2017 (1) TMI 1456 - HC - Income Tax

Procedure followed by the Tribunal in deciding appeals pending before it filed by the Revenue as well as the assessee - difference of opinion between two Members of the Bench - change of accounting system - Held that - Having gone through the record we find that the dissenting opinion were rendered by the Accountant Member and the Judicial Member of the Tribunal on October 16 1996 and thereafter both the Members stated points on which they differed which we have noticed above. The Third Member i.e. Senior Vice-President Sri V. Dongzathang rendered his opinion vide order dated March 26 1998. It answered question No. 1 by observing when the assessee and Revenue both are aggrieved by an order of the Commissioner of Income-tax (Appeals) it is incumbent upon the Tribunal to adjudicate issue raised before it and pass such order thereon as it thinks fit. Question No. 1 therefore was answered in the affirmative. Question No. 2 was answered stating that there is no need of changing entire system of accounting adopted by the assessee as the entries in accounts are correct and complete on the basis of which correct income chargeable to tax can be computed. We find that the Third Member instead of answering questions has looked into the correctness of decision of two differing Members and observed that they have not looked into the relevant circumstances and should re-decide ground of appeal after giving opportunity to both the sides. The Third Member it appears forgot his position that he was not sitting in appeal over the opinion rendered by two Members of the Tribunal since jurisdiction of Third Member was co-ordinate and it was his duty to hear the two sides and decide question referred for its opinion in one or other way and not to make comments in the manner in which two differing Members have rendered their opinion for deciding certain issues. Unfortunately Third Member has looked into question No. 5 as if he was sitting in appeal over different opinions recorded by two Members and this approach on the part of the Third Member is clearly erroneous. Whether any purpose would be served by answering question No. 5 or not was not within the domain of the Third Member for the reason that it was under a statutory duty to answer questions referred for its opinion in one or other way. Some of the observations made by the Third Member of the Tribunal commenting upon differing Members of the Bench are clearly beyond his authority. As already said he was not hearing an appeal of judgment of two Members of the Tribunal but was under an obligation to render his own opinion after hearing the parties on specific points rendered by two differing Members. Interestingly this strange approach and manner of functioning of the Third Member has put the Regular Bench in a difficult situation. In the order dated December 31 2003 the Division Bench found it a rare case wherein judgment was not possible in the manner in which it was required by section 255(4). The Bench however found itself obliged to comply with the Third Member s opinion of reopening issues and requiring re-hearing of appeals of the assessee/Department as well as cross-objection on the points of difference. This situation was created by the Third Member who appears to have forgotten its own duty and statutory obligation that it has to decide specific points referred for its opinion and not to sit in appeal over the entire matter and take its own decision independently and bereft of points formulated by different Members and referred for opinion of the Third Member. We have no option but are constrained to observe that the order and approach of the Third Member is patently erroneous illegal impermissible and constitutionally unsustainable in law rendering the order dated December 31 2003 passed by the Regular Bench unsustainable. We answer in favour of the appellants and accordingly set aside not only the order passed by the Regular Bench on December 31 2003 but also the Third Member s order dated March 26 1998 and remand the matter to the President of the Tribunal to nominate another Bench constituting one or more Members to consider and decide the seven points formulated by differing Members in their order dated October 16 1996 for giving opinion thereon and thereafter the Regular Bench may decide the matter in the light of the majority opinion as contemplated in section 255(4) of the Act 1961.

Summary

Issues:
Procedure followed by Tribunal in deciding appeals involving dissenting opinions.

Analysis:
1. The primary issue in this judgment revolves around the procedure followed by the Tribunal in deciding appeals where there is a difference of opinion between the Members of the Bench. The crux of the matter is whether the Third Member, to whom specific points of dissent were referred for opinion, had the authority to answer those questions in his own way or decline to answer some questions, and whether the Regular Bench could decide the appeal afresh based on the lack of clear answers or some unanswered questions by the Third Member.

2. The Tribunal referred seven questions to the Third Member for opinion due to a difference of opinion between two Members of the Bench. The Third Member declined to answer questions 5 and 6 and provided vague answers to the remaining questions. This led to the Regular Bench finding it difficult to decide the appeals based on the majority opinion of the Members, as required by the Income-tax Act, resulting in the Regular Bench deciding the appeals independently.

3. The judgment delves into the legal framework provided by Section 255(4) of the Income-tax Act, 1961, which outlines the procedure to be followed when Members of a Bench differ in opinion. The provision mandates that if Members are equally divided, the case shall be referred to one or more other Members of the Tribunal for a decision based on the majority opinion.

4. The Court emphasized that when specific points of dissent are referred to the Third Member, it is not within the Third Member's purview to sit in appeal over the matter and decide questions selectively. The Third Member is obligated to answer the questions referred in a specific manner, enabling the Regular Bench to decide based on the majority opinion of the Bench.

5. The judgment scrutinizes the actions of the Third Member, highlighting that the Third Member's duty was to render an opinion on the specific points referred and not to re-decide the entire matter independently. The Court found the Third Member's approach erroneous and beyond the scope of its authority, leading to a situation where the Regular Bench faced difficulties in passing a final order as mandated by the law.

6. Ultimately, the Court set aside the orders passed by the Regular Bench and the Third Member, remanding the matter to the President of the Tribunal to nominate another Bench to consider and decide the points formulated by the differing Members. The Court directed the Tribunal to expedite the hearing and decide the appeals within a specified timeframe.

In conclusion, the judgment emphasizes the importance of following the prescribed legal procedure in cases of dissenting opinions within the Tribunal, ensuring decisions are made based on the majority opinion of the Bench as mandated by the law.