INCOME TAX OFFICER vs. M. K. MOHAMMED KUNHI

CIVIL APPEAL No. 1164/1966Supreme Court[1969] 2 S.C.R. 6511 September 1968Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER8 pages
AI SummaryDismissed

What were the facts?

The Income Tax Officer imposed penalties on the assessee under Sections 271(1)(c) and 274(2) of the Income-tax Act, 1961, for concealment and inaccurate particulars of income for assessment years 1954-55, 1960-61, and 1961-62. The total penalties amounted to Rs. 18,000, Rs. 1,700, and Rs. 14,000. The assessee appealed to the Appellate Tribunal and requested a stay of recovery pending the appeal. The Tribunal refused the stay, stating it lacked the power. The assessee then petitioned the High Court under Article 226, which held that the Tribunal did possess the power to grant a stay and directed it to consider the application. The Income Tax Officer appealed this High Court decision to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the Appellate Income-tax Tribunal possesses the power to order the stay of recovery of penalties as an incidental and ancillary power to its appellate jurisdiction. While the Act does not expressly grant this power to the Tribunal, Section 254, which confers appellate jurisdiction, implicitly grants the power to do all such acts as are essentially necessary for its execution. This includes the power to stay proceedings in proper cases to prevent an appeal from being rendered nugatory. The Court noted that Section 220(6) provides a mechanism for stay when an appeal is before the Appellate Assistant Commissioner, but the Act is silent for appeals before the Tribunal. The Court emphasized that this power should be exercised judiciously, only in deserving and appropriate cases where a strong prima facie case is made out and the appeal would otherwise be frustrated. Conditions may be imposed to safeguard revenue. The Court disapproved of observations in Vatcha Sreeramurthy v. I.T.O., Vizianagaram, which suggested the Tribunal lacked such power.

What were the issues?

1. Does the Appellate Income-tax Tribunal have the power to grant a stay of recovery of penalties imposed on an assessee during the pendency of an appeal before it, under the Income-tax Act, 1961? Assessee's Contentions (as inferred from the High Court's decision and the Tribunal's initial refusal): The assessee contended that the Tribunal, as an appellate authority, should possess the inherent power to grant a stay of recovery, as such a power is incidental and ancillary to its appellate jurisdiction. This power is necessary to prevent the appeal from becoming infructuous if the assessee is successful. Revenue's Contentions (as inferred from the appeal and the Tribunal's initial decision): The revenue contended that the Income-tax Act, 1961, and the Income-tax Appellate Tribunal Rules, 1963, do not expressly grant the Tribunal the power to stay the recovery of penalties pending an appeal. The Act is silent on this specific power for the Tribunal, unlike provisions for the Income-tax Officer under Section 220(6) concerning appeals before the Appellate Assistant Commissioner.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274(2),Section 220(6),Section 246,Section 254,Section 255(5),Section 131,Section 156,Section 221,Section 222,Section 223,Section 224,Section 225,Section 229,Section 252,Section 253

AI-generated summary — verify with the full judgment below

' ; A B c D E F G INCOME TAX OFFICER v. M. K. MOHAMMED KUNHI September 11, 1968 [J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] 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.

Certain amounts were imposed as penalty upon the assessee (respon· dent) under ss. 27l(l)(c) and 274(2) of the Income-tax Act, 1961, for concealment of particulars of income and for furnishing inaccurate parti .. culars.

The assessee preferred appeals before the Appellate Tribunal and prayed for stay of recoV<ry of the penalties pending disposal of the ap- peals, 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 juris- di1tion. [72 CJ Under s. 220(6) the Income-tax Of

The order continues below.

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