M/S. HEXA INDUSTRIES PVT. LTD.,CHENNAI V. DCIT, CORPORATE CIRCLE - 2 (2), CHENNAI

SA 60/CHNY/2025

AI Insights

The case involves M/s. Hexa Industries Pvt. Ltd., which filed a stay application against the recovery of a disputed tax demand of \\u20b936,67,21,379/- for the assessment year 2017-18. The Tribunal had previously granted stays under certain conditions, which the assessee fulfilled by offering immovable property as security. The appeal was heard multiple times, and due to administrative difficulties, it was listed for fresh hearing without the assessee's request for adjournment. The Department of Revenue opposed the stay based on the third proviso to sub-section 2A of section 254 of the Income Tax Act, but the assessee countered with a Supreme Court decision that read down this proviso as arbitrary and discriminatory.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717001 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Stay Application
• Pronouncement Date: 20-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Appeal Filed On: 30-06-2025
• Other Referred Cases: DCIT v. Pepsi Foods Ltd. [2021] 433 ITR 295 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREENIVASAN
• Assessee Lawyers: AJAY VOHRA; VIRTUAL; ADITYA VOHRA
• Keywords: Application of stay; Extension of stay

Judgement Text

"आयकर अपीलीय अिधकरण, ’डी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क े समƗ । Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Jagadish, Accountant Member S.A. No. 60/Chny/2025 [In I.T.A. No. 753/Chny/2020] िनधाŊरण वषŊ/Assessment Year: 2017-18 M/s. Hexa Industries Pvt. Ltd., No. 1, Subbaraya Avenue, Trimex Towers, CP Ramaswamy Iyer Road, Chennai 600 018. [PAN: AADCH1028B] Vs. The Deputy Commissioner of Income Tax, Corporate Circle 2(2), Chennai. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri Ajay Vohra, Advocate (Virtual) & Shri Aditya Vohra, Advocate ŮȑथŎ की ओर से/Respondent by : Shri AR V Sreenivasan, CIT सुनवाई की तारीख/ Date of hearing : 14.08.2025 घोषणा की तारीख /Date of Pronouncement : 20.08.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This stay application is filed by the petitioner seeking grant of stay from recovery of outstanding disputed demand of ₹.36,67,21,379/- till the final disposal of the appeal of the assessee for the assessment year 2017-18. 2. The ld. AR Shri Aditya Vohra, Advocate for Shri Ajay Vohra, Advocate submits that this Tribunal originally granted stay for a period Printed from counselvise.com S.A. No.60/Chny/25 2 of six months vide its order in S.P.No.157/Chny/2020 dated 08.01.2021 with a condition that the assessee shall furnish bank guarantee equal to 20% of the disputed tax demanded as collateral or the assessee to offer security of immovable property to the satisfaction of the Assessing Officer for the amount equal to the total disputed tax demanded. Since the assessee fulfilled the above condition to offer security of immovable property, the Tribunal vide its order in SP No. 17/Chny/2021 dated 16.07.2021 granted extension of stay for a period of three months vide its order dated 22.10.2021 and 23.12.2021 for two months and three months respectively. The ld. AR submits that after hearing extensive arguments from both sides, the appeal was considered as heard and reserved for orders vide daily order sheet dated 08.02.2022. Thereafter, the appeal was listed for clarification and upon hearing on 04.07.2022 treated the appeal as heard on that date. He submits that the appeal was subsequently considered as de-heard for want of clarification and administrative difficulties. The assessee realised only vide order sheet entry dated 11.10.2022 that the appeal is posted for fresh hearing. Since the assessee has not sought for any adjournment till date, the delay in disposal of the appeal is not attributable to the assessee, the ld. AR prayed for grant of stay of Printed from counselvise.com S.A. No.60/Chny/25 3 recovery of outstanding demand till the final disposal of the appeal for the assessment year 2017-18. 3. The ld. DR Shri AR V Sreenivasan, CIT opposed for grant of stay and relied on 3rd proviso to sub-section 2A of section 254 of the Act. 4. In reply to the submissions of the ld. DR, the ld. AR relied on the decision of the Hon’ble Supreme Court in the case of DCIT v. Pepsi Foods Ltd. [2021] 433 ITR 295 (SC) and argued vehemently that the Hon’ble Supreme Court read down the 3rd proviso to section 254(2A) of the Act. 5. We have heard both the parties and perused the material available on record. We find that the assessee filed the stay application originally on 01.09.2020, wherein, this Tribunal granted stay of the disputed tax demanded for a period of six months or till the final disposal of the appeal, whichever is earlier, subject to the condition that the assessee to furnish bank guarantee equal to 20% of the disputed tax demanded as collateral or the assessee to offer security of immovable property to the satisfaction of the Assessing Officer for the amount equal to the total disputed tax demanded. We find that in response to the said stay order, the assessee offered immovable Printed from counselvise.com S.A. No.60/Chny/25 4 property held in its subsidiary entities as security vide its letter dated 05.02.2021 and 05.03.2021. Further the assessee also furnished details of the sale deed, survey Nos. Land extent details and audited financial statement to the satisfaction of the Assessing Officer. Acknowledging the same, the Tribunal extended the stay for further period of 2 months vide order dated 16.07.2021 by noting that the assessee duly complied with the conditions imposed upon by offering security in the form of immovable property to the satisfaction of the Assessing officer. We note that further stay was extended for a period of two months and 3 months from the date of stay order vide order dated 22.10.2021 and 23.10.2021 respectively. Pursuant to the stay granted, the appeal was listed for hearing on multiple dates and the assessee duly appeared on such dates. We note that the appeal was considered as heard and reserved for orders vide daily order sheet dated 08.02.2022. Thereafter, the appeal was listed for clarification and upon hearing on 04.07.2022 treated the appeal as heard on that date. He submits that the appeal was subsequently considered as de-heard for want of clarification and administrative difficulties. We note that the assessee has not sought for any adjournment till date, in our opinion, the delay in disposal of the appeal is not attributable to the assessee Printed from counselvise.com S.A. No.60/Chny/25 5 as rightly pointed out by the ld. AR. Therefore, we find force in the arguments of the ld. AR in granting of stay of recovery of outstanding demand till the final disposal of the appeal for the assessment year 2017-18. 6. We note that in reply to the submissions of the ld. DR, the ld. AR relied on the decision of the Hon’ble Supreme Court in the case of DCIT v. Pepsi Foods Ltd. [2021] 433 ITR 295 (SC) and argued vehemently that the Hon’ble Supreme Court read down the 3rd proviso to section 254(2A) of the Act, relevant portions are reproduced herein below: “13. The impugned judgment in M/s Pepsi Foods Ltd. v. ACIT (2015) 376 ITR 87 dealt with the challenge to the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act, as amended by the Finance Act, 2008. A Division Bench of the Delhi High Court, after setting out the Bombay High Court judgment in Narang Overseas (supra), then referred to the previous judgment of the Delhi High Court in Maruti Suzuki (supra) and held: “12. From the above extract, it is evident that the Division Bench was not called upon and did not examine the constitutional validity of the provisos to Section 254(2A) of the said Act and left the issue open. It is only on a plain reading of the provisos, as they existed, that the Division Bench came to the conclusion that the Tribunal had no power to extend stay beyond a period of 365 days from the date of the first order of stay but that an assessee could file a writ petition in the High Court asking for stay even beyond the said period of 365 days and the High Court had the power and jurisdiction to grant stay and issue directions to the Tribunal and that Section 254(2A) did not prohibit/bar the High Court from issuing appropriate directions, including grant of stay of recovery. A similar view was taken by the Bombay High Court in Jethmal Faujimal Soni (supra). But that decision was also rendered on a plain meaning of the Printed from counselvise.com S.A. No.60/Chny/25 6 provisos, as they stood. There was no challenge to the constitutional validity of the third proviso to Section 254(2A) of the said Act after the amendment introduced by the Finance Act, 2008. No decision of any High Court has been brought to our notice by the learned counsel for the parties, wherein the constitutional validity of the third proviso to Section 254(2A) of the said Act has been examined.” [at page 96-97]” Xxxxxxxxx xxxxxxxxxx “17. Judged by both these parameters, there can be no doubt that the third proviso to Section 254(2A) of the Income Tax Act, introduced by the Finance Act, 2008, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of the Constitution of India. First and foremost, as has correctly been held in the impugned judgment, unequals are treated equally in that no differentiation is made by the third proviso between the assessees who are responsible for delaying the proceedings and assessees who are not so responsible. This is a little peculiar in that the legislature itself has made the aforesaid differentiation in the second proviso to Section 254(2A) of the Income Tax Act, making it clear that a stay order may be extended upto a period of 365 days upon satisfaction that the delay in disposing of the appeal is not attributable to the assessee. We have already seen as to how, as correctly held by Narang Overseas (supra), the second proviso was introduced by the Finance Act, 2007 to mitigate the rigour of the first proviso to Section 254(2A) of the Income Tax Act in its previous avatar. Ordinarily, the Appellate Tribunal, where possible, is to hear and decide appeals within a period of four years from the end of the financial year in which such appeal is filed. It is only when a stay of the impugned order before the Appellate Tribunal is granted, that the appeal is required to be disposed of within 365 days. So far as the disposal of an appeal by the Appellate Tribunal is concerned, this is a directory provision. However, so far as vacation of stay on expiry of the said period is concerned, this condition becomes mandatory so far as the assessee is concerned. The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee. But such object cannot itself be discriminatory or arbitrary... xxxxxxxxxxxxxx xxxxxxxxxxxxxxx 25. The law laid down by the impugned judgment of the Delhi High Court in M/s Pepsi Foods Ltd. (supra) is correct. Resultantly, the judgments of the various High Courts which follow the aforesaid declaration of law are also correct. Consequently, the third proviso to Section 254(2A) of the Income Tax Act will now be read without the word “even” and the words “is not” Printed from counselvise.com S.A. No.60/Chny/25 7 after the words “delay in disposing of the appeal”. Any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee. The appeals of the revenue are, therefore, dismissed. 7. On careful reading of para 17 reproduced above, we note that the Hon’ble Supreme Court was pleased to hold that the third proviso to sub-section (2A) to section 254 of the Act would be both arbitrary and discriminatory and liable to be struck down as it is offending Article 14 of the Constitution of India. Resultantly, vide para 25 above, the Hon’ble Supreme Court was pleased to read down the words “even” and “is not” in the third proviso. We find that the present stay application is a fresh application filed seeking grant of stay pursuant to release of appeal vide order sheet entry dated 11.10.2022. As discussed above, this Tribunal granted stay for 180 days, which was extended from time to time till the hearing of the appeal. We note that the orders in Stay Application stands closed/disposed of in view of final disposal of main appeal. In the present case, the appeal was released and listed for fresh hearing along with stay application for our consideration. The ld. AR requested upon to grant stay since the assessee did not withdraw the security of immovable property and we therefore, treating the present stay application afresh, considering the same as afresh without going to other aspects on merits, grant stay of Printed from counselvise.com S.A. No.60/Chny/25 8 recovery of outstanding demand for a period of 180 days or till the final disposal of the appeal, whichever is earlier. 8. In the result, the stay application filed by the assessee is allowed. Order pronounced on 20th August, 2025 at Chennai. Sd/- Sd/- (JAGADISH) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 20.08.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. Printed from counselvise.com "