2011 (8) TMI 657 - AT - Income Tax

Constitution of Special Bench of the Tribunal- Assessee requested for reference to Special Bench when Division Bench was not in agreement with the earlier decision of the co-ordinate bench in the case cited by assessee- Division bench also recommended for constitution of Special Bench -Subsequent plea of the Assessee to withdraw reference to the Special Bench as the High Court has admitted identical question of law in the said case Held that - Once a case has been decided by an earlier Bench the subsequent Bench should respect such decision and should not endeavor to make departure there from unless the facts are different or the legal position appreciated by the earlier Bench has undergone change because of some statutory amendment or enunciation of law by the Hon ble Supreme Court or the Hon ble jurisdictional High Court. Consistency in the approach of the tribunal in the sense of following the earlier view is a rule but doubting its correctness is an exception.Constitution of special bench by the tribunal to resolve a possible conflict in the views amongst various benches of the tribunal and not waiting till the matter is finally decided by the High court eases the situation. The mere fact that a superior authority is seized of an issue identical to the one before the lower authority there cannot be any impediment on the powers of the lower authority in disposing off the matters involving such issue as per prevailing law. Decided against the Assessee.

Summary

Issues Involved:
1. Whether the Assessing Officer was right in adding the amount of liabilities reflected in the negative net worth to the sale consideration for determining the capital gains on account of slump sale.
2. Whether the reference to the Special Bench should be withdrawn due to the pending identical question of law before the Hon'ble Bombay High Court.

Issue-wise Detailed Analysis:

1. Addition of Liabilities to Sale Consideration for Capital Gains Determination:
The primary issue was whether the Assessing Officer (AO) was correct in adding the liabilities reflected in the negative net worth to the sale consideration for determining capital gains on a slump sale. The assessee had transferred its power transmission business and reported capital gains based on the agreed consideration of Rs. 143 crore. However, the AO added the negative net worth of Rs. 157.19 crore, as determined by the auditors, to the sale consideration, resulting in a total of Rs. 300 crore. The AO's action was challenged, and the first appellate authority, relying on the decisions in Zuari Industries Ltd. vs. ACIT and Paperbase Co. Ltd. vs. CIT, held that the negative net worth should be treated as zero under section 50B, thus reversing the AO's determination. The Division Bench, however, was not convinced with the earlier decisions and referred the issue to the Special Bench.

2. Withdrawal of Reference to the Special Bench:
The second issue was whether the reference to the Special Bench should be withdrawn due to the pending identical question of law before the Hon'ble Bombay High Court in the case of Zuari Industries Ltd. The assessee's counsel argued for withdrawal, citing past instances where references were withdrawn under similar circumstances. The Departmental Representative objected, emphasizing that the reference was made at the assessee's request and that the President of the Tribunal has the authority to refer cases to a Larger Bench. The Tribunal noted the importance of consistency and judicial discipline, emphasizing that subsequent Benches should respect earlier decisions unless there is a strong reason to doubt their correctness. The Tribunal also highlighted that the mere admission of a question of law by a High Court does not impede the Tribunal's authority to dispose of cases involving similar issues. The Tribunal concluded that the reference to the Special Bench should not be withdrawn merely because the High Court admitted an identical question of law, as it would lead to a chaotic situation and hinder the Tribunal's functioning.

Conclusion:
The Tribunal dismissed the preliminary objection raised by the assessee for the withdrawal of the reference to the Special Bench. It directed the Registry to fix the case for hearing by the Special Bench on merits, emphasizing the need for consistency in judicial decisions and the Tribunal's authority to resolve conflicting views through the constitution of Special Benches. The judgment underscores the importance of maintaining judicial discipline and the proper functioning of the Tribunal despite pending litigation on similar issues in higher courts.