Before going on to discuss the doctrine and its essentials, it is pertinent to go through a certain provision of the Income Tax Act. Section 254(2A) states the follows:

     “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 sub-section (2) of section 253”

However, the third proviso provides that “if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.”

“Even if not attributable to the assessee” is where the actual problem of discrimination occurs. In the case of Deputy Commissioner of Income Tax and Anr. v. PEPSICO India Holdings Pvt. Ltd. This was filed in the appellate jurisdiction of the Supreme Court against the judgment of Delhi High Court. While hearing the appeal and upholding the judgment of the Delhi High Court, the Apex Court laid down that the third proviso to Section 254 (2A) of the Income Tax Act stands in violation of Article 14 of the Constitution of India. The effect of the said proviso was that the order of stay, as originally granted by the Appellate Tribunal under the first proviso and extended under the second proviso, stood automatically vacated even where the assessee was not at fault for the delay in disposal of the appeal by the Appellate Tribunal.[1]

This is where the application of the doctrine was made. The said proviso is considered to be manifestly arbitrary because it gave unfettered power to the taxman on one hand and made the appellate tribunal as well as the assessee helpless on the other hand. The automatic vacation of the stay would either way lie in favour of the taxman irrespective of the party at fault. This application of the Doctrine of Manifest Arbitrariness aided the Apex Court to to strike out the said proviso. The violation of Article 14, which is the basis of rule of law, gives rise to sufficient grounds for justifying the judgment. Hence, the proviso is to be struck down for being discriminatory in nature.