2012 (6) TMI 268 - AT - Income Tax

Principal of natural justice - High Court on petition of assessee directed Tribunal to disclose material collected by the Revenue in the course of various searches and surveys, connected with the dispute in question, which is not yet disclosed and which may be relied upon by the Tribunal - reference to Special bench - dissenting views of all the three members - Held that - It has been noticed above that both the sides are at variance in reading the majority conclusion drawn by the three members of the earlier special bench. After going through such orders The majority view is in favor of the Revenue and against the assessee. As such, in so far as the tribunal is concerned, it cannot issue any direction to the AO to disclose the material in a particular manner or to a particular extent.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Disclosure of material to the assessee.
3. Cross-examination of witnesses.
4. Bias allegations against tribunal members.
5. Constitution and functioning of the Special Bench.

Issue-wise Detailed Analysis:

1. Violation of Principles of Natural Justice:
The assessee argued that the Revenue used material collected during searches and surveys without confronting it, which led to a violation of the principles of natural justice. The Tribunal initially held there was no violation of natural justice. However, the Bombay High Court directed the Tribunal to disclose material not yet disclosed and decide on the cross-examination of witnesses.

2. Disclosure of Material to the Assessee:
The Tribunal was directed by the High Court to ensure that the Revenue disclosed all material used against the assessee. The first Member of the Special Bench directed the complete disclosure of 31 items to the assessee. The second Member disagreed, stating that the Tribunal should not compel the Revenue to disclose material beyond what it deemed necessary. The third Member concurred with the second Member, concluding that the Tribunal should not dictate the manner or extent of disclosure, leaving it to the Revenue and the assessee to resolve.

3. Cross-Examination of Witnesses:
The Tribunal did not initially address the issue of cross-examination of witnesses. The High Court had directed the Tribunal to decide on the cross-examination of witnesses whose evidence was likely to be relied upon. This issue was left open for future consideration.

4. Bias Allegations Against Tribunal Members:
The assessee alleged bias against the Judicial Member who authored the order rejecting the contention of the violation of natural justice. To address this, the Hon'ble President constituted a Special Bench to ensure impartiality and thorough examination of the case.

5. Constitution and Functioning of the Special Bench:
The Special Bench was constituted due to the complexity and high stakes of the case. The hearing was concluded, and the first Member prepared a draft order, which was disagreed upon by the second Member, leading to separate orders. The third Member initially concurred with the first Member but later agreed with the second Member upon re-evaluation, following a High Court directive.

Conclusion and Confirmatory Order:
The majority view of the Special Bench was in favor of the Revenue, concluding that the Tribunal should not issue specific directions on the disclosure of material. The Tribunal confirmed that it could not compel the AO to disclose material in any particular manner or extent. The appeals were scheduled for further hearing on merits on July 30, 2012.

Order Pronounced:
The order was pronounced on May 30, 2012, directing the registry to list the appeals for further hearing on the specified date.