ITAT has power to stay order appealed, even in absence of any subsisting tax demand

ITAT has jurisdiction to stay an order appealed against, even in absence of any subsisting tax demand.

In a recent judgment, High Court has held that the ITAT has the jurisdiction to grant stay of the order cancelling Registration u/s 12A of the Income Tax Act notwithstanding that there was no subsisting tax demand as on date of consideration.

ABCAUS Case Law Citation:
5028 (2026) (01) abcaus.in HC

In the instant case, the Petitioner/assessee had challenged action of CIT(Exemptions), rejecting Registration u/s 12A in exercise of powers under section 12AB(4)(ii) of the Income Tax Act, 1961 (the Act).

The petitioner was registered under the Societies Registration Act and was granted registration under section 12A(1)(ac)(i) of the Act. The said registration came to be cancelled by the Commissioner of Income-tax

Aggrieved by the order of cancellation, the petitioner preferred an appeal before the Income-tax Appellate Tribunal (ITAT/Tribunal). A stay application was also filed along with the appeal, seeking, inter alia, stay of the operation of the cancellation order during pendency of the appeal.

The Tribunal however, dismissed the application for stay on the grounds that there was no outstanding tax demand against the petitioner and that, in the absence of any subsisting tax demand as on date of consideration, the Tribunal had no jurisdiction to stay the operation of the order passed by the Commissioner.

The Hon’ble High Court observed that the power of the Income-tax Appellate Tribunal to grant stay as an incidence of its appellate jurisdiction is no longer res integra. The Kerala High Court had examined the power of the Tribunal to stay the order appealed against, albeit in the context of stay of demand at a time when such power was not expressly provided for under the Act. The High Court had held that even in the absence of an express statutory provision, an appellate authority possesses the power to stay proceedings pending appeal, such power being incidental or ancillary to the effective exercise of its appellate jurisdiction.

The Hon’ble High Court further observed that the decision of the Kerala High Court was affirmed by the Hon’ble Supreme Court holding that the conferment of appellate jurisdiction under section 254 of the Act necessarily carries with it the power to pass such interim orders as may be required to prevent the appeal, if successful, from being rendered nugatory.

The Hon’ble High Court further observed that the Delhi High Court reaffirmed the position of law regarding the powers of the Tribunal observing that the Tribunal, while exercising its appellate powers under the Income Tax Act has also the power to ensure that the fruits of success are not rendered futile or nugatory and for this purpose it is empowered, appropriate orders including orders of stay.

The Hon’ble High Court also noted that the Gujarat High Court had reiterated that the Income-tax Appellate Tribunal, in exercise of its powers under section 254 of the Income-tax Act, possesses incidental and ancillary powers to pass such interim orders as may be necessary to protect the efficacy of the appellate remedy. The Court held that the Tribunal is competent to grant stay where continuation thereof during pendency of the appeal would render the appeal nugatory. It was further observed that while exercising such power, the Tribunal must be satisfied that a strong prima facie case is made out and that refusal to grant interim relief would frustrate the very purpose of the appeal, while ensuring that the appeal itself is disposed of expeditiously.

The Hon’ble High Court noted that in the present case, the Tribunal had declined to entertain the stay application predominantly on the premise that no tax demand had arisen and that it lacks jurisdiction to stay the operation of the order passed by the Commissioner.

The Hon’ble High Court opined that the above view taken by the ITAT was clearly contrary to the settled legal position governing the scope of powers of the Appellate Tribunal under section 254 of the Act. Therefore, the finding recorded by the Tribunal that it had no jurisdiction to stay the operation of the order appealed against was legally unsustainable.

As a result, the impugned order passed by the Income-tax Appellate Tribunal was set aside. The matter was remitted to Tribunal to consider and decide the stay application afresh.

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