Section 254(2A) third provisio declared unconstitutional: DHC

The Delhi High Court struck down an expression in third proviso to Section 254(2A) of Income Tax Act that stipulated Income Tax Appellate Tribunal has no power to grant extension of stay beyond 365 days even if the delay in disposing of the appeal is not attributable to the assesse as being violative of the Constitution.

“……we find that the insertion of the expression – ‘even if the delay in disposing of the appeal is not attributable to the assessee’– by virtue of the Finance Act, 2008, violates the non-discrimination clause of Article 14 of the Constitution of India”, a Division Bench of the Court said.

“Assessees who, after having obtained stay orders and by their conduct delay the appeal proceedings, have been treated in the same manner in which assessees, who have not, in any way, delayed the proceedings in the appeal. The two classes of assessees are distinct and cannot be clubbed together. This clubbing together has led to hostile discrimination against the assessees to whom the delay is not attributable”, the Court said.

The Court further added, “The object that appeals should be heard expeditiously and that assesses should not misuse the stay orders granted in their favour by adopting delaying tactics is not at all achieved by the provision as it stands. On the contrary, the clubbing together of ‘well behaved’ assesses and those who cause delay in the appeal proceedings is itself violative of Article 14 of the Constitution and has no nexus or connection with the object sought to be achieved.”

The Court said that Section 254(2A) had to be read down in such a manner that even if the period of 365 days from the initial grant of stay had expired, the Tribunal could extend the stay granted, provided the delay was not attributable to the assessee.

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