Can consider and apply case law not cited before it – better course would be to provide further opportunity of hearing the parties.

[C.A. DEV KUMAR KOTHARI]

Tribunal:

References:

Sections  253, 254 and 255 of Income-tax Act,1961 relating to appeals, procedure and order on appeals before Tribunal.

Income Tax (Appellate Tribunal) Rules, 1963.

Geofin Investment (P) Ltd vs. CIT [2011 -TMI - 206365 - DELHI HIGH COURT] 

Naresh Pahuja v DCIT [2007 -TMI - 59682 - ITAT BOMBAY-J]

Vindhya Telelink Ltd v JCIT [2008 -TMI - 67428 - ITAT JABALPUR]

Lakhmini Merwal Das v ITO [1970 -TMI - 8339 - CALCUTTA High Court]

M/s.Inventure Growth & Securities Limited Versus The Income tax Appellate Tribunal and others [2010 -TMI - 76303 - BOMBAY HIGH COURT]     

Hon’ble President’s Guidelines to Hon’ble Members for drafting orders.

Appeal before Tribunal:

Provisions relating to appeal before Tribunal are provided in Sections  253, 254 and 255 of Income-tax Act, 1961. These relates to appealable orders, filing of appeals, hearing on appeal, orders on appeal and procedures to be followed and incidental matters. The Income-tax Appellate Tribunal Rules are subordinate to these provisions and provide for procedural provisions about appeals before Tribunal.

Order of Tribunal:

Section 254 (1) provides that “ The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.

A bare reading of the section suggests that the tribunal has to pass an order on appeal. Therefore, seemingly there is no limitation on the nature of order and matter to be considered for passing an order on the appeal. Anything or information which is necessary for passing an order on appeal can be considered by the Tribunal while discharging its function by way of passing an order on the appeal before it.

Decided cases- precedence and cases laws not referred to by counsels:

As a rule of judicial discipline Tribunal is required to follow orders of co-ordinate benches and also decisions of courts while deciding appeals. Tribunal has access to many of judgments of Tribunal which may not be reported and therefore, the counsels appearing before it may not be in a position to refer to the same. Many times counsels appearing before the Tribunal are not in a position to refer to all cases laws on the issues in hand. Due to difference of views, difference of facts and other reasons counsel may not cite many of the cases which can have a bearing on the issue.

Another limitation of hearing is that hearing is for a short duration, there are limitations of time, and limitation of capabilities to refer all matters verbally during hearing. Therefore, written notes, paper book etc. are important. Any case laws cited in the written notes, and referred to hearing are required to be considered by the Tribunal. However, Tribunal is not precluded from relying on other cases laws.

To render justice, tribunal can definitely consider judgments of other benches or courts while passing order even if they were not referred to or cited before the Tribunal in written documents or verbally. 

For example, suppose on the issue there is decision of Tribunal which is against the appellant. Naturally, in most of cases the authorized representative of the appellant will not like to mention such decision because (a) it is against him (b) it is duty of the opposite side representative to mention such decision and (c) his duty is to argue non-maintainability of the same, if there be need to do so.

 Now suppose the authorized representative is ignorant about the same and he does not cite the same. In such situation the members of Tribunal can mention that there is decision against the appellant and can ask the A/R of appellant to   submit his views on the same. The A/R of appellant can ask for a copy of such decision or reference of reported judgment and also seek time to study the decision and then submit his views on applicability or otherwise in his case and distinguish facts and applicable law etc.

Sometimes after hearing of case, members notice many more decisions having bearing on the case. In such circumstances better course for Tribunal can be to issue a show cause notice and re-fix the case for further hearing allowing both parties to submit their views on the issue vis a vis such judgments.

Opportunity must be allowed by Tribunal and Courts:

Better course is to give another hearing.

There is no doubt that Tribunals and courts are established to render justice. The parties to case are entitled to represent their case. Tribunal and Court hear  all parties to the case  (Revenue and concerned assessee in case of tax appeals) if both are present or can decide the matter by hearing any party present and other remaining absent. They can also pass ex-parte order or judgment if any party is not present. Therefore, it is clear that Tribunal and Court can consider entire material available and legal position prevailing at the time decision or judgment is rendered. Therefore, Tribunal and Court can consider latest legal position.

Sometimes, there is time gap between hearing and judgment. In the meanwhile there can be change in legal position due to amendment or new judgments of the Supreme Court or High Courts.  In such situation also the Tribunal and Court can consider latest legal position.

Better way is to re-fix the case and rehear parties:

When Tribunal or Court want to refer, rely and  apply any decision which was not cited by parties, better course would be to fix a date for further hearing and ask the parties (particularly party who will be adversely affected) why the judgments being considered by Tribunal or Court for reliance and application in given case should not be applied.

A recent case before Delhi High court: In  Geofin Investment (P) Ltd vs. CIT [2011 -TMI - 206365 - DELHI HIGH COURT]  a case which came before the Delhi High Court,  by way of a Writ Petition against rejection of petition u/s 254 (2) made by the assessee before the Tribunal.

Learned counsel for the petitioner submitted that the tribunal had erred in dismissing the  application under Section 254(2) of the Income Tax Act, 1961 (Act, for short) as the tribunal in its order dated 13th October, 2010, had referred to and relied upon decision of another ITAT Bench which had not  been cited at the time of hearing.

He submitted that the order passed by the tribunal dated 13th October, 2010 under Section 254(1) of the Act, should have been recalled because it is based on a decision which was not cited during appellate proceedings.

The High Court while dismissing the appeal observed and held on the following lines:

We do not find any merit in the said contention..

Under Section 254(2), a mistake apparent from the record can be rectified. The power is circumscribed and limited. There should be mistake which is apparent before the power can be exercised. This is a mandatory pre-condition.

 The Tribunal in its order dated 13th October, 2011, referred to the controversy in question relating to disallowance made on account of short term capital loss and long term capital loss.

The entire issue was examined on merits including the judgments relied upon the petitioner assessee.

Only after examining the matter in detail, the tribunal allowed the appeal filed by the revenue.

While allowing the appeal, the tribunal also referred to another decision of ITAT, Mumbai, ‘F’ Bench, in the case of Macintosh Finance Estates Ltd. Vs. ACIT. Reliance and reference to reasons stated in Macintosh (supra) cannot be regarded as a mistake apparent from the record.

It is not unusual or abnormal for Judges or adjudicators to refer and rely upon judgments/decisions after making their own research.

 In view of the aforesaid, the court did not find any merit in the writ petition and accordingly the same was dismissed.

 The court also noted that the petitioner has filed an appeal under Section 260A of the Act against the order dated 13th October, 2010 and observed that the said appeal will be decided on its own merits and clarified that we have not commented or expressed our opinion on the merits of the addition.

Weakness in the case and authors point of view:

It seems that the petitioner has relied on concept of mistake apparent from records and took view that a decision not cited by parties before Tribunal cannot be considered by Tribunal and a decision based on such a un cited decision constitute a mistake apparent from records. It seems that the petitioner has not placed the contention that the Tribunal has not followed principles of natural justice, an opportunity was not provided by Tribunal to show case as to why the decision in case of Macintosh Finance Estates Ltd. Vs. ACIT should not be applied, and a fresh hearing should have been allowed by the Tribunal before passing a decision against the petitioner relying on decision which the respondent or the tribunal has not  mentioned during hearing or other appeal proceedings. Had those contentions been raised, the author hope that the High Court could have set aside the order of Tribunal with directions to provide further reasonable opportunity of hearing to the assessee to show case as to why the said decision should not be applied in his case. Similar view was taken in Naresh Pahuja vs. CIT by Bombay High Court wherein  it was held that  Judgements not cited by parties during the hearing should not be referred to in deciding the appeal. In case the ITAT decided the appeal against the assessee by relying on judgments that had not been cited by the Departmental Representative and opportunity was not given to the assessee, an opportunity to explain why those judgments had no application to the case of assess, the High Court had set aside the order of the Tribunal for a fresh hearing.  The order of the Tribunal is reported as Naresh Pahuja v DCIT [2007 -TMI - 59682 - ITAT BOMBAY-J] In this regard reference can also be made to  Vindhya Telelink Ltd v JCIT [2008 -TMI - 67428 - ITAT JABALPUR] and Lakhmini Merwal Das v ITO [1970 -TMI - 8339 - CALCUTTA High Court] M/s.Inventure Growth & Securities Limited Versus The Income tax Appellate Tribunal and others [2010 -TMI - 76303 - BOMBAY HIGH COURT]     and  Hon’ble President’s Guidelines to Hon’ble Members for drafting orders.