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PETITIONER: INCOME TAX OFFICER

       Vs.

RESPONDENT: M.K. MOHAMMED KUNHI

DATE OF JUDGMENT: 11/09/1968

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C. RAMASWAMI, V.

CITATION:  1969 AIR  430            1969 SCR  (1)  65  CITATOR INFO :  E          1986 SC 421  (27)  R          1992 SC2279  (37)

ACT: Income-tax Act (43 of 1961), ss. 254 and 255-Amount  imposed as   penalty  on  assessee-Appeal  to  Appellate   Tribunal- Tribunal’s  power  to  grant stay  of  recovery  of  penalty pending appeal.

HEADNOTE: Certain  amounts were imposed as penalty upon  the  assessee (respondent)  under ss. 271(1)(c) and 274(2) of the  Income- tax Act, 1961, for concealment of particulars of income  and for   furnishing  inaccurate  particulars.    The   assessee preferred  appeals before the Appellate Tribunal and  prayed for  stay of recovery of the penalties pending  disposal  of the appeals, but the Tribunal declined to stay on the ground that it had no power to do so.  The assessee moved the High. Court  under  Art.  226 and the High  Court  held  that  the Tribunal had the power to stay and directed the Tribunal  to dispose of the stay application in accordance with law. In appeal to this Court,     HELD:  The Tribunal has the power to order the  stay  of recovery of the penalty as an incidental and ancillary power to its appellate jurisdiction. [72 C]     Under  s. 220(6) the Income-tax Officer has a power  not to  treat  an assessee as being in default, when  an  appeal under  s.  246  before  the Appellate Assistant Commissioner is  pending.   But neither the Income-tax  Officer  nor  any other  departmental  officer  has  the  power  to  stay  the recovery  of  penalty when an appeal is pending  before  the Tribunal. The Act is silent in that behalf, and there is  no provision  in the Act or the Income-tax  Appellate  Tribunal Rules,  1963,  granting  expressly  such  a  power  to   the Tribunal.   That  is because, the Tribunal,  though  not   a court, exercises in its appellate jurisdiction under s.  254 judicial powers of an appellate court of the widest possible amplitude  ’and such a statutory power impliedly grants  the power of doing all such acts, or employing such means as are essentially necessary to the execution of such  jurisdiction and carries with. it the power to stay proceedings in proper

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cases.   In  view  of the special nature  of  taxation  ’and revenue  laws.  such power can be exercised  after  imposing conditions  for safeguarding the revenue only  in  deserving and  appropriate  cases where the appeal will  be  otherwise frustrated or rendered nugatory.  The general principle that in  a  taxing  statute there is no room for  what  could  be called  equitable  construction applies only to  the  taxing part of the statute and not to its procedural part. [68 C-E; 69 E; 70 D-E; 72 F-G]     Burhanpur Tapti Mills Ltd. v. Board of Revenue,   Madhya Pradesh, (1955) 6 S.T.C. 670, referred to.     Observations   in   Vatcha  Sreeramamurthy   v.   I.T.O. Vizianagaram, (1956) 30 I.T.R. 252 at p. 271, disapproved.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1164 of 1966. 66     Appeal  by  special leave from the  judgment  and  order dated  September 27, 1965 of the Kerala High Court’ in  O.P. No. 688 of 1965.     D.  Narsaraju, S.A.L. Narayana Rao,  R.N. Sachthey   and B.D. Sharma, for the appellant. The respondent did not appear. The Judgment of the Court was delivered by     Grover,  J.  The short but important question  which  is involved in this appeal ’by special leave from a judgment of the  Kerala High Court is whether the  Appellate  Income-tax Tribunal   has the power, under the relevant  provisions  of the  Income tax Act, 1961, (hereinafter called the  Act)  to stay  the  recovery   of  the  realization  of  the  penalty imposed  by  the  departmental authorities  on  an  assessee during the pendency of an appeal before it.     The  assessee,  who  is  the  respondent,  was   imposed penalties  in the sum of Rs. 18,000/-, 1,700/- and  14,000/- respectively  in  respect of the assessment  years  1954-55, 1960-61 and 1961-62. These penalties were imposed .under  s. 271(1)(c) read with s. 274(2) of the Act for concealment  of particular  income  and furnishing  inaccurate  particulars. The assessee preferred  appeals to the Income tax  Appellate Tribunal  and made an interim prayer for stay of  collection of  the penalties imposed.  The Tribunal declined  to  order any  stay  holding  that it had no power  to  grant  such  a prayer.   The assessee then moved the High Court under  Art. 226  of  the  Constitution.  The High Court  held  that  the Tribunal  had the power to stay the proceedings as also  the collection  of the penalties pending the appeal  since  that power   was  incidental  and  ancillary  to  its   appellate jurisdiction.   The  Tribunal  was consequently directed  to dispose of the stay application in accordance with law.     The  relevant  provisions.  of  the  Act  may  be  first noticed.  Section 156 provides that when any tax,  interest, penalty, fine or any other sum is payable in consequence  of any order passed under the Act, the Income tax Officer shall serve upon the assessee a notice of demand in the prescribed form  specifying the sum so payable.  Under s. 220( 1 )  any amount specified in the notice of demand under s. 156 has to be  paid  within  35 days of the service of  the  notice  or within  such  lesser period as may be  specified  under  the proviso  to sub-s. (1 ).  If the amount is not  paid  within the period limited or extended (the assessee can ask for  an extension)  the assessee shall be deemed to be  in  default. Sub-section  (6) of s. 220 provides that where  an  assessee

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has presented an appeal under s. 246 the Income-tax  Officer may, in his  discretion and subject to such conditions as he may think fit, treat the assessee as not being in default so long as the  appeal .remains  pending. 67 Section  221  provides for the imposition of  penalty   when the  assessee is in default.  Sections 222 to 224 relate  to the  issuance of a certificate to the Tax Recovery  Officer. Under  s.   225  the Income tax Officer can  order  stay  of proceedings,  even after the certificate has been issued  to the Tax Recovery Officer.  It may be mentioned that the last four  sections  in terms relate to recovery of tax,  but  by virtue of s. 229 any penalty imposed is also recoverable  in the  same manner.  Section 246 to which reference  has  been made in s. 220(6) gives the appealable orders against  which an   assessee   may  appeal  to  the   Appellate   Assistant Commissioner. Appeals to the Tribunal are dealt with by  ss. 252 to 255.  Section 252 provides merely for constitution of the  Tribunal. Section 253 says that any assessee  aggrieved by the orders set out in cls. (a), (b) and (c) of sub-s. (1) may  appeal  to  the Tribunal.   The  Commissioner  is  also entitled to direct the Income-tax Officer to file an  appeal against  the  order of an Appellate  Assistant  Commissioner made  under s. 250.  Section 254 specifies the orders  which the Tribunal can make.  Sub-section (1 ) which is material may be reproduced below :--                     "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."               Section   255  gives  the  procedure  of   the               Appellate  Tribunal.  Subsections (5) and  (6)               of this section need alone be noticed.               "255 (1)  ............................                    (2)                    (3)                    (4)               (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  powers  or  of  the               discharge   of its functions,   including  the               places  at which the Benches shall hold  their               sittings.                     (6) The Appellate Tribunal shaH, for the               purpose of discharging its functions, have all               the powers which are vested in the  Income-tax               authorities  referred  to in s. 131,  and  any               proceeding before the Appellate Tribunal shall               be  deemed to be a judicial proceeding  within               the meaning of ss. 193 and 68               228  and  for  the purpose of s.  196  of  the               Indian  Penal  Code  (XLV  of  1860)  and  the               Appellate  Tribunal  shall be deemed to  be  a               civil  court for all the purposes  of  s.  195               and  Chapter  XXXV  of the  Code  of  Criminal               Procedure, 1898 (V of 1898)." Section 131 may at this stage be referred to.  It  gives  to the Income tax Officer, the Appellate Assistant Commissioner and  the Commissioner the same powers as are vested  in  the court  under the Code of Civil Procedure when trying a  suit in  respect  of the matters specified in the  section.   But

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these  powers relate to discovery and inspection;  enforcing the  attendance   of  witnesses;  compelling  production  of books  of  account  etc.;  issuing  commissions  and  allied matters.     There  can be no manner of doubt that by the  provisions of the Act or the Income-tax Appellate Tribunal Rules,  1963 powers have not been expressly conferred upon  the Appellate Tribunal  to  stay proceedings relating to the  recovery  of penalty or tax due from an assessee.  At the same time it is significant  that   under s. 220 (6) the power  of  stay  by treating  the  assessee as not being in default  during  the pendency  of  an  appeal has been given  to  the  Income-tax Officer  only  when an appeal has been  presented  under  s. 246  .which will be to the Appellate Assistant  Commissioner and not to the Appellate Tribunal.  There is no provision in s.  220  under which the Income-tax Officer or  any  of  his superior  departmental  officers can be moved  for  granting stay  in  the recovery of penalty or tax.  It  may  be  that under   s. 225  notwithstanding that a certificate has  been issued  to the Tax Recovery Officer for the recovery of  any tax  (the position will be the same with regard to  penalty) the Income tax Officer may grant time for the payment of the tax.   In  this  manner he can  probably  keep  on  granting extensions until the disposal of the appeal by the Tribunal. It  may also be that as a matter of practice  prevailing  in the department the Commissioner or the Inspecting  Assistant Commissioner  in exercise of administrative powers can  give the necessary relief of staying recovery to the assessee but that  can hardly be put at par with a statutory power as  is contained in s. 220(6)  which  is confined only to the stage of  pendency  of an appeal before  the  Appellate  Assistant Commissioner. The  argument advanced on behalf of the appellant before  us that in the absence of any express provisions in ss. 254 and 255  of  the  Act relating to stay of  recovery  during  the pendency of an appeal it must be held that no such power can be  exercised  by the Tribunal, suffers from  a  fundamental infirmity inasmuch as it assumes and proceeds on the premise that  the  statute confers such a power  on  the  Income-tax Officer who can give the  necessary           69 relief to an assessee.  The right of appeal is a substantive right and the questions of fact and law are at large and are open  to  review  by the  Appellate  Tribunal.   Indeed  the Tribunal has been given very wide powers under s. 254(1) for it may pass  such orders as it thinks fit after giving  full hearing to both the parties to the appeal. If the Income-tax Officer  and the Appellate Assistant Commissioner have  made assessments or imposed penalties raising very large  demands and  if the Appellate Tribunal is entirely helpless  in  the matter of stay or recovery the entire purpose of the  appeal can be defeated if ultimately the orders of the departmental authorities are set aside.  It is difficult to conceive that the  Legislature should have left the entire matter  to  the administrative  authorities  to  make such  orders  as  they choose  to pass in exercise of unfettered  discretion.   The assessee,  as has been pointed out before, has no  right  to even  move an application when an appeal is  pending  before the  Appellate Tribunal under s. 220 (6 ) and it is only  at the  earlier stage of appeal before the Appellate  Assistant Commissioner  that  the statute provides for such  a  matter being dealt with by the Income-tax Officer.  It is a  firmly established  rule that an express grant of statutory.  power carries with  it  by necessary implication the authority  to use  all  reasonable  means to  make  such  grant  effective

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(Sutherland  Statutory  Construction, Third  Edition,  Arts. 5401 and 5402).  The powers which have been conferred by  s. 254 on the Appellate Tribunal with widest possible amplitude must carry with them by necessary implication all powers and duties  incidental  and necessary to make  the  exercise  of those  powers,  fully  effective.   In  Domat’s  Civil   Law Cushing’s Edition, Vol. 1 at page 88, it has been stated:                      "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." Maxwell  on  Interpretation of Statutes,  Eleventh  Edition, contains a statement at p. 350 that "where an Act confers  a jurisdiction,  it impliedly also grants the power  of  doing all  such acts, or employing such means, as are  essentially necessary  to its execution. Cui jurisdiction data  est,  ea quoque  concessa  esse videntur,  sine  quibus  jurisdiction explicari non potuit."  An instance  is  given based on  Ex. parte Martin(x) that "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." (1) [1879] 4. Q.B.D. 212, 491. 70     The  High  Court  in the present case  has  referred  to certain decisions under the Motor Vehicles Act in which  the question  arose  whether an interim order of stay  could  be passed  although  s.  64(2) of the  Motor  Vehicles  Act  as amended did not expressly confer a power on the authority to pass  such  an order.  It was held in those cases  that  the power  to  stay was a necessary corollary to  the  power  to entertain an appeal or revision: Swarnambikar Motor  Service v.  Wahite Motor Service(D; Themmalpuram Bus Transport  Ltd. v.  The  Regional Transport Officer,  Malabar(2).  The  full bench  decision  in Dharmadas v. State  Transport  Appellate Tribunal(3)  related to the question whether a remand  could be ordered in exercise of appellate jurisdiction under s. 64 of  the  Motor Vehicles Act in the absence  of  any  express power  to that effect existing in the statute.  It was  held that  the power to remand was incidental to and implicit  in the  appellate jurisdiction created by s. 64.  According  to the  decision in the Burhanpur Tapti Mill Ltd. v. The  Board of  Revenue, Madhya Pradesh & Ors. (4), since the  Board  of Revenue had the power to adjudge the correctness of an order passed  by  the  Commissioner  under  s.  22B  reopening  an assessment  the Board had also the power to stay  the  fresh assessment    proceedings   started   by   the     Assistant Commissioner  in pursuance of that order.  It was said  that the general principle was that in a taxing statute there was no room for what could be called the equitable construction, but  that  principle applied only to the taxing part of  the statute and not to the procedural part.  It has further been observed  that "where the legislature invests  an  Appellate Tribunal  with powers to prevent an injustice, it  impliedly empowers  it  to stay the proceedings which  may  result  in causing further mischief."     It is well known that an Income-tax  Appellate  Tribunal is  not  a  court but it exercises  judicial   powers.   The Tribunal’s powers in dealing with appeals are of the  widest amplitude  and have in some cases been held similar  to  and identical  with  the powers of an appellate court under  the

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Civil   Procedure   Code. (See Commissioner of  Income  tax, Bombay  City  v.   Hazarimal Nagji & Co.(5)  and  New  India Assurance  Co.  Ltd. v. Commissioner of Income  tax,  Excess Profits, Bombay City(6). In Polini v. Grey(7), this is  what Jessel M.R. said about the powers of the Court of Appeal to. grant stay at page 443:                     "It appears to me on principle that  the               Court  ought  to  possess  that  jurisdiction,               because  the  principle  which  underlies  all               orders  for  the  preservation   of   property               pending   litigation   is   this,   that   the               successful party, is to Shortnotes (1956) 2M.L.J. 12.               (2) A.I.R.  1957 Kerala. 142. (3)  [1962]  Kerala L.J. 1133.                (4)  (1955)  6 S.T.C. 670. (5)46  I.T.R.  1168.                         (6)  31  I.T.R. 844.                                             (7)  [1879]   12 Ch. D. 438. 71               reap  the fruits of that litigation,  and  not               obtain   merely   a  barren   success.    That               principle,  as  it appears to me,  applies  as               much to the Court of first instance before the               first trial, and to the Court of Appeal before               the  second  trial, as to. the Court  of  last               instance  before  the  hearing  of  the  final               appeal". There  are certain decisions, however, in  which  difficulty was  felt  that the Appellate Tribunal did not  possess  the power   to  stay recovery during the pendency of an  appeal. In   Vetcha  Sreeramamurthy  v.  The  Income   tax   Officer Vizianagram  & Another(1), the assessee had to file  a  writ petition because the realisation of the tax assessed had not been  stayed  during the pendency of an  appeal  before  the Tribunal.   The controversy centred in that case  mainly  on the  scope of the discretionary power conferred by s. 45  of the Indian Income-tax Act, 1922, on the Income-tax  Officer. It  was held that a writ petition to compel  the  Income-tax Officer  to  exercise  his  discretion under  s.  45  or  to exercise  it honestly and, objectively was not barred.   But on the merits the Court declined  issue a writ.   Viswanatha Sastri  J.,  in  his separate judgment  made  the  following observations at page 271:                       "Lastly it has to ’be observed that s.               45  of  the Income-tax Act is somewhat cryptic               in its  terms and merely gives the  Income-tax               Officer power to declare a person to be not in               default  pending  the  appeal.   There  is  no               provision for stay similar to Order XLI, Rules               5 & 6, of the Civil Procedure Code.  There  is               no conferment of an express power of  granting               a  stay of realisation of the tax, though  the               effect  of an order in favour of the  assessee               under  s.  45 of the Act is a  stay.   Nor  is               there  a provision for allowing the tax to  be               paid   in instalments or  for taking  security               for  deferred  payment. Neither the  Appellate               Assistant  Commissioner   nor  the   Appellate               Tribunal  is  given  the  power  to  stay  the               collection of tax.  Whether the law should not               be  made  more,  liberal so as  to  enable  an               assessee  who  has  preferred  an  appeal,  to               obtain  from the appellate  forum, a  stay  of

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             collection of the tax, either in whole  or  in               part,   on furnishing suitable security, is  a               matter for the legislature to consider." It is interesting that in another case  Pollisetti  Narayana Rao  v. Commissioner of Income-tax, Hyderabad(2), the   same High  Court  held that stay could be granted by  it  pending reference  of a case by the Appellate Tribunal to  the  High Court.   This power  the High Court had under s. 151 of  the Civil Procedure Code and under Art. 227 of the Constitution. (1)  [1956] 30 I.T.R. 252.                   (2) [1956]   29 I.T.R. 222. 72     The  High  Court,  in the present case,  referred  to  a passage  from Halsbury’s Laws of England, 3rd Edition,  Vol. 20, p. 705 where 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." This statement is apparently based on the provisions of  the English  Statutes  and  it is not  possible  to  derive  any assistance from it.     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  s. 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 s. 254  confers  appellate jurisdiction,  it  impliedly grants the power of  doing  all such  acts,  or  employing such means,  as  are  essentially necessary  to  its execution and that  the  statutory  power carries with it the duty in proper cases to make such orders for  staying  proceedings  as will  prevent  the  appeal  if successful from being rendered nugatory.     A  certain  apprehension may legitimately arise  in  the minds  of the authorities administering the Act that if  the Appellate  Tribunals  proceed to stay recovery of  taxes  or penalties payable by or imposed on the assessees as a matter of  course the revenue will be put to great loss because  of the  inordinate  delay in the disposal of  appeals  by   the Appellate  Tribunals.  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 wilt  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.     For all the reasons given above, the appeal fails and it is   hereby   dismissed.   But  in  view   of   the   entire circumstances the parties are left to bear their own costs. V.P.S.                                                Appeal dismissed. 73