Supreme Court’s Judgement on Section 254(2A) of the Income Tax Act: DCIT vs Pepsi Foods Ltd

COURT: Supreme Court

CORAM: B. R. Gavai J, Hrishikesh Roy J, Rohinton Fali Nariman J.

SECTION(S): 254(2A)

GENRE: Domestic Tax

COUNSEL: Ajay Vohra, Deepak Chopra, Himanshu S. Sinha, Sachit Jolly, Vikramjit Banerjee ASG

DATE: April 6, 2021 (Date of pronouncement)

DATE: April 7, 2021 (Date of publication)



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Section 254(2A) Stay by ITAT: Since the object of the 3rd proviso to s. 254(2A) is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the delay caused in hearing the appeal, such object being itself discriminatory, is liable to be struck down as violating Article 14 of the Constitution of India. Also, the said proviso would result in the automatic vacation of a stay upon the expiry of 365 days even if the Appellate Tribunal could not take up the appeal in time for no fault of the assessee. Further, vacation of stay in favour of the revenue would ensue even if the revenue is itself responsible for the delay in hearing the appeal. In this sense, the said proviso is also manifestly arbitrary being a provision which is capricious, irrational and disproportionate so far as the assessee is concerned. Consequently, the third proviso to s. 254(2A) will now be read without the word “even” and the words “is not” 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.

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