TMI Blog2010 (3) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... August, 2009 This appeal by the assessee is directed against the order dt. 11th March, 2008 of the CIT(A)-I, Coimbatore for the asst. yr. 2002-03. 2. In this appeal, the assessee has raised the following effective grounds: "(I) The learned CIT(A) has erred in sustaining the assessment when the learned AO reopened the assessment while he had time to make a regular assessment under s. 143(3) itself. (II) The learned CIT(A) has erred in sustaining the disallowance of the inter-corporate loan of Rs. 25,00,000 to Mercantile Credit Corporation, which had become unrealizable and written off in the books of account, without considering the objects of the company and the provisions of s. 36(2)(i) and the fact that interest income from these loans have been accepted in the earlier year as business income in the hands of the appellant. (III) The learned CIT(A) has erred in sustaining the disallowance of the inter-corporate loan of Rs. 27,00,000 to Asia Constructions which had become unrealizable and written off in the books of account, without considering the objects of the company and the provisions of s. 36(2)(i) and the fact that interest from these loans have been accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital in nature and to restrict the excess claim made under s. 80HHC, the AO initiated proceedings under s. 147 of the IT Act, 1961 as he had reason to believe that income of the assessee liable to tax in the relevant period had escaped assessment and then issued notice under s. 148 of the IT Act, 1961 to the assessee on 9th July, 2004. The AO after examining the case completed the assessment by order under s. 143(3) r/w s. 147 on 15th March, 2006 determining the income of the assessee at Rs. 15,96,84,223 as against the returned income of Rs. 3,08,59,280. On appeal, the CIT(A) has rejected the plea of assessee on this issue in para 5.4 as under: "From the above points raised in paras 5.1 to 5.3, it is seen that the validity of the proceedings initiated under s. 147 validity of the notice issued under s. 148 and consequently the validity of the order of the assessment for the asst. yr. 2002-03 dt. 15th March, 2006 have been challenged. From the records of the assessment, I find that the proceedings under s. 147 were initiated only after the return of income for the asst. yr. 2002-03 was processed under s. 143(1). The Hon'ble apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble income of Rs. 3,40,13,780. This return was accepted under s. 143(1)(a) vide intimation dt. 19th Dec., 2003. A revised return was filed on 23rd March, 2004. There was time to issue notice under s. 143(2) upto 31st March, 2005 on the revised return. While proceedings on the return were pending, the learned AO issued a notice under s. 148 on 9th July, 2004. (b) The issuance of notice under s. 148, when the proceedings on the return were pending is a violation of the provisions of the IT Act and the settled position of law supported by the decisions of the Hon'ble Supreme Courts and High Courts including the jurisdiction High Court. He has relied upon the following decisions: (i) Hon'ble Supreme Court in Trustees of H.E.H. The Nizam's Supplemental Family Trust vs. CIT (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC); (ii) Hon'ble Madras High Court in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad); (iii) In the decision of the Hon'ble Delhi High Court in the case of KLM Royal Dutch Airlines vs. Asstt. Director of IT (2007) 208 CTR (Del) 33 : (2007) 292 ITR 49 (Del); (iv) In the case of CIT vs. Qatalys Software Technologies Ltd. (2009) 308 ITR 249 (Mad). ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a notice under s. 148, if the conditions for initiating the proceedings under s. 147 are satisfied. He has further contended that the jurisdictional High Court has not considered the decision of the Hon'ble apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. while deciding the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad). But in the subsequent case of CIT vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad), the jurisdictional High Court after considering the decision of Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. sustained the reopening and reversed the decision in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad). He has further contended that in view of the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., the power of AO is not fettered for reopening the assessment even if the time for issuing notice under s. 143(2) of the IT Act, 1961 is still available and not expired. He has relied upon the order of lower authorities as well as the following decisions: (1) In the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd.; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe' would mean cause or justification. If the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. The function of the AO is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. vs. ITO (1991) 98 CTR (SC) 161 : (1991) 191 ITR 662 (SC), for initiation under s. 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome to the proceeding is not relevant. In other words, at the initiation stage, what is required is 'reason to believe', but not the established fact of escapement of income. At the stage of issue of notice, the only question is I whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Hon'ble. Delhi High Court in the case of KLM Royal Dutch Airlines vs. Asstt. Director of IT and the decision of the Hon'ble Supreme Court in the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust vs. CIT. As far as the decision of the Hon'ble Supreme Court in the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust vs. CIT is concerned, the said decision is regarding the asst. yr. 1962-63 and based on the unamended provision of s. 147 of the IT Act, 1961. In the case of KLM Royal Dutch Airlines vs. Asstt. Director of IT, the decision is dt. 12th Jan., 2007 which means the said decision is prior to the decision of the Hon'ble apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., which is dt. 23rd May, 2007 and thus the Hon'ble Delhi High Court had no occasion to consider the said decision of the Hon'ble Supreme Court. 8. Similarly, the decision of Hon'ble jurisdictional High Court in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad) has been passed without considering the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. We note that in the subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is valid, in case where the assessment has been reopened under s. 147 of the Act, since the time to issue notice under s. 143(2) of the Act was over, referred with approval the decision in the case of Mahanagar Telephone Nigam Ltd. vs. Chairman, CBDT (2000) 162 CTR (Del) 554 : (2000) 246 ITR 173 (Del), wherein the Delhi High Court held that the intimation under s. 143(1)(a) of the Act could not be treated to be an order of assessment and that a distinction was well brought out by statutory provisions as they stood at different points of time, that the intimation under s. 143(1)(c) was deemed to be a notice of demand under s. 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery of the amount indicated to be payable in the intimation became permissible. And nothing more could be inferred from the deeming provision. The Kerala High Court held that so long as the ingredients of s. 147 are fulfilled, the AO was free to initiate proceedings under s. 147 and failure to taken steps under s. 143(3) would not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of the year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under s. 148 r/w s. 147(a). But under the substituted s. 147 existence or only the first condition suffices. In other words, if the AO for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment......... So long as the ingredients of s. 147 are fulfilled, the AO is free to initiate proceedings under s. 147 and failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued.' For the reasons stated above and in the light of the pronouncement of the Supreme Court and the judgments of the High Courts referred to supra, we are of the considered view that the order of the Tribunal impugned in this appeal has to be set aside and the same is set aside by allowing the appeal." The subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of CIT vs. Qatalys Software Technologies Ltd. that the Hon'ble jurisdictional High Court has followed the decision in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad) and the decision in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. was also not considered. The subsequent decision in the case of ITO vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad), is the latest decision of the Hon'ble jurisdictional High Court on the point. When the effect of the subsequent decision is reversal/overruling of the earlier decision, then the decision in the case of CIT vs. Qatalys Software Technologies Ltd. would not help the assessee. 9. When there is diversion of views of the Hon'ble High Court on the same issue, then the decision which laid down the principle of law and based on the latest decision of the Hon'ble Supreme Court shall be followed by the lower authorities. Though, this Tribunal is no authority to distinguish the decision of the Hon'ble High Court but when there are decisions taking different views, then the lower authorities have to follow the latest decision which has laid down the law more elaborately and logically. In this respect, we may ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alizable receivables and advances. The AO found from the details that the assessee had advanced a sum of Rs. 25 lakhs to the Mercantile Credit Corporation Ltd. (MCC) during the period 1996-97 and Rs. 27 lakhs to M/s Alsa Constructions. The assessee claimed that by its memorandum and articles of association, it was authorized to invest any of the funds of the company as per cl. 15 thereof. The AO denied the claim of the assessee and held that since the regular business of the assessee was manufacturing of yarn and not moneylending activity, these advances of the assessee were investments made by utilizing its surplus funds and the same were capital in nature. The AO thus disallowed the claim in respect of Rs. 25 lakhs to Mercantile Credit Corporation Ltd. and Rs. 27 lakhs to M/s Alsa Constructions. On appeal, the CIT(A) has confirmed the order of the AO on this issue by taking similar view. 12. Before us, the learned Authorised Representative has submitted that the assessee offered interest on these advances as income in the earlier years which was accepted. He has further submitted that as per cl. 15 of the memorandum and articles of association the assessee has been authorized t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. As per cl. (i) of sub-s. (2) of s. 36 of the IT Act, 1961, the deduction of bad debts shall not be allowed unless such debts or part thereof has been taken into account in computing the income of the assessee of the previous year in which such debts or part thereof is written off or of an earlier previous year. In the case of business of banking or moneylending, the money lent in the ordinary course of business is also permitted as deduction for bad debts. In the present case, the assessee is not doing banking or a moneylending business. Therefore, by the provisions of s. 36(2), the claim of the assessee is not allowable. The case referred by the assessee is regarding a bank. Therefore, the decision of the Hon'ble Bombay High Court in the case of Director of IT (International Taxation) vs. Oman International Bank SAOG is not applicable in the facts and circumstances of the present case. Even otherwise, the said decision is on the point of writing off the bad debts in the books of account and in view of the amendments, the assessee is not required to establish that the concerned debt has actually become bad. 14. In view of the above discussion, we are of the consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant records. From the facts of the case, prima facie these issues are covered by the decision of the Hon'ble apex Court in the case of CIT vs. K. Ravindranathan Nair (2007) 213 CTR (SC) 227 : (2007) 295 ITR 228 (SC). However, there is no discussion either by the AO or by the CIT(A) in respect of these issues item-wise. Accordingly, we set aside these issues to the record of the AO to decide after discussing each and every item, whether the same are directly relating to the export activity of the assessee or not. As far as the netting of interest expenditure against the interest income is concerned, the same is covered against the assessee by the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. V. Chinnapandi (2006) 201 CTR (Mad) 13 : (2006) 282 ITR 389 (Mad), wherein the jurisdictional High Court has held that while computing the income under the head 'Profits and gains of business or profession', if any receipt by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature is included in such profits, the same has to be reduced by 90 per cent from the profits computed as aforesaid. The deductions to be made are from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions of this Tribunal as well as the agreement between the assessee and the Tamil Nadu Electricity Board. Needless to say that the assessee be given an appropriate opportunity of hearing. 21. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. AHMAD FAREED, A.M.: 11th Sept., 2009 22. I have gone through the order proposed by learned Brother in this appeal and have also discussed the issues with him. I am unable to persuade myself to subscribe to the view proposed by learned Brother relating to the ground No. 1 in paras 6 to 10 of his proposed order and therefore, I hereby pass a separate dissenting order, in relation to this issue alone. And in respect of the other grounds/issue I am in agreement with the order proposed by learned Brother. 23. The aforesaid ground is about the validity of the notice issued by the AO under s. 148 of the Act, and it has to be examined in the light of the decisions of the jurisdictional High Court and of the Supreme Court in the following cases: ------------------------------------------------------------------- S.No. Name of the case Dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------- 1. Return filed (asst. yr. 2001-02) 30.10.2001 2. Processed under s. 143(1) Yes (26.11.2001) 3. Time available for issuing notice under 31.10.2002 s. 143(2) 4. Notice under s. 148 12.05.2004 ------------------------------------------------------------------- 25.1 The AO's action of initiating proceeding under s. 147 was upheld by the Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. 26. In the case of K.M. Pachayappan (2008) 304 ITR 264 (Mad), the return for asst. yr. 1997-98 was filed on 30th March, 1999 and the time for issuing notice under s. 143(2) was available upto 31st March, 2000. The notice under s. 148 was issued on 15th March, 2000, when the time for issuing notice under s. 143(2) had not expired. These facts are presented below: K.M. Pachayappan (2008) 304 ITR 264 (Mad) (Date of judgment: 4th July, 2007) ------------------------------------------------------------------- S.No. Particulars Date ------------------------------------------------------------------- 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Date of judgment: 29th July, 2008) ------------------------------------------------------------------- S.No. Particulars Date ------------------------------------------------------------------- 1. Return filed (asst. yr. 2003-04) 13.11.2003 2. Processed under s. 143(1) Yes (20.12.2003) 3. Time available for issuing notice under 30.11.2004 s. 143(2) 4. Notice under s. 148 05.10.2004 ------------------------------------------------------------------- 28.1 In the case of Qatalys Software Technologies Ltd., the AO's action of initiating proceeding under s. 147 was not upheld, on the ground that the time for issuing notice under s. 143(2) had not expired. 29. It is seen that in the present case the notice under s. 148 was issued before the expiry of the time available for issuing notice under s. 143(2), whereas in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. the notice under s. 148 was issued after the expiry of the time available for issuing notice under s. 143(2). This is the crucial difference in facts, because of which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VICE PRESIDENT (AS THIRD MEMBER): 22nd Dec., 2009 There being a difference between the two Members who originally heard the appeal, the Hon'ble President was pleased to nominate the zonal Vice President as the Third Member by his order dt. 13th Oct., 2009. Accordingly, I proceed to resolve the points of difference referred to the Third Member which are as follows: "1. Whether, on the facts and circumstances of the case, the proceedings initiated by the AO under s. 147 of the Act for asst. yr. 2002-03, vide notice issued under s. 148 on 9th July, 2004, was valid? 2. Whether, on the facts and circumstances of the case, the AO could initiate proceedings under s. 147 of the Act when the time for issuance of notice under s. 143(2) had not expired?" 2. The facts as narrated in the orders of both the Members are not in dispute and hence, they are not repeated here. The short question for consideration is whether proceedings under s. 147 can be initiated or not when the time for issuance of notice under s. 143 (2) has not expired. The learned JM has held that proceedings under s. 147 can be initiated even when the time for issuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Engineers vs. Union of India (1997) 7 SCC 734. The learned counsel after referring to several other judgments contended that it is a settled proposition that the proceedings under s. 148 can be initiated when no assessment under s. 143(3) can be made. 4. The contention of the learned Departmental Representative was that the assessee should not have any grievance as to whether the assessment is made under s. 143 or 147 or whether it is rectified under s. 154 or revised under s. 263 of the Act as ultimately the assessee is going to pay the tax at the same rate. Hence, in the present case if the assessment is made under s. 147 instead of s. 143, there is no damage to the assessee. It was contended that when the notice under s. 148 was issued in the present case, no proceedings were pending and hence, the notice was valid. It was also argued that the assessee cannot dictate terms to the Department as to which provision of the Act should be made applicable to him. There could be some overlapping of the provisions but that cannot oust the jurisdiction of the authority. For this proposition, the learned Departmental Representative relied on the judgment of the Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a completed assessment only on the basis of his own honest belief. Therefore, though s. 147, in essence, is a machinery section, it also affects the substantive right of the assessee which had accrued to him on completion of original assessment. This is an example of what Chief Justice Venkatachaliah said in the case of CWT vs. Sharvan Kumar Swamp Sons (1994) 122 CTR (SC) 380 : (1994) 210 ITR 886 (SC) that a substantive right can be found secreted in the interstices of procedure. This is one principle which we shall keep in mind while adjudicating the matter on hand. 7. As mentioned earlier, in s. 147 we are concerned with income escaping assessment. The Law Lexicon by P. Ramanatha Aiyar (Second Edition) gives several shades of meaning for the expression "escape assessment." One of the meanings given is as follows: "At all events, income has not escaped assessment if they are pending at the time of proceedings for the assessment of the assessee's income which have not yet terminated in a final assessment thereof." In simple words, the above meaning conveys that assessment proceedings which have not yet terminated, it will not be a case of escaped assessment. It was way b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ............. (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c)..............." The Department wants to interpret the expression "no assessment has been made" in the above clause to mean that it also includes situation where assessment under s. 143(3) is still possible but not yet made. If this interpretation is to be accepted, it will set at naught the fundamental principles underlying s. 147 of the Act and which principles have been followed till date. These principles are applicable even to the extended meaning given to the term "escaped assessment" in the amended provision. The above clause is intended to cover the following two situations: (i) where a return is filed and non-action is taken either under s. 143(1) or under s. 143(3) and the time-limit for issuing notice under s. 143(2) has expired; (ii) where a return is filed and is processed under s. 143(1) and the time-limit for issuing notice under s. 143(2) has expired. It does not envisage a situation where a retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, action under s. 147 was initiated only on the termination of the proceedings under s. 143(3) of the Act. Therefore, the said action was upheld by the Supreme Court which is in consonance with the earlier judgments of the same Court referred to in para 7 above. The observation in placitum 18 of the Supreme Court judgment has to be understood in the right perspective. It is mentioned that failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued. The failure of the AO which the Court is talking about will be deemed to have occurred only when the hands of the AO are tied down by law and he is unable to initiate the proceedings under s. 143(3) of the Act. Till the time-limit to issue notice under s. 143(2) is available, it cannot be said that the AO has failed to take steps under s. 143(3) of the Act. The question of failure arises only when by operation of law he cannot take any steps. Further, this observation of the Court is in connection with the intimation under s. 143(1). What it means is that mere intimation under s. 143(1) and failure to take steps under s. 143(3) as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or initiating the proceedings under s. 147 by issuing notice under s. 148, even prior to the expiry of the period for issuing notice, the under s. 143(2)" (sic). The judgment of the Supreme Court referred to in the above observation is that in the case of Rajesh Jhaveri. I have read the said judgment more than once. Unfortunately, I have not found anywhere in the judgment the above observation made by the Court either directly or indirectly. Nowhere in the judgment is there any reference about the time-limit of notice to be issued under s. 143(2) of the Act. 12. Coming to the three decisions of the jurisdictional High Court, there is indeed a divergence of opinion in the two judgments viz., one in the case of ITO vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad) and Qatalys Software in which the decision in the case of K.M. Pachayappan (2008) 304 ITR 264 (Mad) has been followed. I am of the view that in such a situation, the decision which appeals to one's conscious more should be followed. The decision in the case of Qatalys Software is in consonance with all the Supreme Court judgments on the issue including the one in the case of Rajesh Jhaveri. Therefore, I am inclined to follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC. (VII) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of interest income from the profits while computing the deduction under s. 80HHC, without first netting off the interest expenditure against the interest income. (VIII) The learned CIT(A) in his order has erred in not considering the following ground raised before him: "The learned AO has erred in assessing the interest receipts amounting to Rs. 59,27,318 under the head 'Income from other sources' without considering the facts and circumstances of the receipts." (IX) The learned CIT(A) has erred in sustaining the disallowance of the claim under s. 80-IA." 3. There was a difference of opinion between the JM and the learned AM with respect to ground No. 1 on the issue of validity of initiation of proceedings under s. 147 and notice issued under s. 148 on 9th July, 2004 when the time for issuance of notice under s. 143(2) had not expired. The JM has held that there is no bar for issuing notice under s. 148 before the expiry of time available for issuance of notice under s. 143(2) of the IT Act if the other conditions for reopening of the assessment and initiation of proceedings under s. 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and matters connected with the return. Secs. 142 to 145A deal with assessment procedures. It is only after s. 145A the subject of reopening of assessment follows. This is one indication that an assessment can be reopened only on the termination of the procedure prescribed in the preceding provisions viz., from ss. 142 to 145A. Further, s. 147 uses the expression 'assess or reassess'. The word 'reassess' is used to indicate the termination of proceedings as a result of an assessment made under s. 143(3) of the Act. The word 'assess' is used to cover those situations where the return has or has not been processed under s. 143(1) but the time-limit to issue notice under s. 142(1) has expired. When the legislature has logically arranged the relevant provisions, there is no need to put a specific bar in. s. 147/148 to the effect that the AO cannot initiate proceedings under s. 147 when the time available for issuing notice under s. 143(2) has not expired. In my view, it would be quite absurd to put such a provision and it is well known that legislature does not waste words. The next observation of the learned JM is also in para 6 which says that failure to take steps under s. 143(3) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member appears to us as if it had been passed by an appellate authority sitting over the orders of the Members of the regular Bench of the Tribunal. This has necessitated and persuaded us to discuss the power, authority and jurisdiction of the learned Third Member under s. 255(4) of the IT Act. 9. Secs. 255(4) confers jurisdiction upon the Third Member in case of difference of opinion between two Members constituting the Bench that originally heard the appeal. Sub-s. (4) of s. 255 of the IT Act reads as under: "255(4) If the Members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Tribunal for hearing on such point or points by one or more of the other Members of the Tribunal, and such point or points shall be decided according to the opinion of the majority of the Members of the Tribunal who have heard the case, including those who first heard it." 10. The Hon'ble jurisdictional High Court in the ease of Dynavision Ltd. vs. ITAT Ors. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal and direct them to rehear and dispose of the matter afresh. No doubt, the Third Member, in this case happened to be the Vice President. But that will not clothe him with the power to give directions or remit the matters while functioning under s. 255(4) of the Act. The learned Advocate General appearing for the assessee would say that s. 255(4) of the Act should be read in conjunction with s. 254(1) of the Act which deals with the powers of the Tribunal. According to him, the Third Member to whom the points of difference have been referred, should be taken to have all the powers of the Tribunal under s. 254(1) and as such the Tribunal can pass such orders as it thinks fit. Therefore, the Third Member has got the power to pass any order as he thinks fit. The submission of the learned Advocate General is in direct conflict with the language and the object behind s. 255(4) of the Act. When s. 255(4) says that the Third Member shall decide the points of difference referred to him and the decision of the Tribunal will be as per the majority opinion, the Third Member is expected to give his decision, whatever it is, so that the majority opinion could be determined for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as follows: The Third Member could, therefore, decide only the point that had been referred to him and he could not formulate a new point for himself on which he could base his decision. It appears to us to be further clear from a reading of the sub-section quoted above that, after the decision of the point or points referred to him by the Third Member, the case should go back to the original Tribunal because so far as we can see the Third Member has not been given any right to decide the appeal. According to s. 5A(6) of the IT Act, the appeal must be decided by the Tribunal which must consist of a Bench of not less than two Members. As we have already said, the point referred to the Third Member was whether there could be a presumption legally drawn from the materials on the record that the bus belonged to the 'appellant', and on that point the Third Member having agreed with Shri Kalbe Abbas that no such presumption could be legally drawn, the majority view was in favour of the assessee. The last part of s. 5A(7) of the Act provides that the point or points have to be decided according to the opinion of the majority of the Members of the Tribunal who had heard the case inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the orders of the differing Members. The point of difference has to be decided on positive reasoning and assertion or by supporting the reasoning of either of the dissenting Members but should not be on the basis of finding fault in the orders of the differing Members. The resolution of difference of opinion by the Third Member shall be based on fair and positive assertion and appreciation of facts and law and shall not be guided by any personal likes and dislikes. The judicial order shall not exhibit expressly or impliedly any biasness including extra-judicial biasness or partiality in the form of finding faults and dissection of the order by selected sentences. The Third Member acting as an umpire to resolve the differences of opinion of the fellow Members does not enjoy any more power, authority or jurisdiction than the differing Member; rather, the jurisdiction of the Third Member is limited to the point of view already taken. Therefore, the jurisdiction of the Third Member is limited to the views of the dissenting Members. Accordingly, we are of the view that the Third Member functioning under sub-s. (4) of s. 255 of the IT Act is not supposed to act as if it were a superior ..... X X X X Extracts X X X X X X X X Extracts X X X X
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