More often than not, in any case before a court or a tribunal, all eyes are focused on the main matter. However, what many fail to realise is that the path to the end of a case is teeming with filing various applications – some procedural, and some for interim relief. One of the latter is for grant of stay, which is important in an income tax matter as it prevents the Income Tax department from taking coercive measures to recover the tax demand during the pendency of the appeal.
We already know that stay applications are generally disposed off quite quickly (10-20 days in most cases). In this segment, we dig deeper and look at the results of stay applications filed before ITAT Mumbai.
Good news for the assessee!
Crunching the data on stay applications in ITAT Mumbai from FY 2009-10 onwards, we found that in approximately 65% of the cases, stay was granted, while in 18% of the cases, the application was partly allowed.
Here is a financial year-wise division:
Since FY 2011-12, the Tribunal has heavily favoured the assessee by granting stay. We believe there are two reasons which may have influenced this trend –
- Towards the end of FY 2011-12 (where the rate of grant of stay was at its lowest), Rule 35A of ITAT Rules was amended to omit sub-section (3) which provided for summary rejection in the event the requirements for the stay application set out in sub-section (2) were not fulfilled. This made it tougher to dismiss a stay application in the event the information in the application is deficient in any manner. Instead, the assessee now has the opportunity to present a rectified application.
- Additionally, in March of 2013, the Bombay High Court held that proving financial hardship is not necessary for grant of stay [UTI Mutual Fund vs. Income Tax Officer, WP(L) No. 523 of 2013], thus making it easier to grant stays if a strong prima facie case is made out against the tax demand.
What is Rule 35A?
Rule 35A of the IT (Appellate Tribunal) Rules deals with the procedure for filing and disposal of stay petitions before the Tribunal. It sets out requirements for certain points of information [like facts of tax demand, result of appeal before CIT(Appeals), reasons for seeking stay etc.] to be provided in the application which is to be filed by the assessee.
If you are interested in reading Rule 35A, click here.
Faster relief for the taxpayer
We mapped the outcome of stay applications against the duration of the matters from FY 2009-10 to FY 2016-17. Interestingly, while it takes an average of about 13 days to grant stay, it takes around 30 days to reject the application. However, the reason for this gap can be attributed to outlier cases which skews the average duration. In order to accommodate the exceptions and present a more accurate description, we calculated the median which shows that 50% of the cases granting stays are disposed off within 7 days while 50% of the cases rejecting stays are disposed off within 9-10 days.
An analytical point of view
While 50% of the cases either granting or rejecting stay applications take around 10 days to be disposed (which tells us why the medians are close), the next 50% has a different story all together. 95% of the cases granting stay are getting decided within 40 days, while 95% of cases rejecting the stay application are decided in around 200 days. Alternatively, from the applications granted, 95% of them get disposed off within 40 days, while during the same time, 80% of all the applications rejected get disposed.
To summarize, ITAT Mumbai has dismissed only 17% of the applications disposed by it from April ’09 to March ’17. Further, they look pro-active while granting stay applications. Even though CBDT’s revised guidelines (Office Memo dated 31st July, 2017) on stay of demand might cause problems, the stance of the Tribunal seems pro-assessee which is a good sign for the taxpayers.
(Written by Ankit Sinha, Product Counsel and Rutuja Udyawar, VP Analytics on behalf of Riverus)
Edit: Minor changes in words, rephrased sections “An analytical point of view” and “Conclusion“.