Monday, February 7, 2011

ITAT(MUM):- Filing stay application before the lower authorities is directory and mandatory for filing stay application before ITAT

Filing stay application before the lower authorities is directory and mandatory for filing stay application before ITAT

In brief :- In the case of DHL Express (India) P Ltd. v. ACIT [SA No. 119/Mum/2010], dated 19 November, 2010, the Mumbai Income Tax Appellate Tribunal ("Tribunal") has held that stay application arising out of the assessment order passed by the Assessing Officer ("AO") in pursuance to the direction of the Dispute Resolution Panel ("DRP") under section 144C of the Income-tax Act, 1961 ("the Act"), is maintainable before the Tribunal. Filing of stay application before lower authorities is directory, and not mandatory, for filing stay application before the Tribunal.

Facts

• This is the first year wherein the assessee could have opted for DRP route instead of the conventional route (i.e., filing of an appeal before the Commissioner of Income tax (Appeals) against the assessment order passed by the AO.

• The assessee had adopted the DRP route. Accordingly, against the order of the AO, it had filed an appeal before the Tribunal.

• Thereafter, it filed a stay application before the Tribunal requesting for stay against recovery of outstanding demand raised by the AO. Further, it had not approached the revenue authorities viz., AO, Additional Commissioner and Commissioner of Income-tax requesting for stay against the recovery of outstanding demand.

Issue :*Whether the Tribunal is empowered to grant stay where the assessee had taken DRP route and had not filed any stay application before the revenue authorities.

Assessee's contentions

• In view of the procedure for filing of stay application, prescribed under Rule 35A of the Appellate Tribunal Rules, 1963 ("the Rules"), the assessee had taken a position that only in case a stay application is filed before the revenue authorities, the same is required to be filed alongwith the stay application before the Tribunal and not otherwise.

• In the assessee's case, since no stay application was filed before the revenue authorities, no correspondence was enclosed with the stay application to the Tribunal.

• The assessee had requested for full stay against recovery of outstanding demand and out-of-turn hearing of its appeal.

Revenue's contentions

• Relying on the Mumbai Tribunal decision in the case of RPG Enterprises Ltd. v. DCIT [2001] 74 TTJ 391 (Mum), the revenue insisted that the assessee ought to have approached the Commissioner for grant of stay of the disputed demand, which would give an opportunity to study the case, gather necessary data and protect revenue's interest.

• The assessee should be directed to pay forthwith the entire outstanding demand.


Tribunal

• In the instant case, the assessment order had been framed in conformity with the directions of the DRP under section 144C of the Act and therefore, the assessee had filed an appeal directly before the Tribunal.

• In the view of the Tribunal, it was not mandatory on the part of the assessee to move an application before revenue authorities for granting stay of outstanding demand. Such a requirement is directory and not mandatory.

• As the Tribunal was satisfied that the assessee had a prima facie case, the Tribunal directed the assessee to pay around 20% of the outstanding demand and stayed the recovery of the balance demand till the disposal of the appeal, or for a period of six months from the date of order, whichever is earlier.

• It also granted an out-of-turn hearing of the appeal.

Conclusion:-This decision of the Tribunal is the first decision adopting such an approach against an order passed by the AO in conformity with the directions of the DRP. Such an approach of the Tribunal will expedite the process of obtaining a stay order and also provide an early disposal of the quantum appeal before the Tribunal.

Source : DHL Express (India) P Ltd. v. ACIT [SA No. 119/Mum/2010]

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