Stay applications can provide relief to taxpayers who have been served a tax demand. In this post, we take a look at how quickly the stay applications are processed in the Income Tax Appellate Tribunal in Mumbai.

What is a stay application?

Imagine you get a notice from the Income Tax Department demanding more tax. This demand has to be paid within 30 days, after which the Department can take coercive action to recover that demand. Now, either you can pay the amount or you can appeal against the notice and during the pendency of the appeal, you can file a stay application on the tax demand.

If you can get a stay on the demand, the Revenue cannot take any action on recovering the tax demand and you will also avoid incurring interest and penalties on the tax demand during the lifetime of the appeal.

Quick work of most Stay Applications

Stay applications protect the financial stability and liquidity of the assessee and are judged upon its prima facie merits. Therefore, it becomes crucial to decide upon an application for stay swiftly. Overall, our data shows that this goal is met in most cases.

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The histogram shows the time taken to dispose stay applications in the April 2010 to Mar 2017 period. The number of disposed stay applications were 1598, which comprise about 63% cases of the total number of stay applications.

As you see, more than 60% of the disposed cases took less than 10 days, and about 80% were disposed within 20 days. There are only a few outlier cases that have taken a longer time, which may have to be studied individually.

In future, sooner!

The draft version of Income Tax Appellate Tribunal Rules, 2017, states that if a stay application is filed on or before Wednesday, the hearing shall take place on Friday of the same week, and that the result of the application should be announced within the next working day after the conclusion of the hearing. So, in future the stay applications should be disposed within 7 days in most cases.

Stay Applications by CIT(A)?

Though the Mumbai ITAT deals with a large volume of tax appeals, the number of stay applications in comparison are not as many. This may be attributed to the fact that the first appellate authority, the Commissioner of Income Tax – Appeals [CIT(A)], has been empowered to grant stay (as stated in numerous Supreme Court and High Court judgements), which includes the power to grant stay till the disposal of appeal before the ITAT.

Testing this hypothesis requires analysis of orders of CIT(A) which, sadly, remain outside the public domain.

Inefficiency or missing information?

While most of the stay applications were disposed in quick time, we found a large number of stay applications that were still not disposed (based on our data from ITAT Mumbai).

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The ring chart shows that approximately 37% of the applications filed between April 2010 to March 2017 are still pending. This defeats the purpose of stay applications, which is to confer immediate but temporary relief to the taxpayers from demand and recovery proceedings.

However, we can’t help but consider the possibility that the ITAT Mumbai website may not have been updated with the relevant information.

Summary

In conclusion, the stay applications ordinarily gets disposed within 10 days of its filing and if the new ITAT Rules are implemented, then we can expect this disposal rate to go down even further.

The ITAT Mumbai probably needs to fix the stay application disposal dates on their website for the other 37% stay applications that still show as pending, if they are indeed not disposed then possibly there may some inefficiencies that need to be resolved.

 

Note:
1) Since the FY 2017-18 is still underway, applications filed after 31st March, 2017 have not been considered for the purpose of this article.
2) We had separately sought information from Mumbai ITAT under RTI on the number of stay applications where we noticed a couple of peculiarities. For 2012, the RTI gives the number of applications filed at 304, while the website provides information for 379 for the same year. Secondly, the website does not contain data for all the cases filed in the remaining years. Say, for example, in 2011, according to the RTI, 382 stays were filed, however, the website provides data for only 351 applications. This is true across majority of the years.

(Written by Ankit Sinha, Product Counsel and Rutuja Udyawar, VP Analytics on behalf of Riverus)

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