is not unknown and it may result in serious prejudice to the assessee and miscarriage of justice and sometimes may even result into insolvency or closure of the business if such power was to be exercised only in a pro revenue manner. It may be like execution of death sentence, whereas the accused may get even acquittal from higher appellate forums or courts. Therefore, this Court is of the opinion that such powers under sub-Section (6) of Section 220 of the Act also have to be exercised in accordance with the letter and spirit of Instruction No. 95 dated 21.08.1969, which even now holds the field and its spirit survives in all subsequent CBDT Circulars quoted above, and undoubtedly the same is binding on all the assessing authorities created under the Act.

54. The submissions of the learned counsel for the petitioner that Income Tax Act does not provides for any pre-deposit of portion of disputed demand of tax unlike other enactments like, Central Excise Act, Customs Act and Sales Tax laws of various States, is not really very relevant in the matter. Since, it is for the Parliament to enact the laws and make provisions and whether such requirement is there or not in the Income Tax Act, it is not for this Court to make any comment upon that. However, since this Court has already held that power to grant stay is inherent in the power to decide the appeal even by the first appellate authority, it is not necessary to further go into this submission.

55. Likewise, this Court would abstain from commenting upon the conspicuous absence of provision akin to Section 254 (2A) and (2B) conferring such powers to grant stay upon the Income Tax Appellate Tribunal purportedly brought in pursuance of judgment of the Hon'ble Supreme Court in the case of M.K. Mohammed Kunhi (supra) and not conferring such powers upon first appellate authorities also and it is for the Parliament to consider the requirement of enacting similar provisions in this regard for first appellate authorities under the Act, though this legal position enunciated by various High Courts in this regard, as quoted above, makes it an eminently a fit and deserving amendment in law.

56. However, this Court respectfully following the Division Bench observations of Delhi High Court in the case of Valvoline Cummins Ltd. (supra), would again urge the Central Board of Direct Taxes to issue appropriate guidelines for grant of stay in the spirit of Instruction No.95 dated 21.08.1969 to all the subordinate authorities and to clarify for uniform application all over the country at department level that first appellate authority shall have power to entertain and decide stay application during pendency of appeal before it upon relevant considerations for grant of stay against recovery of disputed demand of tax.

57. Turning back to the facts of the present case, as already narrated above, the income assessed by the Assessing Officer is almost 47 times of the income declared by the assessee viz. Rs. 1,44,42,320/- against the declared income of Rs.3,48,140/-. The disputed demand of tax also would be almost the same multiples of the declared and admitted tax liability or may be more because of interest and penalties. The main additions are trading additions on the basis of GP rates, the validity of which is subject matter of appeal before the C.I.T. (Appeals). Therefore, applicability of Instruction No.95 dated 21.08.1969, in the present case, is beyond the pale of doubt. Against the net demand of Rs. 58 lacs raised vide Annex-5 dated 21.01.2011 for AY 2008-09, the assessee has been made to pay Rs. 5 lacs already besides his admitted tax liability as already paid by him before filing the return of income. Thus, this Court would stay the recovery of entire balance amount from the petitioner-assessee, while directing the C.I.T. (Appeals) to dispose of the pending appeal of the assessee within a period of six months from today. The attachment of bank accounts of the petitioner-assessee already attached by the respondent-Assessing Authority are also be lifted and the assessee will be free to operate its bank accounts.

58. As already held, since the C.I.T. (Appeals) also has inherent and implied powers to grant stay, the assessee-petitioner may also file stay application before the C.I.T. (Appeals), who may also consider such stay application on its own merits upon the relevant factors as enumerated above viz. prima facie case, balance of convenience, irreparable injury, nature of demand and hardship likely to be caused to the assessee, liquidity available to the assessee etc. It is directed that all the first appellate authorities in the cases of other appellant assessees within the State of Rajasthan also, would entertain stay applications filed before them during the pendency of appeals and would decide the same on their own merits in future also. The assessing authorities will also decide applications under Section 220 (6) of the Act in accordance with Instruction No.95 dated 21st August, 1969 and observations made herein before.

59. Writ petition is accordingly allowed. No order as to costs.