TMI Blog2009 (9) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... g raised before it. HELD THAT:- Reference may be made to the decision of the Apex Court in the case of Chhabildas Tribhuvandas Shah v. CIT [ 1964 (9) TMI 8 - SUPREME COURT] . Where there is denial of principles of natural justice in a given case it will give rise to a legal question, as pointed out by the Madhya Pradesh High Court in the case of CIT v. Abhyeshwar. Failure to give proper and effective hearing amounts to denial of opportunity of being herd and is likely to be construed as one being perverse and all such orders are liable to be disturbed. Only on this preliminary ground if the order could be disturbed, there can be no effective disposal of appeal. Therefore, this issue requires to be properly addressed and sorted out in accordance with well laid down principles of law and also the principles of natural justice. In our considered opinion, in the light of the principle laid down in the case of M.K. Mohammed Kunhi [ 1968 (9) TMI 5 - SUPREME COURT] . The Tribunal has inherent jurisdiction to go into the question, whether the parties who are appearing before it are properly entitled under the law to make appearance. For this purpose, they are entitled to go into prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho have retired after 3-6-2009. We are not for the moment holding anything about the legislative competence of the President to make the Rules in the manner it is done, but we have only interpreted the provisions that are made as part of conditions of service and from such conditions of service the ban on right to practice can only be made applicable to the employees who are presently serving the Union of India or in connection with the affairs of the State. In our view, having regard to the principle laid down in the decisions of Apex Court in Kailashnath [ 1988 (11) TMI 346 - SUPREME COURT] ; P. Mahandran [ 1989 (12) TMI 351 - SUPREME COURT] ; T.R. Kapur [ 1986 (12) TMI 366 - SUPREME COURT] , Kaishav Madhavan Menon[ 1951 (1) TMI 32 - SUPREME COURT] ; R.S. Ajara [ 1997 (3) TMI 614 - SUPREME COURT] ; P.D. Aggarwal [ 1987 (6) TMI 393 - SUPREME COURT] , Chairman, Central Board, which have been discussed elaborately, we are of the view that these provisions are applicable to those persons who retired from the service on or after the date of publication of this notification. Accordingly, in the light of the discussion, the reference is answered as under: 1. Whether, the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with law, after giving both the parties to appeal an opportunity of being heard. - G. E. Veerabhadrappa V.P. , C. L. Sethi J.M. And K. D. Ranjan A.M. For the Assessee : Dr. Rakesh Gupta For the Intervers : Ved Jain , Anoop Sharma , Salil Kapoor , Y. K. Kapoor , through Kanan Kapoor K. C. Singhal , Dr. M. V. R. Prasad , T. N. Chopra , Prakash Narain , S. C. Tiwari , Keshav Prasad For the Revenue : A. K. Bhardwaj , for the Ministry of Law Stephen George ORDER PER G.E. VEERABHADRAPPA, VICE PRESIDENT.- 1. When the above captioned appeal was posted for hearing before the Division Bench, it was noticed by the Bench that in view of insertion of Rule 13E in the I.T.A.T. (Recruitment and Conditions of Service) Rules, 1963, vide Notification No. GSR 389(E), dated3-6-2009 question were raised as to validity to the appearance of Dr. Rakesh Gupta, Advocate, on behalf of the assessee. The Bench, after hearing Dr. Rakesh Gupta, Adv. and some ex-Members of the Income-tax Appellate Tribunal ( ITAT in short), who were present in the Court, felt that the issue was complex and would, therefore, require to be first decided, before deciding the merits of appeal. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s who arc recruited before but retire after the date of Notification? 4. Whether, the said Notification applies to the Members who retire, if otherwise are qualified to practice under section 288 of the Income-tax Act, should still be debarred to appear and argue before the Tribunal? 5. Whether, the said Notification applies to the Members who resigned from services before the date of Notification, without any retirement benefits? 3. In pursuance of the directions of the Special Bench, a notice was issued to the Ministry of Law Justice. The case was fixed for hearing on3-8-2009. In pursuance of the notice given, several ex-Members of the ITAT, who are practicing in Delhi and outside Delhi, sent their applications, referring to their cases before ITAT and pleaded to act as interveners in this case. Having regard to the issue in question, the Bench permitted all such persons who have the cases before the Tribunal to act as interveners. The Departmental Representative was also present and on behalf of the Ministry, Sr. Central Government Counsel, Shri A.K. Bhardwaj, put in the appearance. 4. At the out set, a preliminary objection was taken by the Sr. Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 24/25-8-2009. Before going into the questions themselves, as we discussed earlier, the objection of the Law Ministry remains to be adjudicated, which we take up now. 8. It was argued on behalf of the Ministry of Law Justice that the ITAT is constituted only for the purpose of hearing and disposing of the appeals arising under the Income-tax Act. It cannot go into interpretation of the validity or correctness or otherwise of Rule 13E which is the part of the ITAT Members (Recruitment Conditions of Service) Rules, 1963. The proper forum, according to him, is the Central Administrative Tribunal ('CAT') and, therefore, it was vehemently opposed the reference by arguing that this Tribunal has no jurisdiction to adjudicate upon the issues that are being raised before it. The service in the Government is a contract between the employee and the Government of India. The Tribunal Members are part of that class and if their conditions of service are amended to their detriment, it is fair and proper that they should be directed to go before the CAT and not argue their entitlement before the ITAT. 9. On the other hand, the learned counsel for the assessee as well as the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be effective and adequate and it cannot be made illusory under any circumstance. Mere issue of a notice of hearing of the appeal will not suffice in all circumstances. In fact the power to grant adjournment also arises from the provisions of section 254(1) of the Act. A wrong exercise of a discretion to adjourn itself can give rise to questions of law before the High Court and the decision rendered by the ITAT without giving an opportunity of being heard itself can be questioned. The powers of the ITAT under section 254 of the Act in dealing with the appeal are expressed in the widest possible terms and are similar to the power of an appellate court under the Civil Procedure Code. It was so held by the Bombay High Court in New India Life Assurance Co. Ltd. v. CIT [1957] 31 ITR 844. The Supreme Court in the case of Esthuri Aswathiah v. CIT [1967] 66 ITR 468 has held that function of the Appellate Tribunal in hearing an appeal is purely judicial. It is under a duty to decide all questions of fact and law raised in the appeal before it. But the Tribunal cannot make arbitrary decisions. It cannot found its judgment on conjectures, surmises or speculation. In the exercise of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT v. Abhyeshwar [1999] 153 CTR MP 372. Failure to give proper and effective hearing amounts to denial of opportunity of being herd and is likely to be construed as one being perverse and all such orders are liable to be disturbed. Only on this preliminary ground if the order could be disturbed, there can be no effective disposal of appeal. Therefore, this issue requires to be properly addressed and sorted out in accordance with well laid down principles of law and also the principles of natural justice. 13. Now we will see the facts in the case of M.K. Mohammed Kunhi, the assessee was imposed with penalty under section 271(1)(c) of the Income-tax Act for concealment of particulars of income. The assessee questioned those penalties before the ITAT and also made an interim prayer for stay of collection of the penalties imposed. The Tribunal declined to order any stay holding that it had no power to grant such a prayer. In fact there were no provisions as the one we have now at that point of time when the prayer for stay was made. The assessee then moved the Kerala High Court under article 226 of the Constitution. The Kerala High Court in the case of M.K. Mohammed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given based on Ex parte Martin that where an inferior court is empowered to grant an injunction, the power of punishing disobedience to it by commitment is impliedly conveyed by the enactment, for the power would be unless if it could not be enforced. 15. It is quite interesting to note that their Lordships further proceeded and made the following observation: It was said that the general principle was that in a taxing statute there was no room for what could be called the equitable construction, but that principle applied only to the taxing part of the statute and not to the procedural part. It has further been observed that where the Legislature invests an Appellate Tribunal with powers to prevent an injustice, it impliedly empowers it to stay the proceedings which may result in causing further mischief. It is well-known that the Income-tax Appellate Tribunal is not a court but it exercises judicial powers. The Tribunal's powers in dealing with appeals are of the widest amplitude and have in some cases been held similar to and identical with the powers of an appellate court under the Civil Procedure Code: see Commissioner of Income-tax v. Hazarimal Nagji and Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inary issue, when it raised or arises before it as a part of such a judicial process. 18. Although it is not of much importance, rules 16 and 17 of the Appellate Tribunal Rules, 1963, also provide for filing of proper authorization for appearing before the ITAT. It may be quite possible the Registry officials may raise objection and do not accept the power of attorney of a person filed by the parties when a rule like rule 13E is raised on a person who claims an opportunity of being heard in the matter. Therefore, it is all the more necessary that the Tribunal has to go into this question and dispose of the preliminary objection in this regard. It may be mentioned, that Jaipur and Bombay Benches of the Tribunal, in the cases cited earlier, have exactly done the same thing when disputes were raised as to the competence of a person claiming to represent before ITAT. In both these cases, the competence of person appearing as authorized representative was a Departmental Representative, protecting the interest of the revenue was in question and the Tribunal adjudicated these issues. Therefore, we entirely agree with the view taken by the Jaipur Bench and the Mumbai Bench in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 2007 with effect from11-5-2007. The said sub-section reads as under: 129(6)-On ceasing to hold office, the President, Vice-President or other Member shall not be entitled to appear, act or plead before the Appellate Tribunal. 23. It was pointed out that Delhi High Court was not at all concerned with the interpretation of a provision relating to conditions of service. They were concerned with the provisions of section 129(6), which was brought by the Parliament in the statute relating to Customs Act. This is the difference, according to the interveners and the appellant's advocate. The major issues that fall for our consideration, could be as under: (i) Whether, there is any difference in the legislative amendment in section 129(6) of the Customs Act, 1962 and Rule 13E of the Income-tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963. Whether, that really makes any difference? (ii) Classification of the Members, whether prohibited from appearing before the ITAT. Whether, the said prohibition applies to the ex-Members or the present Members or only the Members who join hereafter. 24. Among the ex-Members, there is an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant rules and orders in force from time to time. ........ 13. Your said appointment to the post of Member in the ITAT will be subject to the final orders in CWP Nos. 6797/99 (K.K. Gupta v. UOI) 6798/99 (B.R. Jain v. UOI) 7241/99 (Sh. D.K. Tyagi v. UOI) 7714/99 (B.R. Mittal v. UOI) and 135/2000 (UOI v. P.K. Bansal) pending before the High Court of Delhi. 26. Shri Rakesh Gupta, in his compilation, filed copy of the recruitment rules, which were sent to him. He accepted the offer of appointment. He joined the Tribunal on16-8-2000. He submitted his resignation during the probation itself and the said resignation was accepted from21-3-2001. The said acceptance, it may be stated was done by the Government even by waiving the notice period of one month, as mentioned in the acceptance letter. It may be mentioned that before joining the Tribunal Dr. Rakesh Gupta practiced between 1984 to 2000 and appeared before Delhi Benches of the ITAT in various cases from 1990 to 2000. After he resigned, Dr. Gupta started practicing as an advocate from May 2001 and has been appearing before the Tribunal mainly before Delhi Benches of the ITAT regularly since then. It was stated by him that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age of fifty-eight years on or before the first day of May, 1998 and is on extension in service, shall retire from the service on expiry of his extended period of service. or on the expiry of any further extension in service granted by the Central Government in public interest, provided that no such extension in service shall be granted beyond the age of 60 years. 28. According to Dr. Rakesh Gupta, the retirement can be at superannuation, voluntary retirement on completing prescribed years of service; or a compulsory retirement by employer. According to him, the retirement takes place normally a superannuation or on completion of qualified period of service. In his case and in the cases of four others, there is no retirement but they have resigned from service. The resignation is not the same thing as retirement. This difference, according to him, was noticed by the Supreme Court in the case of UCO Bank v. Sanwar Mal AIR 2004 SC 2135. In that case, according to Shri Rakesh Gupta, the Supreme Court went through different regulations and opined that the expressions 'resignation' and 'retirement' have been employed for different purposes and carry different meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work or to discharge special functions, which are not of a permanent nature. Our attention was drawn to the decision of the Supreme Court in the case of Kedar Nath Behl v. State of Punjab AIR 1972 SC 873 held that the phrase likely to continue with a temporary post does not mean an assurance that the post will be permanent. In fact in the case of Kedar Nath Behl v. State ofPunjabAIR 1979 SC 220. The Supreme Court held that there could be no question of confirmation if the post itself is temporary. It was again argued by Shri Rakesh Kumar Gupta that during probation there is no question of right to the post. The Hon'ble Supreme Court in the case of Purshottam Lal Dhingra v. Union of India AIR 1958 SC 36 at page 42 have elaborated the concept of 'probation' in these words:- an appointment to a permanent post in Government service on probation means.... That the servant so appointed is taken on trial . 31. Dr. Rakesh Kumar Gupta argued that in his case even the appointment as not to a permanent post. Our attention was further drawn to the decision of the Supreme Court in the case of State of U.P. v. Kaushal Kishore Shukla [1991] 1 SCC 691 wherein it has been hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is being made, cannot take away the vested rights and any such amendment must be reasonable. Dr. Gupta referred to the decision of the Apex Court in the case of Satish Chandra Anand v. UOI AIR 1953 SC 250 on the point of conditions of service being governed by the contract and contended that although the Government can enter into contracts and impose special terms that some one would be ineligible to practice, the special term must exist at the time when he joined the service and such term must be accepted to become effective whereas in his case it was pleaded that there was no term at the time when he accepted or when he relinquished, hence, no question of acceptance on his part. Even the State, according to him, is bound by the term or absence of term. Reliance was also placed on the decisions of Supreme Court in the cases of State of M.P. v. Shardul Singh [1970] 3 SCR 302; and I.N. Subba Reddy v. Andhra University [1976] 3 SCR 1013, wherein it has been held that the expression conditions of service means all those conditions which regulate the holding of a post by a person right from the time of his appointment till his retirement and even beyond it in matters like pension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of P.C Jain, was not applicable to him and to the other interveners, who are identically placed, as the facts in that case are totally different. According to him, in the case of P.C. Jain, their Lordships of Delhi High Court were mainly concerned with interpretation of section 129(6) of the Customs Act and were not concerned with any interpretation as to the conditions of service. Moreover, it was emphasized by Dr. Gupta that in the case of P.C. Jain, none of the instances discussed therein pertained to the Members, who have resigned from service. The terminology used in rule 129(6) and rule 13E are different and is to be judicially recognized before views are drawn, debarring the eligible persons under section 288 of the Income-tax Act from appearing before the ITAT. It will be denial of opportunity, which, according to him, is not warranted even on the basis of decision of Delhi High Court in the case of P.C. Jain. 35. In the case of Shri Ved Jain by letter dated21-11-1997, he was offered the post of Accountant Member in ITAT. The conditions on which the post was offered, were the same as in the case of Dr. Rakesh Kumar Gupta, except condition No. 13 as spelt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f decision of Delhi High Court in the case of Raj Bhaskar v. Oriental Insurance Co. Ltd. MANU/DE/9223/2006 wherein their Lordships, applying the principle laid down by the Supreme Court in the case of UCO Bank, held that the resignation and the retirement cannot be taken together. Our attention was drawn to the decision of Rajasthan High Court in the case of Sohan Lal Soni. Shri Y.K. Kapoor further submitted that the Supreme Court again noticed the same difference between resignation and retirement in the case of Chandrashekar A.K. v. State of Kerala AIR 2009 SC 643. Having regard to the facts that he could not be considered to have retired within the meaning of rule 11 of the Income-tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963. Our attention was specifically drawn to para 26 of the decision of the Delhi High Court in the case of P.C. Jain, as reproduced below: 26. In our view, the two cases cited by the petitioners are clearly distinguishable. In both the cases the Court struck down the bar placed on the legal practitioners to practice before the Tribunal constituted under the concerned statutes on the ground that the prohibition was enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is that of resignation from service and not retirement. Reliance was placed on the ratio of decisions of Supreme Court in the cases of Union of India v. Gopal Chandra Mishra [1978] 2 SCC 301; Sanwar Mal's case; and Jaipal Singh's case, wherein the difference between resignation and retirement is judicially noticed. He argued on the same lines as in the case of Shri Rakesh Gupta. 40. On behalf of the Ministry Shri A.K. Bhardwaj, Sr. Central Government Counsel appeared and has filed detailed affidavit. It was pleaded that in the light of the decision of Delhi High Court in the case of P.C. Jain, which interpreted the identical provision of section 129(6) of Customs Act, 1962, there is a possibility to debar the appearance of such Members also. In view of dignity of office and perception of bias, such Members on their own should refrain from appearing and practicing before the Tribunal wherein they have adjudicated the dispute of others. According to him, although many of the interveners have questioned the legislative competence for enacting rule 13E into the service conditions and have also questioned its validity as discriminatory and violative of articles 14, 19 and 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 309 of the Constitution has the same legislative impact as the one that was done by the Parliament. According to him, rule 13E has the same force as that of the provision of section 129(6) of the Customs Act. Any difference in interpretation will not be in line with the view expressed by the Delhi High Court in the case of P.C. Jain. He vehemently relied upon the decision of P.C. Jain. According to him, their Lordships of Delhi High Court have elaborately dealt with all the contentions that are now being taken by the parties and, therefore, the law expressed by the Jurisdictional High Court in that case should be applied in the larger interest of the Institution. 42. The learned Sr. Central Government Counsel further relied on the decision of the Supreme Court in the case of Slate of Punjab v. Kailash Nath AIR 1989 SC 558. According to him, this decision, carried the scope of article 309 even beyond the period after retirement. The ratio laid down in this case, according to him, supported the view canvassed by the Ministry of Law Justice in this regard. The prosecution of an employee who long back retired, was upheld by theApex Courteven after the retirement as a part of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions of service' can be framed only in relation to matters relating to pension and other retirement benefits. A rule framed under proviso to article 309 cannot apply to a person who is no longer in service. For this reliance was placed on the ratio of decision of Supreme Court in the case of Kailas Nath. The learned intervener further submitted that the right to practice was not a condition to service. This fact has been admitted by the ASG who appeared in the case of P.C. Jain. At any rate the decision of the Delhi High Court in the case of P.C. Jain is binding on this Tribunal to the extent it holds that right to practice before the ITAT is not a condition of service. Our attention was drawn to para 34 of the judgment. In fact in the case of P.C. Jain, their Lordships were dealing with the legislative provision in the form of section 129(6) of the Customs Act and not the condition of service. According to him, rule 13E must be ignored as it cannot be made under the proviso to article 309 of the Constitution of India. Our attention was drawn to the decision of Supreme Court in the case of D.R. Yadav v. R.K. Singh AIR 2003 SC 3935, wherein it was held that on a plain readi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a State Legislature or claim itself as an 'Act of Parliament'. In other words, the right to practice conferred by the Act by the Parliament can be taken away only by another Act of Parliament which is not the case here. The qualification of the interveners, according to him, are duly supported by section 288 of the Income-tax Act, 1961 and section 14 of the Bar Councils Act and section 30 of the Advocates Act and, therefore, cannot get adversely affected by rule 13E of the ITAT (Recruitment and Conditions of Service) Rules, 1963. 47. Shri Tiwari further pointed out that the provisions of section 129 of the provisions of Customs Act are in pari materia with the provisions of section 252 of the Income-tax Act word by word. They are bodily lifted provisions. Nothing prevented the Parliament from inserting in the provisions of section 252 which is in pari materia with section 129 of the Customs Act. If that course would have been adopted by the Parliament, it could be argued that the decision of Delhi High Court in the case of P.C. Jain settles the matter in all fours. The provisions are not made that way. Nor the provisions of section 288 of the Income-tax Act are amende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-12-1983 22. Shri C.B. Rathi 30-12-1978 23. Shri D.V. Junakar 31-10-1984 24. Shri Rajendra 17-1-1980 25. Shri B. Gupta 31-1-1987 26. Shri S.K. Jain 26-10-1993 27. Dr. O.N. Tripathi 2-2-1996 48. The learned intervener further pleaded that there are several other retired Members who are in practice and whose names are not included in the above list. In the case of ITO v. Ramakrishna Bajaj [1992] 43 TTJ (Bom.) (SB) 400, the retired Member of the ITAT, Dr. V. Balasubramaniam, in the said Bench, appeared not for the assessee but for the revenue. Rule framed under proviso to article 309 of the Constitution, cannot turn back the clock by over 50 years to the prejudice of the Members who have accepted in past the post of Members of Income-tax Appellate Tribunal with post retirement career in their mind. According to him, Notification No. GSR 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax authorities including the ITAT. According to him, it contained a provision similar to section 129(6) of the Customs Act in the form of section 288(3) which was brought to achieve the similar object as these, read as under:- (3) Notwithstanding anything contained in this section, if the authorized representative is a person formerly employed as an income-tax authority, not below the rank of Income-tax Officer, and has retired or resigned from such employment after having served for not less than three years in any capacity under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), from the date of his first employment as such, he shall not be entitled to represent any assessee for a period of two years from the date of his retirement or resignation, as the case may be. 51. This was omitted by the Taxation Laws (Amendment) Act, 1984 with effect from1-10-1984. But, however, officers belonging to Indian Revenue Service, who have retired from Government service, were again prohibited under Central Civil Service, Pension Rules, from practicing after retirement under Rule 11 of the CCS (Pension) Rules. The said Rule was challenged before the Central Administrative Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also to the decision of Supreme Court in the case of U. Raghavendra Acharya v. State of Karnataka AIR 2006 SC 2145. In all these cases it was pleaded that an executive order cannot operate retrospectively to destroy any crystallized/vested right. Our attention was also drawn to the decision ofApex Courtin the case of State Government Pensioners Association v. State ofAP AIR1986 SC 1907, wherein it was held that amended provision relating to gratuity cannot apply to those who retired before commencement of the rule. Our attention was also drawn to the decision of Apex Court in the case of Eramma v. Veerupana AIR 1966 SC 1879 (1) that rule introduced in Hindu Succession Act can only be prospective. Our attention was drawn to the decisions of Supreme Court in the cases of P Ganeshwar Rao v. State ofAP AIR1988 SC 2068; and Y.V. Rangaiah v. J. Srinivasa Rao AIR 1983 SC 852(1), wherein amendments that are brought out later cannot be made good for vacancies arising out after appointment. 52. Shri K.C. Singhal, Advocate, another intervener, pointed out that the impugned notification No. GSR 389(E), dated 3-6-2009 inserting Rule 13E in the ITAT Members (Recruitment and Conditions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to him, unless such rule was there at the time of recruitment, the same cannot be applied at the time of retirement. 54. He pointed out that a provision can be said to be retrospective if it is declaratory of law. In this case, neither rule 13E expressly states it to be retrospective nor such rule can be considered as declaratory of law. Hence, by no logic, such rule can be said to be on the statute when the. interveners were in service. Hence, this rule cannot be applied to persons who retired prior to3-6-2009. Even assuming, for the sake of argument, though not admitted, the learned intervener pleaded that Rule 13E is retrospective in nature, it cannot take away the accrued or vested rights acquired before 3-6-2009 as held by the Supreme Court in the cases of P.D. Aggarwal; and Chairman, Railway Board v. R. Rangadhamaiah AIR 1997 SC 3828 (Constitution Bench). Accordingly, it is the duty of the Court of the Tribunal to interpret the service rules in the manner that the interpretation does not take away the vested rights acquired by any public officer. According to him, he was carrying on the legal profession since 1969 and as an advocate and appearing before the ITAT till 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t till date, meaning thereby, the Parliament itself wanted the difference in both the Acts to continue. The reason is obvious, according to him. The provision of sub-section (3) to section 288 existed in the Income-tax Act. As per the said sub-section, the retired income-tax officials were not permitted to appear before income-tax authority including the ITAT up to two years from the date of their retirement. The validity of the said sub-section was challenged in the Court and the Hon'ble Punjab Haryana High Court in the case of Kulwant Singh v. ITO [1970] 75 ITR 99, held the said provision to be constitutionally valid. Still the Parliament in its own wisdom deleted sub-section (3) from the statute by Taxation Laws Amendment Act, 1984. Thereafter Rule 11 was inserted in the Central Civil Services (Pension) Rules, 1972 in 1984. As per that rule, the retired income-tax officials could not set up practice for 3 years. This rule was held to be ultra vires by theApex Courtand presently this rule is non-existent. According to him, the amendments that are made in the conditions of service, in the light of the principle laid down by theApex Courtin the case of Keshvan Madhvan Menon v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilash Nath AIR 1989 SC 558 and Shardul Singh's case. 56. Shri T.N. Chopra, Advocate pleaded that notification issued by the Law Ministry being in the nature of subordinate legislation, cannot conceivably amend, modify or override the statutory provision of section 288 of the Act. The Notification is outside the domain of the Income-tax Act and merely relates to administrative and disciplinary jurisdiction of the Law Ministry and cannot interfere with the judicial functions of the Tribunal. Our attention was drawn to the decision of the Supreme Court in the case of ITAT v. V.K. Agarwal [1999] 235 ITR 175. Our attention was also drawn to the decision of Delhi High Court in the case of Chairman, CBDT v. V.S. Malhotra [1981] 128 ITR 543, wherein it was held that provision to debar an income-tax practitioner can only be prospective in character where the person commits an act or default complained of after the amendment has come into force and not before. It was also pleaded by Shri T.N. Chopra that Notification imposes a life ban on the retired Members for practice before the Tribunal, whereas section 288 of the Income-tax Act as well as section 30 of the Advocates Act declare t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. On account of ex-Members who once presided over the judicial body, are arguing their cases before it, the charge of bias can always be raised. Rather, it is always presumed. The judicial body should be free from such charge on its reputation. That, according to him, should be taken note of and the Members of the ITAT who retired long back should, therefore, not practice before the ITAT after their retirement from now onwards. As regards the contention that it applies only to the Members who are recruited after the issuance of Notification, he vehemently argued that it will be against the principle laid down by the Delhi High Court in the case of P.C Jain. The learned Sr. Central Government Counsel heavily relied upon the decision of the Apex Court in the case of Bishnu Narain Mishra v. State of U.P. AIR 1965 SC 1567 to contend that the provision, like the one made in Rule 13E is applicable to all the persons who have even retired prior to the coming into force of the said Notification. This decision is of 5-Members Bench of theApex Courtand is binding on the ITAT and, therefore, the ratio laid down by the Delhi High Court in the case of PC Jain is applicable to all the retired p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were once Members. The High Court specifically dealt with the issue in para 24 of its Judgment again on the ground that such clear discrimination was untenable. In the opinion of the High Court the step taken in amending the Customs Act was reformatory and not discriminatory, as contended by the petitioner. It was also based on the recommendation of the President of the CESTAT. In the opinion of the High Court, a bar has been made in the provision in respect of some Tribunals such as CESTAT and CAT, leading to their conclusion that the intended provisions were not discriminatory. The Hon'ble High Court also appreciated the fact that Addl. Solicitor General ('ASG' in short), who brought to their notice an inter-departmental letter dated 20-9-2007, exchanged between the Ministry of Law Justice, Department of Legal Affairs and the Department of Revenue, which suggested that the Government was in principle agreed that steps should be initiated to bring about a suitable amendment so that similar bar is incorporated in the Income-tax Act, in respect of Members of the Income-tax Appellate Tribunal. In fact the ASG submitted that this was an aspect which was pending for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself treated as probationary with an option that the Government may extend-the probation on its discretion. Except in the case of Shri Y.K. Kapoor, in all other cases of the interveners at Sl. Nos. 1 to 4, mentioned in the caption, resigned from their service much before their confirmation. In case of Dr. Rakesh Gupta, the offer was with further condition, subject to the final orders in certain civil writ petitions pending before the High Court. That means the offer of appointment given in all these cases was purely for a temporary post and the post itself was subject to probationary period of two years. 64. The Hon'ble Supreme Court in the case of Purshottam Lal Dhingra, have explained the terms 'temporary post' as well as 'probation', as under:- 17. Articles 310 and 311 are two of the articles which have been grouped under the heading Services in Chapter 1 of Part XIV which deals with the Services under theUnionand the States. It is well-known that there are different species of Government services. In the absence of a contract to the contrary the terms of employment of persons in different services are governed by rules made by the appropriate autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the servant so appointed is taken on trial. The period of probation may in some cases be for a fixed period, e.g., for six months or for one year or it may be expressed simply as on probation without any specification of any period. Such an employment on probation, under the ordinary law of master and servant, comes to an end if during or at the end of the probation the servant so appointed on trial is found unsuitable and his service is terminated by a notice. An appointment to officiate in a permanent post is usually made when the incumbent substantively holding that post is on leave or when the permanent post is vacant and no substantive appointment has yet been made to that post. Such an officiating appointment comes to an end on the return of the incumbent substantively holding the post from leave in the former case or on a substantive appointment being made to that permanent post in the latter case or on the service of a notice of termination as agreed upon or as may be reasonable under the ordinary law. It is, therefore, quite clear that appointment to a permanent post in a Government service, either on probation, or on an officiating basis, is, from the very nature of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abolished and his service cannot be terminated except by way of punishment for misconduct, negligence, inefficiency or any other disqualification found against him on proper enquiry after due notice to him. An appointment to a temporary post for a certain specified period also gives the servant so appointed a right to hold the post for the entire period of his tenure and his tenure cannot be put an end to during that period unless he is, by way of punishment, dismissed or removed from the service. Except in these two cases the appointment to a post, permanent or temporary, on probation or on an officiating basis or a substantive appointment to a temporary post gives to the servant so appointed no right to the post and his service may be terminated unless his service had opened into what is, in the service rules, called a quasi-permanent service. The question for our consideration is whether the protections of Article 311 are available to each of these several categories of Government servants. 65. Therefore, the nature of contract of the Government with these interveners has to be understood in the sense in which it is interpreted by the Supreme Court in the aforesaid case. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on taken against the Government Servant is punitive in nature. The Court further held that in determining the true nature of the order the Court should apply two tests namely: (1) whether the temporary Government servant had a right to the post or the rank or (2) whether he has been visited with even consequences; and if either of the tests is satisfied, it must be held that the order of termination of a temporary Government servant is by way of punishment. It must be borne in mind that a temporary Government servant has no right to hold the post and termination of such a Government servant does not visit him with any evil consequences. The even consequences as held in Parshotam Lal Dhingra's case do not include the termination of services of a temporary Government Servant in accordance with the terms and conditions of service. The view taken by the Constitution Bench in Dhingra's case has been reiterated and affirmed by the Constitution Bench decisions of this Court in the State of Orissa v. Ram Narayan Das MANU/SC/0311/1960; R.C. Lacy v. The State of Bihar CA No. 590/62, decided on23-10-1963; Champaklal Chimanlal Shah v. TheUnionofIndiaMAN/SC/0274/1963; Jagdish Miner v. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the month in which he attains the age of sixty years, which means that the retirement takes place on the superannuation or in case of voluntary retirement, on completion of qualifying period of service. 69. In the case of the Members of the Income-tax Appellate Tribunal, Rule 11 of the aforesaid ITAT Members (Recruitment and Conditions of Service) Rules, 1964, provide that the date of retirement of a Member shall be the date on which he attains the age of 62 years and not the last day of the month as in the cases of other Government servants. That means retirement in relation to ITAT Members is different from the retirement in relation to other Government servants to which large class they belong. Here the Member retires when he attains the age of 62 years. In the date of retirement, there is no reference to the last day of the month in which the other Government servants normally retire. The Rule has been subsequently amended to provide for a different age of retirement of the office of the President, which is now at 65 years that means retirement as a Member takes place in the Tribunal only upon attainment of superannuation as retirement does not take place prior to that. Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary retirement maintains the relationship for the purposes of gnat of retiral benefits, in view of the past service. Similarly, acceptance of resignation is dependent upon discretion of the employer whereas retirement is completion of service in terms of regulations/rules framed by the bank. Resignation can be tendered irrespective of the length of service whereas in the case of voluntary retirement, the employee has to complete qualifying service for retiral benefits. Further, there are different yardsticks and criteria for submitting resignation vis-a-vis voluntary retirement and acceptance thereof. Since the pension regulations disqualify an employee, who has resigned, from claiming pension the respondent cannot claim membership of the fund. In our view, Regulation 22 provides for disqualification of employees who have resigned from service and for those who have been dismissed or removed from service. Hence, we do not find any merit in the arguments advanced on behalf of the respondent that Regulation 22 makes an arbitrary and unreasonable classification repugnant to Article 14 of the Constitution by keeping out such class of employees. The view we have taken is supported by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be hit by the provisions of Rule 13E which is brought in the statute book much after they have relinquished their posts and got their past service forfeited. In our view by following the above principles and in the light of the Supreme Court decisions, discussed herein, we cannot accept the theory that they should be treated as having retired from service as a Member and they should be disqualified from appearing before the ITAT, if they are otherwise qualified to appear, as that will be only be in violation to the ratio laid down by the Supreme Court in the case of Sanwar Mal. 75. Coming to the plea of the Ministry that the spirit behind P.C. Jain's case, required to be applied in the larger interest of the Institution, cannot also be accepted. Having regard to the fact that in the case of P.C. Jain, the Delhi High Court was not at all concerned with any employee who was appointed on temporary post and on a probationary period and resigned from service during the probation period. The instances mentioned in the case of P.C. Jain, do not even deal with such type of cases. A judgment is an authority for a law that is pronounced on the facts of that case. It cannot be us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... probation cannot be extended, theApex Courthas observed as under: 15. Whether an employee at the end of probationary period automatically gets confirmation in the post or whether an order of confirmation or any specific act on the part of the employer confirming the employee is necessary, will depend upon the provisions in the relevant service rules relating to probation and confirmation. There are broadly two sets of authorities of this Court dealing with this question. In those cases where the Rules provide for a maximum period of probation beyond which probation cannot be extended, the Court has held that at the end of the maximum probationary period there will be a deemed confirmation of the employee unless rules provide to the contrary. This is the lie of cases starting with State ofPunjabv. Dharam Singh MANU/SC/0183/1968, M.K. Agarwal v. Gurgaon Gramin Bank MANU/SC/0899/1987, Om Parkash Maurya v. U.P. Cooperative Sugar Factories Federation, Lucknow MANU/SC/0476/1986, State ofGujaratv. Akhilesh C. Bhargav MANU/SC/0707/1987. 16. However, even when the Rules prescribe a maximum period of probation, if there is a further provision in the Rules for continuation of such prob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bes 2 years as a period of probation with a discretion to the employer to increase such period on its discretion. Here, whether discretion was exercised to extend such period of probation is not forthcoming from the records. It was confirmed by Shri Y.K. Kapur that he was not confirmed during the period prior to resignation. In the light of this, we also hold, by taking support by the ratio of decisions of the Apex Court, cited above, that he resigned from service much before his confirmation took place and will fit into the same other cases of interveners who have resigned before the date of confirmation, during the probation period. Accordingly, the answer that is given to their cases will equally apply to Shri Y.K. Kapur. 79. Before parting with this issue, we may mention that the Ministry of Law Justice in their affidavit in relation to the resigned Members have drawn our attention to Article 220 of the Constitution in relation to High Court Judges, wherein it is provided that permanent Judge of a High Court shall not plea or act in any Court or before any authority except the Supreme Court and the other High Courts. In other words, all such persons who are not permanent J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice as such, as rightly pointed out by the ASG when the matter was argued before the Delhi High Court in the case of P.C. Jain, whereas when it came to the ITAT Members, the Legislature has taken a different route, in our view, rather a risky route. They did not go to the Parliament but used the powers of the President that were vested in her under the provisions to Article 309 of the Constitution, which, in our view, are limited either to the recruitment or to the conditions of service. This aspect of the matter had already been amply discussed and threshed out by the Supreme Court in Kailash Nath's case. In fact, theApex Courtin the said case took pains to enumerate as to matters which would fall within the purview of conditions of service . The Ministry, which has filed the affidavit, has stated that these amendments are in the sphere of conditions of service. Now when once it is stated so which should strictly fall in the light what could be a condition of service, as interpreted by the Supreme Court in the cases of Shardul Singh; I.N. Subbareddy and Kailash Nath, in our considered opinion Rule 13E cannot be treated as one falling within the meaning of conditions of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e belonged to. It may be pointed out at this stage that the validity of the sub-section was challenged before the Punjab Haryana High Court in the case of Kulwant Singh, which held the provision to be constitutionally valid. Still the Parliament used its higher wisdom to delete sub-section (3) of section 288 of the Income-tax Act from the statute by the Taxation Laws Amendment Act, 1984. The larger public interest which the Legislature has envisaged while dropping the provision that already existed cannot merit ignorance merely because the executive authority felt otherwise, perhaps wiser than the higher wisdom of the Parliament. 86. After having removed those provisions, they tried to enforce same objective by taking recourse to amendment in pension rules (a type of conditions of service). That piece of the legislation which was brought to pension rules and which prohibited the employees of the Central Government from appearing and practicing before the same income-tax authorities to which they belonged while they were in service, was challenged before the CAT and the CAT struck down the said provision as unconstitutional and invalid. The matter went to the Supreme Court and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi High Court in the case of P.C. Jain should be plainly applied to this piece of legislation which brings certain amendments in the conditions of service akin to CCS (Pension) Rules. Again we go back to the earlier question which was bothering us, if it is a condition of service and whether it applies to the Members who are in service or who join the service from now so in relation to persons who were in service earlier and who are not in service on the date of notification. Now we first look to the plain words of Rule 13E which states that the President, Sr. Vice President, Vice Presidents and Members of the Tribunal shall not practice before the Tribunal after retirement from the service of the Tribunal. That means it can apply to the persons who are President, Sr. Vice President, Vice Presidents and Members on the date when the Notification was issued. The authorities relied upon by the interveners has shown that all amendments as to the conditions of service can only be prospective and in this case, the Notification itself says that it is prospective. The hitch that now entered our minds is that interpretation is the decision of theApex Courtin the case of Bishun Narain Misr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to those who join ITAT after3-6-2009. At the same time, as already explained, it does not apply to those who have already retired prior to3-6-2009. It does not disturb the historical facts or events that have already happened before or long time back. 88. The Ministry has resorted to issuance of the said Notification as it is claimed in the larger interest of the ITAT. They drew reference to the discussion in P.C. Jain's case to say all these are in the direction of reformatory steps brought in to uphold the dignity of the Institution to free this institution from charges of bias in discharge of its judicial function. Ends are simply laudable. But we should see whether the means by which it is sought to be achieved stands the test of law laid down and explained by the Supreme Court from time to time in relation to Article 309 of the Constitution. No doubt the Ministry, as it were, built a nice palace so that all of us in the ITAT could lead a happy and blissful life hereafter, used strong bricks, good cement and ISI marked steel but they built, in our view, on a loose soil or sandy bed or say without taking ecological clearance. The palace so built, although of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the ITAT as on3-6-2009, when these are made applicable, definitely suffer from the present disqualification. If it is to be treated as condition of service. In our understanding even the plain-reading of the provision of section 13E indicates that it can only apply to the Members who have retired after3-6-2009. 90. Before we part with the matter, the President had sent two representations received from ITAT Bar Association, Mumbai and ITAT Bar Association, Rajasthan for consideration of the same as per law. They stated in the said representations that they support the notification by the Ministry in the light of the decision of P.C. Jain's case. We would have certainly appreciated their personal appearance and arguments. We must say that no legal issue can be decided on the basis of some perception of the matter in one quarter of the society. We have to go by the judicial interpretation that the law enacted by the Parliament/Rule making Authority has received. In the light of the discussions made, we feel that we have done it. After all no law can be interpreted in a manner that pleases one section or to achieve the objects which they feel is right unless the Legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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