Case Note & Summary
The Supreme Court addressed the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act, 1961, which limited the extension of stay orders to 365 days, regardless of the reasons for delay in appeal hearings. The respondent, an Indian company, challenged this provision after a stay order was granted by the Income Tax Appellate Tribunal, which was subsequently vacated after the stipulated period. The Delhi High Court had previously struck down the provision, leading to the current appeals by the revenue. The court examined arguments from both sides regarding the discretionary nature of stay orders and the implications of the provision on the right to appeal. The court found that the provision treated all assessees equally, regardless of whether the delay was attributable to them, thus violating Article 14 of the Constitution. The court emphasized that the right to appeal should not be rendered nugatory due to delays not caused by the assessee. Ultimately, the court held the third proviso unconstitutional, allowing for extensions of stay orders beyond 365 days in cases where the delay was not the fault of the assessee.
Headnote
A) Constitutional Law - Discrimination - Violation of Article 14 - Income Tax Act, 1961, Section 254(2A) - The third proviso to Section 254(2A) was struck down as it treated assessees equally regardless of fault in delaying proceedings, violating the principle of non-discrimination. The court held that the provision rendered the right of appeal illusory for those not at fault, thus unconstitutional (Paras 107-109).
Issue of Consideration
Whether the third proviso to Section 254(2A) of the Income Tax Act, 1961 is constitutionally valid.
Final Decision
The Supreme Court struck down the third proviso to Section 254(2A) of the Income Tax Act, 1961, holding it unconstitutional for violating Article 14 of the Constitution. The court ruled that the Tribunal has the power to extend stay orders beyond 365 days in cases where the delay is not attributable to the assessee.
Law Points
- Constitutional validity
- stay orders
- Income Tax Act
- discrimination
- Article 14
