TMI Blog2011 (7) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... the principles of natural justice. The law permits certain things to be carried out as a matter of necessity. The doctrine of necessity makes it imperative for the authority to carry out its statutory functions and if the doctrine of necessity is not allowed full play in certain situations, it would impede the course of justice.Thus the contention of the petitioner that section 144C and rule 3(2) of the Rules should be declared ultra vires is patently erroneous. Mere potential of bias against one of the members of the Panel will not render the provision unconstitutional. The Court finds that in the facts and circumstances of the case, there is no conflict of interest. Alleged bias against one member of the Panel does not make the provision ultra vires. The contention of the petitioner on this issue is rejected - Writ dismissed. - 1778 OF 2010(M/S) - - - Dated:- 21-7-2011 - TARUN AGARWALA, J. JUDGMENT 1. The petitioner is basically aggrieved by the constitution of the Dispute Resolution Panel envisaged under section 144C of the Income-tax Act and, has consequently, filed the present writ petition challenging the vires of section 144C of the Income-tax Act as well as ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the DIT-II had exercised his power granting approval for the re-assessment for the assessment years 2003-04, 2005-06 and 2006-07 under section 148 of the Act. The petitioner consequently orally objected to the constitution of the collegium and submitted that there was a conflict of interest if the DIT-II continues to sit in the collegium since he was involved in the reassessment proceedings. In spite of the oral objection, the DIT-II did not recuse himself and participated in the proceedings and finalised the draft assessment order. The Panel without considering the objection of the petitioner issued orders to the Assessing Officer by its order dated 30-9-2010 for the assessment years 2002-03, 2004-05, 2005-06 and 2007-08. The petitioner, being aggrieved by the aforesaid orders, has filed the present writ petition challenging the vires of section 144C of the Act as well as rule 3(2) of the Rules and has also prayed for the quashing of the order dated 30-9-2010 passed by the Panel. In the alternate, the petitioner has prayed that the provision of section 144C should be read down so that there is no conflict of interest. 5. Heard Mrs. Shashi M. Kapila, the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clear violation of the principle of natural justice, vis- -vis, the Rule against bias enshrined in the dictum "nemo judex in sua causa" which means that no one can be judge in his own cause. 9. The petitioner in order to prove bias has elucidated the matter in the petition and submitted that the Commissioner of Income-tax is required to discharge the following functions under the Income-tax, namely : "(i) Under section 253(2) of the Act, the Commissioner is expected to direct revenue/Assessing Officer working under him to lodge appeals on behalf of the Tax Department to the Income-tax Appellate Tribunal against any order passed by the Commissioner of Income-tax (Appeals) on any issues decided against the Income-tax department. (ii) Under section 260A(2) of the Act, the Commissioner is required to institute appeals before the High Court against any orders which are adverse to the Revenue Deptt. passed by the Income-tax Appellate Tribunal on all/any issues decided against the Income-tax department. (iii) Under section 147/148 read with proviso to section 151 of the Act, the Commissioner accords approval for reopening of tax assessment in cases where the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functioning of the Panel remains independent and unbiased. 12. The basic ground which emerges from the submission of the learned counsel for the petitioner is that the jurisdictional Commissioner should not be nominated as a member of the Panel, inasmuch as, in the case of the petitioner, the jurisdictional Commissioner, namely, the DIT-II had granted approval for initiating reassessment proceedings under sections 147 and 148 of the Act and that the draft assessment orders were made under the supervisory aegis of the jurisdictional Commissioner. The submission of the learned counsel is, that the jurisdictional Commissioner, being the overall jurisdictional head had, exercised supervisory/directory functions in getting the draft assessment orders prepared by the Assessing Officer and, thereafter, the very same jurisdictional Commissioner functioned as a member of the collegium of the Panel and examined the draft assessment orders and, thereafter, had given directions to the Assessing Officer, thereby making the jurisdictional Commissioner, a judge in his own cause. 13. The respondent has filed a Counter affidavit indicating that section 144C of the Act could not be declared ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the jurisdictional Commissioner who had approved initiation of reassessment proceedings under sections 147 and 148 of the Act was a different person from the person who sat as a member of the Panel. In the light of the aforesaid admitted position, it is clear that there exists no personal bias. The only question which is to be considered is whether there exists a legal bias or not. 16. In order to appreciate the controversy, it would be appropriate to peruse section 144C of the Act and rule 3(2) of the Rules. 17. The Government found that the dispute relating to the foreign companies were not being resolved and that the existing dispute resolution mechanism was consuming a lot of time and finality in high demand cases was being done after long drawn litigation which went up to the Supreme Court. In order to address this issue relating to multi-national companies and to provide a mechanism for speedy disposal of the cases so as to attain finality, a new section 144C was inserted under the Income-tax Act in the year 2009 to facilitate expeditious disposal of the dispute. For facility, the provision of section 144C of the Income-tax Act is extracted hereunder :- "144C. Referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the said Rules is extracted hereunder:- "(2) The Board shall assign by name three Commissioners of Income-tax to each panel as Members who, in addition to their regular duties as Commissioners, shall also carry on the functions of the panel." 21. In pursuance of rule 3(2) of the Rules, the Board issued an Order No. 1 of 2010 dated 10-2-2010, nominating members of the Dispute Resolution Panel. In the case of the petitioner, for Delhi DRP-II, the following members were nominated, namely, Sri S.C. Joshi CIT-III Delhi, Sri Hari Krishna CIT-V, Delhi and Sri Virendra Singh DIT (Intl. Tax)-II, Delhi. The petitioner is aggrieved by the appointment of Sri Virendra Singh, DIT (Intl. Tax)-II Delhi who is also the jurisdictional Commissioner. 22. Under the aforesaid rule 3(2) of the Rules, the Commissioner designated to operate as a Member of the collegium comprising the Panel was also expected to continue to perform his regular statutory duties as Commissioner as envisaged under the Income-tax Act, 1961. 23. Having heard the learned counsel for the parties, the Court finds that the rule of natural justice can operate only in areas not covered by any law validly made. The rules of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct biased in the sense that he was involved or interested in his personal capacity in the outcome of the assessment or the procedure for assessment, in which case, it would be a good ground for setting aside the assessment order but not otherwise. 26. In T. Govindaraja Mudaliar v. State of Tamil Nadu [1973] 1 SCC 336, the Secretary Home was a member of the Committee which submitted a report. Thereafter, the schemes were published under section 68-C of the Motor Vehicles Act. Objections were filed by the operators which objections were considered by the Secretary Home under section 68-D. The Secretary Home while hearing the objection under section 68-D was acting as a quasi-judicial member. Since, he was a member of the Committee which had made the report in accordance on the basis of which the scheme was published under section 68-C, it was alleged that the Secretary Home had acted as a judge in his own cause. In other words, it was alleged that the Secretary Home participated in the policy decision of the Government and then exercised his power under section 68-D by hearing the objections and considered the merits of the scheme. The Supreme Court held that it cannot be a case wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner to participate, if not the doctrine of necessity may have to be he invoked." 29. In the light of the aforesaid, the Court finds that the doctrine of nemo judex in causa sua is subject to the doctrine of necessity. Bias cannot be established merely because one of the members of the Panel is also a jurisdictional Commissioner. In the present case, there is nothing to indicate that the jurisdictional Commissioner was interested in his personal capacity in the outcome of the assessment order. Further, there is nothing to indicate that the directions issued by the Panel to the Assessing Officer was based on extraneous considerations. The Commissioner is required to discharge certain functions under the Act. He exercises his power impartially and with an independant mind. Such exercise of statutory functions does not get coloured when a member of a Panel issues directions to the Assessing Officer. 30. DIT-II was only discharging its statutory functions provided under the Act and, therefore, on the principles of the doctrine of necessity, bias stood excluded. There is no violation of the principles of natural justice. The law permits certain things to be carried out as a matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done but seen to be done. 35. In S. Parthasarathi v. State of A.P. [1974] 3 SCC 459, the Supreme Court observed:- "16. The tests of 'real likelihood' and 'reasonable suspicion' are really inconsistent with each other. We think that the reviewing authority must make a determination on the basis of the whole evidence before it, whether a reasonable man would in the circumstances infer that there is real likelihood of bias. The court must look at the impression which other people have. This follows from the principle that justice must not only be done but seen to be done. If right-minded persons would think that there is real likelihood of bias on the part of an inquiring officer, he must not conduct the inquiry; nevertheless, there must be a real likelihood of bias. Surmise or conjecture would not be enough. There must exist circumstances from which reasonable men would think it probable or likely that the inquiring officer will be prejudiced against the delinquent. The Court will not inquire whether he was really prejudiced. If a reasonable man would think on the basis of the existing circumstances that he is likely to be prejudiced, that is sufficient to quash the decision." ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
