2004 (1) TMI 6 - SC - Income Tax

Tribunal - Central Government can not transfer the powers of the President or the Tribunal regarding posting and transfer of members of Appellate Tribunal to itself - these transferred cases are allowed

Issues Involved:
1. Authority over the transfer and posting of members of the Income-tax Appellate Tribunal.
2. Validity of the Central Government's order directing the President of the Income-tax Appellate Tribunal to seek prior approval for transfers and postings.
3. Guidelines for the transfer and posting of Tribunal members.

Issue-wise Detailed Analysis:

1. Authority over the transfer and posting of members of the Income-tax Appellate Tribunal:

The judgment established that the President of the Income-tax Appellate Tribunal has the requisite power of transfer and posting of its members. This authority is derived from sub-sections (1) and (5) of section 255 of the Income-tax Act, which allow the President to constitute Benches and regulate the procedure of the Tribunal. The court noted that the Central Government, despite having administrative control over the Tribunal, does not possess the power to transfer and post members, as this function is judicial in nature and integral to the Tribunal's autonomy. The Central Government's historical non-interference in this matter further supports this interpretation.

2. Validity of the Central Government's order directing the President of the Income-tax Appellate Tribunal to seek prior approval for transfers and postings:

The court found the Central Government's order requiring the President to seek prior approval for transfers and postings to be without jurisdiction. The order, based on the Delegation of Financial Powers Rules, 1958, and various Ministry of Finance communications, was deemed to lack a statutory basis under the Income-tax Act. The court emphasized that such administrative directives cannot override the statutory powers conferred upon the President by the Act. The long-standing practice of the President exercising these powers independently was recognized as a significant factor in the decision.

3. Guidelines for the transfer and posting of Tribunal members:

The court proposed specific guidelines to ensure the fair and effective exercise of the President's powers while maintaining the independence of the Tribunal:

(i) Initial posting of a member shall be done by the Government in consultation with the President of the Income-tax Appellate Tribunal.
(ii) Postings to different Benches shall be done by the President, considering the following:
- A member should not be posted where they previously practiced as an advocate or chartered accountant, unless for sufficient reasons.
- A member should not be posted where close relatives practice in taxation matters.
- A member should not be posted at the same place for more than five years or where they were previously posted unless two years have elapsed.
(iii) The President must inform the Government about postings, and the Government can highlight any non-conformity with guidelines or cases of extreme hardship.
(iv) The Government can request transfers in public interest or exceptional circumstances, which the President must consider. If the President refuses a justified request, the Government may issue the transfer order.

The court also suggested that the President should consult two Senior Vice-Presidents before making transfer and posting decisions to ensure informed and fair judgments.

Conclusion:

The judgment underscored the importance of maintaining judicial autonomy for the Income-tax Appellate Tribunal and limited the Central Government's role in administrative matters to ensure the effective administration of justice. The proposed guidelines aim to balance the President's authority with necessary oversight, ensuring transparency and fairness in the transfer and posting of Tribunal members. The court allowed the transferred cases on these terms, with no order as to costs.

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