1996 (1) TMI 5 - SC - Income Tax

Whether the Special Bench of Tribunal had committed breach of the principles of natural justice and had denied reasonable opportunity to Department to put forward its case in the appeals taken up for decision by the Special Bench.- Whether the President of the Tribunal was legally competent to constitute a Special Bench for hearing the three appeals moved by respondent No. 2--assessees in these three cases and whether the Special Bench was validly constituted.

Issues Involved:
1. Breach of principles of natural justice by the Special Bench of the Income-tax Appellate Tribunal.
2. Legal competence of the President of the Tribunal to constitute a Special Bench.

Detailed Analysis:

Point No. 1: Breach of Principles of Natural Justice

The High Court noted that the matter was adjourned 11 times at the instance of the Departmental Representative from October 28, 1992, to January 4, 1993. On January 4, 1993, the designated officer fell ill and was hospitalized, and another Deputy Commissioner, who was ready to argue, did so to the best of his ability. However, due to the complex nature of the case and the significant revenue involved, the Department sought permission to file written submissions, which the Tribunal did not permit. The High Court held that the Tribunal was not justified in refusing the adjournment and not allowing the written submissions.

However, the Supreme Court noted that the Revenue had a full opportunity to present its case before the High Court in the writ petitions and succeeded therein. Therefore, the question of the violation of the principles of natural justice by the Tribunal was deemed insignificant. The Supreme Court observed that prima facie, the High Court's view that the Tribunal adopted an unjustified stand appeared well-sustained. Nonetheless, since the Revenue had not suffered and its viewpoint was accepted by the High Court, the Supreme Court did not delve deeper into this question.

Point No. 2: Legal Competence of the President to Constitute a Special Bench

The Supreme Court examined the relevant facts and statutory provisions. The President of the Income-tax Appellate Tribunal constituted the Special Bench based on a reference by two senior members of the Tribunal and a request from the Tax Bar Association of Andhra Pradesh. The High Court held that the President could not constitute a Special Bench without a judicial order from a Bench of the Tribunal. The Supreme Court disagreed, stating that the President's power under sub-sections (1) and (3) of section 255 of the Income-tax Act to constitute Benches or Special Benches is administrative, not judicial.

The Supreme Court highlighted that the President could act suo motu or based on information suggesting the need for a larger Bench. The President's administrative decision to constitute a Special Bench is not open to scrutiny under article 226 of the Constitution unless shown to be mala fide. The Supreme Court found no such allegation in this case and concluded that the President acted bona fide in constituting the Special Bench to resolve the controversy.

The Supreme Court also addressed the apparent inconsistency in the President's order, as the reference letter suggested placing four specific matters before the Special Bench, but the President constituted the Special Bench for three different appeals. The Supreme Court clarified that the President's decision was based on a bona fide exercise of administrative power, and the High Court's observation that the Special Bench was constituted at the whims and fancies of the President was unjustified.

Conclusion:

The Supreme Court quashed and set aside the High Court's judgment and order regarding the two points. The question about the true construction of section 115J was kept open for decision in the delinked special leave petitions of the assessees. The appeals were allowed, and the writ petitions before the High Court were dismissed to the aforesaid extent, with no order as to costs.

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