Summary
The Supreme Court upheld the invalidation of automatic vacation of an Income Tax Appellate Tribunal stay after 365 days where the assessee did not cause the delay. Treating responsible and blameless assessees alike was discriminatory and manifestly arbitrary, including where the Revenue or Tribunal caused the delay. The third proviso to section 254(2A) was to be read without the specified words, so vacation under it depends on delay attributable to the assessee.
Issues
- Whether automatic vacation of a stay despite delay not attributable to the assessee violates Article 14.
Provisions considered
- Section 254(2A), third proviso as amended by Finance Act, 2008, Income-tax Act, 1961The Court removed the words imposing automatic vacation notwithstanding the assessee’s lack of responsibility for delay. (¶¶ 10, 17, 25)
- Article 14, Constitution of IndiaThe proviso failed both the non-discrimination and manifest-arbitrariness tests; tax legislation is also subject to these standards. (¶¶ 14-17, 21-24)
Held
- Tribunal stay power is ancillary to an effective statutory appeal and is exercised in deserving cases, rather than routinely. The statutory appeal’s origin does not immunise oppressive conditions from constitutional review. (¶¶ 6, 19-20)
- The third proviso treated assessees who delayed proceedings in the same way as those who did not, despite recognising that distinction in the second proviso. Automatic vacation for Tribunal delay, or even delay caused by the Revenue, was irrational and disproportionate and could render effective appellate relief illusory. (¶¶ 17, 22-23)
- Legislative latitude in taxation does not permit a discriminatory or manifestly arbitrary policy. Authorities concerning strict construction of tax liability or exemption did not answer this constitutional challenge to the appellate stay provision. (¶¶ 14-17, 21-24)
- The third proviso must be read without “even” and without “is not” following the words concerning delay in disposing of the appeal. Consequently, a stay stands vacated under the specified time limits only if the delay is attributable to the assessee. The ruling does not confer an unconditional automatic stay in every appeal. (¶ 25)
Result
Revenue appeals dismissed. Delhi High Court’s declaration and following High Court judgments upheld; third proviso to section 254(2A) to operate with the specified words removed.