Case: Income Tax Appellate Tribunal, Hyderabad Special Bench, Hyderabad Vs. Dy. Commissioner of Income Tax III, Hyderabad, A.P. and Ors

constitute a Special Bench of course on appropriate and germane grounds. It is, however, true that the President in exercise of its administrative powers under Section 255(3) cannot just constitute a Special Bench without any rhyme or reason. Such an administrative exercise can be demonstrated to be unreasonable, capricious or mala fide on a given set of facts. But in our view present case was not of that type. There was a conflict of opinion between two Benches of the Tribunal, namely, Madras and Hyderabad Bench. It is, however, true that Madras Bench decision was by a single member while the Hyderabad Bench decision was by a Division Bench. Still it could not be said that there was no conflict of decisions between two benches of the Tribunal. That itself constituted a rational and valid ground for the President to act in exercise of his administrative powers to constitute a Special Bench if he though it fit to do so. Such an exercise on the facts of the present case cannot be styled as an arbitrary or whimsical or fanciful one as wrongly and uncharitably assumed by the Division Bench of the High Court. 17. It is now time for us to deal with one apparent inconsistency underlying the order of the President of the Tribunal, constituting the Special Bench, which was highlighted by ld. Counsel for respondent-Revenue. As noted earlier the President of the Tribunal does not seem to have acted suo motu simply relying upon the recommendations of the Income Tax Bar Association, Hyderabad for constituting a Special Bench for deciding the controversy in issue. He seems to have obtained opinion of senior members of the Tribunal and in the light of their recommendations contained in the communication dated 25.9.1992 the Special Bench was constituted for hearing the appeals of the present three respondents. It is also true that the members had recommended placing before the Special Bench four listed matters which did not include the appeals of these present three respondents. Thus the order constituting Special Bench appeared to be inconsistent with the recommendations of the members of the Tribunal. In this connection further details as noted earlier were sought for from the Appellate Tribunal by our order dated 1st December, 1995. It is in the light of what the Tribunal has stated in response to our order dated 1st December, 1995 that we now proceed to deal with this aspect of the matter. 18. Pursuant to our order dated 1.12.1995, an affidavit has been filed by Shri Kishan Rao, Asstt. Registrar, who worked as Asstt. Registrar, Income Tax Appellate Tribunal Bench at Hyderabad at the relevant time. In the said affidavit, he has clarified that on receipt of letter dated 28.7.1992 addressed by the President of Income Tax Tribunal to Shri T. V. Rajagopala Rao, Member, Tribunal, Bench at Hyderabad, the ld. Member Shri Rajagopala Rao, by his letter dated 25.9.1992 addressed to then President of the Tribunal Shri G. Krishnamurthy, stated that after verifying the files, he felt the justness of the demand made by the Bar and that he discussed the matter with the ld. Brother Member Shri G. Krishnamurthy and formulated the questions referable to the Full Bench, that it was true that in the said letter of reference four matters were mentioned but it is further pointed out that on receipt of the said letter a circular was issued by the Tribunal to all other 18 Benches of the Tribunal intimating that the Special Bench of Income Tax Appellate Tribunal, Hyderabad Bench-A was being constituted to consider the questions which were mentioned in the circular. A copy of the circular is annexed to the affidavit as Annexure-V. This circular shows that all the four matters which were sought to be referred to the Special Bench by reference letter of 25.9.1992 by two Members of the Tribunal were sought to be placed before the Special Bench. In addition thereto is found at serial No. 6 Income Tax Appeal No. 1845/Hyd/90 which is one of the matters in the present proceedings which was disposed of by the Special Bench. It is thereafter that nine cases in which common question of construction of Section 115-J read with Section 143(1)(a) of the Income tax Act was involved were placed before the Special Bench. The cause list of cases posted for hearing before the Special Bench at Hyderabad is annexed as Annexure-VI to the affidavit. It shows that the matters pertaining to the present proceedings were placed for hearing before the Special Bench along with four matters which have been mentioned in the reference letter dated 25.9.1992 of the two Members of the Tribunal, namely, Shri T. V. Rajagopala Rao and Shri Chander Singh. It is further clarified in the affidavit that arguments were concluded in all these appeals on 5.1.1993 and judgment was reserved in four cases to which reference was made. However, at the conclusion of the arguments, the ld. Counsel in those four cases submitted that there were some additional issues which were not specifically covered by the questions which came up for decision before the Special Bench and hence they requested that those appeals be released from Special Bench, and as the Full Bench felt that it was not necessary for them to go into other points and once the main questions referred to in the matters were decided, the said judgment will abide the other cases also, the said four cases were released by the Special Bench to be heard by the Division Bench after the judgment Surana Steels case and others. 19. In view of the aforesaid affidavit based on the relevant events which transpired prior to the constitution of the Special Bench, and in the light of the relevant documentary evidence produced in support of the affidavit, we have no doubt that the ld. President in bona fide exercise of his administrative power constituted the Special Bench for deciding the Income Tax Appeals with which the present proceedings are concerned.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. So far as this point is concerned the High Court in the impugned judgment at page 31 has noted that it was true that the matter was adjourned at the instance of the Departmental Representative from time to time on 11 occasions from 28.10.1992 upto 4.1.1993. However, on 4.1.1993 when the matter was posted for hearing before the Special Bench Shri H. Srinivasulu who was appointed as designated officer to argue the matter before the Special Bench fell sickOn these facts the High Court took the view that the Tribunal was not justified in not adjourning the matter and in insisting to hear the matter. Now we may state at this stage that even though on merits the Revenue lost before the Special Bench of the Income Tax Appellate Tribunal the High Court in Writ Petitions heard the Department fully on the merits of the question, namely, the construction of SectionJ of the Income Tax Act and held in favour of the Revenue and against the assessees. Thus the Revenue had not only full opportunity to put forward its case before the High Court in the Writ Petitions but had succeeded therein. Under the circumstances the question of violation of principles of natural justice by the Tribunal pales into insignificance and, therefore, we do not deem it fit to pronounce upon that question finally. We have already noted that the decision of the Division Bench of the High Court on the merits of the controversy centering round the construction of SectionJ of the Income Tax Act is already pending scrutiny of this Court in the delinked special leave petitions moved by the assessees and this Court is going to decide that question on meritsIt is no doubt true that the matter was adjourned on 11 occasions earlier, it is also true that when a senior counsel is not available to argue an adjourned matter for which a Special Bench is constituted at Hyderabad where the President had to come from Delhi and the other member had to come from Bombay, the Revenue should have taken all care to see that some alternative arrangement was made so that the matter may not get unduly prolonged and indefinitely adjourned and that in such situations the Special Bench of the Tribunal could have legitimately required the Revenue to make alternative arrangement for getting the matter argued. But for that purpose a short adjournment of a day or two could have been granted when the Departmental Representative who was incharge of the matter was admitted to a nursing home. In any case written submissions could have been taken on record and considered by the Tribunal instead of totally brushing them aside. However, as noted earlier as ultimately the Revenue has not suffered till date and its viewpoint has been accepted by the High Court on the construction of SectionJ of the Income Tax Act we do not dilate on this question any further. That disposes of the first point.Point No. 213. So far as this point is concerned it is necessary to have a look at the relevant facts as emerging on the record of the case which resulted in the constitution of the Special Bench by the President of the Appellate TribunalThe High Court has taken the view that the President has to exercise his discretion judiciously and judicially and it may not be exercised at whims and fancies of the President15. In our view the aforesaid decision of the High Court to the effect that the President of the Income Tax Appellate Tribunal cannot constitute a Special Bench save and except under a judicial order cannot be sustained on the scheme of the Act and the relevant regulations. The reasons are obviousIt is obvious that the President in this connection may even act suo motu if it is brought to his notice that any important point is pending for decision in a matter which requires to be decided by a larger bench. If the President acting on such information and in bona fide exercise of his powers constitutes a larger bench or a Special Bench for deciding a matter it cannot be said that he acts ultra vires his powers or functions entrusted to him by the legislature under Section 255(1) read with Section 255(3) of the Income Tax Act. Consequently, the Division Bench of the High Court with respect was in error when it took the view that a Special Bench can be constituted by the President only pursuant to a judicial order and not in exercise of his administrative powersIt is, however, true that the President in exercise of its administrative powers under Section 255(3) cannot just constitute a Special Bench without any rhyme or reason. Such an administrative exercise can be demonstrated to be unreasonable, capricious or mala fide on a given set of facts. But in our view present case was not of that type. There was a conflict of opinion between two Benches of the Tribunal, namely, Madras and Hyderabad Bench. It is, however, true that Madras Bench decision was by a single member while the Hyderabad Bench decision was by a Division Bench. Still it could not be said that there was no conflict of decisions between two benches of the Tribunal. That itself constituted a rational and valid ground for the President to act in exercise of his administrative powers to constitute a Special Bench if he though it fit to do so. Such an exercise on the facts of the present case cannot be styled as an arbitrary or whimsical or fanciful one as wrongly and uncharitably assumed by the Division Bench of the High CourtIt is also true that the members had recommended placing before the Special Bench four listed matters which did not include the appeals of these present three respondents. Thus the order constituting Special Bench appeared to be inconsistent with the recommendations of the members of the Tribunal. In this connection further details as noted earlier were sought for from the Appellate Tribunal by our order dated 1st December, 1995. It is in the light of what the Tribunal has stated in response to our order dated 1st December, 1995 that we now proceed to deal with this aspect of the matterIt shows that the matters pertaining to the present proceedings were placed for hearing before the Special Bench along with four matters which have been mentioned in the reference letter dated 25.9.1992 of the two Members of the Tribunal, namely, Shri T. V. Rajagopala Rao and Shri Chander Singh. It is further clarified in the affidavit that arguments were concluded in all these appeals on 5.1.1993 and judgment was reserved in four cases to which reference was made. However, at the conclusion of the arguments, the ld. Counsel in those four cases submitted that there were some additional issues which were not specifically covered by the questions which came up for decision before the Special Bench and hence they requested that those appeals be released from Special Bench, and as the Full Bench felt that it was not necessary for them to go into other points and once the main questions referred to in the matters were decided, the said judgment will abide the other cases also, the said four cases were released by the Special Bench to be heard by the Division Bench after the judgment Surana Steels case and others19. In view of the aforesaid affidavit based on the relevant events which transpired prior to the constitution of the Special Bench, and in the light of the relevant documentary evidence produced in support of the affidavit, we have no doubt that the ld. President in bona fide exercise of his administrative power constituted the Special Bench for deciding the Income Tax Appeals with which the present proceedings are concerned.