The Special Bench. - Income Tax - 387/CBDT

INSTRUCTION NO. 387/CBDT Dated: March 3, 1972 Section(s) Referred: 257 ,287 ,255(3) Statute: Income - Tax Act, 1961 Reference is invited to paragraph 2(6) of the Board's Instruction No. 376, F.No. 277/2/70-ITJ dated the 1st February, 1972 regarding proceedings before the appellate authorities in case of concealment penalties under section 271(1)(c)-Explanation. Because of large number of appeals before the Tribunal and higher appellate authorities on this issue, the Ministry of Law were consulted whether it would be feasible to request the President of the Tribunal under Section 257 of Income-tax Act, 1961, that the Tribunal may refer some cases involving this issue, directly to the Supreme Court so that the Supreme Court judgments become expeditiously available to serve as guidelines. A copy of a Note dated 15-2-1972 recorded by the Ministry of Law on the Board's reference, is printed below. As suggested by the Ministry of Law, the Board desired that the Commissioners/Additional Commissioners may consider suitable cases pending before the Tribunal (on appeal by assessees or the Department) bearing this issue so that the President of the Tribunal could be requested for a few such cases to constitute under Section 255(3), a Special Bench consisting of three or more Members, for disposing of these specified cases in order that the Special Bench decision may serve as guideline for other Benches of the Tribunal and for the authorities below. The Commissioners/Additional Commissioners are accordingly requested to examine the matter and make recommendations to the Board specifying the relevant appeals (with particulars) before the Tribunal for which the President, Income-tax Appellate Tribunal may be approached on the above lines. After the relevant information has been received from the Commissioners/Additional Commissioners and scrutinised by the Board, further procedure for moving the President, ITAT in the matter will be indicated. 2. For referring to the Special Bench of Income-tax Appellate Tribunal a few appeals before the Tribunal involving other generally contentious legal issues on which the different Tribunal Benches may have given varying decisions and no judgments from higher courts may be available, can also be suggested by the Commissioners/ Additional Commissioners to the Board with necessary particulars. Thus, for penalty under Section 221(1) for non-payment of tax some Tribunal Benches have taken the view that if the tax was in arrear when penalty notice was issued but it was subsequently paid before the imposition of the penalty, there was no default on the date of imposition of penalty; Ahmedabad Bench of the Tribunal have however, interpreted the relevant provisions in favour of the Department. There may be other such issues also. 3. A reply is requested by the 15th April, 1972 positively. COPY OF NOTICES DATED 15-2-1972 RECORDED IN THE MINISTRY OF LAW DEPARTMENT OF LEGAL AFFAIRS (ADVICE 'F' SECTION) IN THE CENTRAL BOARD OF DIRECT TAXES FILE NO. 279/143/-ITJ. Note in the Ministry of Law Department of Legal Affairs, Advice (F) Section. Section 257 of the Income-tax Act which authorises the Tribunal to make a reference direct to the Supreme Court can be invoked only when there is a conflict in the decisions of the High Courts. The principal difficulty at present appears to be that there is no authoritative decision of a High Court. Consequently Section 257 would be of no assistance. 2. It is no doubt true that technically the Department can move the Supreme Court for the grant of special leave under Article 136 from a decision of a Bench of the Tribunal, but when the remedy by way of reference is open to the party, the Supreme Court would be extremely chary of granting special leave. It is doubtful whether the mere fact that there has been certain variation in the approach of different Benches of the Tribunal would be sufficient to pursuade the Supreme Court that it is an appropriate case for the grant of special leave. 3. Another course might be open to the Department. Under Sub-Section (3) of Section 255, the President may constitute a Special Bench consisting of three or more members for the disposal of a particular case. If there is a difference of opinion between the findings of different Benches of the Tribunal, I would suggest that the appropriate course would be in a proper case to request the President of the Tribunal to refer the case to a Special Bench in order to resolve the conflict of opinions. Normally, the decision of the Special Bench would be followed by other Benches of the Tribunal. This would tend to avoid uncertainty. 4. Another course would also be open. From the decision of the Special Bench, a case can be stated to the High Court. Once a reference has been made, a special application can be made to the High Court for taking up that particular case on an out-of-turn basis and for deciding it at an early date on the ground that it would establish a precedent on the basis of which a number of other cases can be decided. Normally, if the matter is properly presented to the High Court, it would accede to the request. 5. Similarly, if a reference is already pending in a matter which the Department can regard as a test case, it may try to move the High Court concerned for deciding that particular case on an out-of-turn basis. 6. But may own preference would be in the first instance to move the Tribunal for the constitution of a Special Bench if there is a conflict of decisions.