The tribunal is restrained by statute from passing orders extending the stay beyond 365 days, as per the third proviso to Section 254(2A) of the Act.

1. These two appeals by the revenue are under Section 260A of the Income Tax Act, 1961 [for short, the Act], directed against the orders dated 19-1-2012 and 20-1- 2012 respectively and both orders passed on applications filed by the respondent-assessee for extending orders of stay which had been granted earlier by the tribunal beyond the period of 365 days in all and till the disposal of the appeals. Revenue had come up in appeal contending that the orders passed by the tribunal are in the teeth of statutory provisions, particularly the provisos to 254(2A) of the Act and more particularly being in ignorance of third proviso to the Section, introduced by way of Finance Act 2008 with effect from 1-10-2008.

2. It is on such grounds the appeals had been admitted for examining the following common substantial question of law:

Whether the Tribunal was correct in holding that it is entitled to extend the stay beyond a period of 365 days which is contrary to Section 254 of the Act?

3. Revenue is represented by Sri K V Aravind, learned standing counsel and the respondent-assessees are represented by Sri Chaithanya K K and Sri A Sai Prasad in ITA Nos 160 of 2012 and 161 of 2012 respectively.

4. We have heard learned standing counsel for the revenue and the learned counsel for the assessees.

5. Sri Aravind has submitted that though the main appeals wherein the interim orders have been passed by the tribunal have themselves been subsequently disposed of, the question being one of interpretation of the provisions of the Act, particularly the third proviso to Section 254(2A) of the Act and one arising frequently and with the tribunal acting contrary to the statutory provisions time and again, it is necessary that the legal position should be clarified one way or the other and therefore, notwithstanding a preliminary objection that the main appeals are disposed of and answer to the question will be more in the nature of an academic exercise, nevertheless, it should be examined and answered, as that will be a guidance for future functioning of the tribunal in the matter of understanding and applying the provisions of the Act etc.

6. Sri Aravind has taken us through the provisions, particularly three provisos to Section 254(2A) of the Act and has also brought to our notice the legislative background for introduction of the third proviso; that it was precisely to provide for a situation and in express terms, in the wake of the judgment of the Bombay High Court rendered in the case of Narang Overseas (P) Ltd. Vs. Income Tax Appellate Tribunal and Others, (2008) 2 BomCR 853 .

7. By drawing our attention to the provisions of Section 254(2A) of the Act, reading as under:

254(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or subsection (2) or sub-section (2A) of section 253:

Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:

Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period of periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days and the Appellate Tribu