- (1.) 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.
(2.) 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 Section 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 Article 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.
(3.) 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 Section 220 (1) any amount specified in the notice of demand under Section 156 has to be paid within 35 days of the service of the notice or within such lesser periods as may be specified under the proviso to sub-section (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 Section 220 provides that where an assessee has presented an appeal under Section 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. Section 221 provides for the imposition of penalty when the assessee is in default. Section 222 to 224 relate to the issuance of a certificate to the Tax Recovery Officer. Under Section 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 section in terms relate to recovery of tax, but by virtue of Section 229 any penalty imposed is also recoverable in the same manner. Section 246 to which reference has been made in Section 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 Sections 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 Clauses (a), (b) and (c) of sub- section (1) may appeal to the tribunal. The Commissioner is also entitled to direct the Income Tax Officer to the an appeal against the order of an Appellate Assistant Commissioner made under Section 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. Sub-sections (5) and (6) of this section need alone be noticed: "255 (l) . . . . .. .. . . . . . . . . . . (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 shall for the purpose of discharging its functions, have all the powers which are vested in the Income-tax authoritites referred to in Section 131, and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purpose of Section 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 Section 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 repeat of the matters specified in the section. But these powers relate to discovery and inspection; enforcing the attendance of witness; compelling production of books of account etc. issuing commissions and allied matters.;