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2015 (8) TMI 473 - BOMBAY HIGH COURT

2015 (8) TMI 473 - BOMBAY HIGH COURT - [2015] 377 ITR 31 (Bom) - Constitution of a special bench of the Income Tax Appellate Tribunal outside Andhra Prades - President of the Income Tax Appellate Tribunal exercising his powers under Section 255(3) of the Income Tax Act, has constituted a special bench of three members to hear the appeal filed by the Petitioner - order passed by bench challenged - grievance of the Petitioner that he was kept in dark about the decision making process - Held that:- .....

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Special counsel knew that the file of the matter was before the Vice president, is a mystery. This was a private meeting and the Petitioner was not informed. The matter was seized before the regular bench and the revenue was a contesting party. The Petitioner was completely unaware that any such private meeting had taken place between the counsel and the Vice president. Permitting a party to the litigation to meet privately in absence of other side in respect of an ongoing litigation and then ba .....

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a judicial body acts in administrative capacity, in midst of the litigation, which order will have effect on the ultimate outcome, the judicial body, must act with fairness, and not allow itself to be influenced. This is a fundamental principle. We will be failing in our duty if we do not uphold this most important principle. No attempts to influence a judicial body by non-judicial methods can be permitted and tolerated. If a litigant, be it the State, indulges in such acts, it shall not derive .....

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d does not specifically invoke this concept. It is the Vice president who has introduced this concept. This concept is then carried forward by the Regular Bench and during the arguments before us. We fail to understand how 'political sensitivity' is relevant in a tax litigation. Tax is levied and collected under the sovereign power of the State. The Revenue is entrusted with collecting the tax and employ all legitimate methods to bring the tax evaders to book. The Tribunal is established to adju .....

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was that the Chief Promoter of the Petitioner was a politician who abused his position, indulged in quid pro quo and what the Department unearthed was a huge financial fraud. Except employing the word 'complex', nothing was shown how it was complex. If the fraud was complex, the Board would seek and request for a more investigating machinery. What may appear complex for investigation, may not, at the end of investigation remain complex for a judicial body to decide and vice-versa. The Regular Be .....

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rmed to us in spite of our repeated queries. There is a clear methodology laid down under the Regulation 98(A) to make a reference by judicial order to the president.

To sum up, the president was under obligation to give hearing to the parties. The Regular Bench had not unequivocally recommended constitution of the special bench and it had merely recommended that the matter be heard outside Andhra Pradesh. Since the Regular Bench had not recommended constitution of the special bench, .....

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tertained the representative of one party to the litigation privately without notice to the other side, and introduced a completely irrelevant concept of ‘political sensitivity’ in the process, which by itself vitiates the decision making. Even otherwise, all the factors cumulatively, it has to be declared that the entire course of action adopted to constitute a special bench was opposed to the rule of law, fairness, transparency and cannot be sustained. We do so declare accordingly. W.P. allowe .....

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J.): The president of the Income Tax Appellate Tribunal, on 5 March 2013 exercising his powers under Section 255(3) of the Income Tax Act, has constituted a special bench of three members to hear the appeal filed by the Petitioner. The Petitioner, by this writ petition has challenged this order of the president. 2. Before we proceed, it will be useful to advert to the legal provision regarding constitution of a special bench of the Income Tax Appellate Tribunal. The Central Government under Sec .....

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rs and functions of the Appellate Tribunal may be exercised and discharged by Benches constituted by the president of the Appellate Tribunal from among the members thereof. (2) Subject to the provisions contained in subsection (3), a Bench shall consist of one judicial member and one accountant member. (3) The president or any other member of the Appellate Tribunal authorized in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of .....

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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 Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal, and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it. (5) Subj .....

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before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860), and the Appellate Tribunal shall be deemed to be a civil Court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1989 (5 of 1898). (emphasis supplied) The proceedings before the Appellate Tribunal are deemed judicial proceedings. The Appellate Tribunal is empowered to re .....

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er. If the members of the bench differ on any point, they can refer to the president to refer the point of difference for decision by one or more members of the appellate tribunal. The decision of the special bench and the position of law decided are binding on the regular two member bench. Regulation 98A and the proforma appended thereto, specifies the procedure for referring cases for constitution of a special bench. The Regulation is as under: Regulation 98(A): With a view to bring about unif .....

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ce by a Bench to the president, Income Tax Appellate Tribunal for constitution of the. 'We the members …......... Bench (es) at …...... (station) are of the opinion that the appeal(s) No.(s) …........... in the matter of ….............. which were posted for hearing before us on …......... is/are fit and proper appeal(s) which should be heard by a special bench consisting of three/or ….............. members of the Tribunal. We accordingly forward the .....

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tribunal functions and how special benches are constituted. 3. The Petitioner Jagati Publications, is an enlisted Public Limited Company. The Petitioner was incorporated in the year 2006. It publishes a Telugu newspaper called 'Sakshi', from Hyderabad, Andhra Pradesh. Sakshi started publication from 24 March 2008. One of the promoter of the Petitioner is Y.S. Jagan Mohan Reddy. He is the son of late Y.S. Rajashekhar Reddy, former chief minister of Andhra Pradesh. Y.S. Jagan Mohan Reddy w .....

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fficers of the revenue in implementing the Act of 1961. The Respondent no.3 is the Department of Revenue, Union of India. 4. In view of the grievance of the Petitioner that the Petitioner was kept in dark about the decision making process,the narration of facts is in two parts. First, the facts as the petitioner knew them when the Petitioner filed the petition. Then the facts as revealed from the replies and the documents from the tribunal which were produced in this Court pursuant to the orders .....

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der Section 143(3) of the Act was completed and the total income of ₹ 2726537270 was determined. An amount of ₹ 2775688650 was added under Section 28(iv) of the Act for share premium received by the Petitioner from the subscribers to the paid up capital. An amount of ₹ 150000000 was added under Section 68 as unexplained cash credit towards capital contribution. 6. Petitioner challenged the order passed by the Assessing Officer on 31 December 2010, by way of an appeal to the Com .....

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that the order of the Assessing Officer was in contravention of the law laid down by the Apex Court and also decisions of the Tribunal. The Commissioner (Appeals), vide order dated 30 December 2011, dismissed the Appeal filed by the Petitioner. 7. The Petitioner thereafter filed a further Appeal No. ITA/18/H of 2012 before the Appellate Tribunal, (B-Bench) at Hyderabad. The Petitioner prayed for stay of recovery of tax demanded. The Appellate Tribunal by an order dated 25 January 2012, granted a .....

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r 2012, 17 September 2012, and 1 November 2012. 8. The Petitioner received a notice dated 27 November 2007 informing the Petitioner that the appeal is fixed for hearing on 14 December 2012 under the caption 'Other matters' for hearing as 'Special Bench Reference'. A copy of the letter of the Board dated 15 November 2012 was annexed to the notice. This letter by the Central Board of Direct Taxes (the Board) Respondent No.2 made a request to the president of the Tribunal (the presi .....

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pecial bench of ITAT u/s 255(3) of I.T. Act in the case of M/s.Jagathi Publications Pvt. Ltd. A. Y. 200809 - Appeal pending before ITAT 'B' Bench, Hyderabad in ITA No.18/Hyd/2012reg. 2. M/s.Jagathi Publications Pvt. Ltd., incorporated in the year 2006, is engaged in publishing a Telugu Newspaper by the name 'Sakshi'. The assessment in the case of assessee company for A.Y. 200809 was completed on a total income of ₹ 272.65 crores against the returned loss of ₹ 19,91,51 .....

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e (face value ₹ 10/) to several persons or entities who received benefits from the Government of Andhra Pradesh for allotment of land at concessional rates, grant of licences, allotment of Special Economic Zones, license for construction of hotel, reduction of Green belt, provision of water and other facilities, regularization of urban land, permission for transfer of land, permission for establishment of ports, etc. During the course of assessment, the AO established that the Investment i .....

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id Pro Quo arrangement is more than ₹ 1700 crores. 5 Section 225(3) of the IT Act empowers the president of the ITAT to constitute a special bench consisting of 3 or more members for disposal of a particular case. The present case needs constitution of a special bench for the following reasons : (i) The Quid Pro Quo arrangement is unique in nature. (ii) The case is very complex involving legal issues having far reaching consequences for the revenue in this case and also in other cases. (ii .....

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set of facts, prosecution had been launched by the CBI and recently a couple of chargesheets have been filed under IPC and the Prevention of Corruption Act against Shri Y.S. Jagan Mohan Reddy. The Enforcement Directorate has also launched an investigation into the money laundering against Shri Y.S. Jagan Mohan Reddy. The decision of ITAT will have a serious impact on the prosecution proceedings launched by the CBI. (vi) The issues involved need an indepth analysis by a as it needs interpretatio .....

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/2012, so that the next hearing takes places before such special bench. Sd/( Anita Kapur) Member (A&J), CBDT. Thus, the basis of request to constitute a special bench was that the main promoter of the Petitioner Y.S. Jagan Mohan Reddy, had allotted shares of the Petitioner at a premium to various persons, who received benefits from Government of Andhra Pradesh in terms of allotment of lands, licenses, reduction of Green Belt, water and other facilities regularization of urban land, etc. Acco .....

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none of the factors mentioned by the Board were germane to constitute a special bench. It contended that the constitution of a special bench would prejudice the petitioner as the petitioner was entitled to the benefit of the settled law in its favour. 10. After the hearing before the Regular Bench concluded, the Petitioner did not receive any communication regarding the constitution of the special bench, nor the opinion reached by the Regular Bench was informed to the Petitioner. The Petitioner .....

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rms of reference. The Petitioner received a reply from the Registry of the Tribunal referring to an extract of the office manual. The Registry replied as under : The Director (Finance & Admin), Jagati Publications Ltd. 63249/ 1, Sakshi Towers, Road #1, Banjara Hilla, Hyderabad - 500 034. Sir, Sub.: Orders of Constitution of special bench in the case of M/s.Jagati Publication Private Limited, Hyderabad, in ITA No.18/H/2012 - request for copy - reg. Ref. : Your letter dated 30.06.2013. This of .....

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There is no provision to furnish copies of the order constituting special bench as well as reference order of the Hon'ble Bench to the concerned parties. This issues with the approval of the Hon'ble president, Income Tax Appellate Tribunal. Yours faithfully, Sd/for Assistant Registrar. Thus, according to the Registry, office manual provided that since the point to be considered by the special bench is widely made known and there is no provision to supply a copy of the reference. 11. The .....

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. When the Petition came up for hearing on 3 September 2013, the counsel for the Respondent No.1 furnished a copy of the intimation issued of Assistant Registrar of the Tribunal dated 19 December 2012 regarding constitution of the bench. It was taken on record and leave was granted to amend the petition. Hearing of the Petition was adjourned and in the meanwhile, by way of an adinterim relief, the proceedings before the special bench were stayed. Thereafter the matter was adjourned from time to .....

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s prayer. The Respondent No.1 was directed to place the order passed on record, keeping the rights and contentions of the parties regarding the judicial review open. Accordingly, the order dated 5 March 2013 was placed on record. It is in the form of a handwritten remark. The respondents also filed their respective affidavit in replies, and the Petitioner its rejoinder. Correspondence was also placed on record. 14. Now, to the second part of the factual narration as it emerged after the record w .....

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eproduced in full. The Vice president wrote as under: Dear Brother, Please find enclosed a copy of the letter addressed by the Member CBDT to the Hon'ble president, which in turn was marked to me for my comments. I have gone through the contents therein. The Special counsel, who was to be engaged by the Revenue in this matter, explained the facts in brief in support of Revenue's request for constitution of special bench in the case of M/s.Jagati Publications Pvt. Ltd. Bearing in mind the .....

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the Bench may be forwarded to the Hon'ble president to enable him to consider as to whether it is a fit case for constituting special bench in exercise of the powers vested under Section 255(3) of the Income Tax Act, 1961. This may be treated as urgent. Sd/. (emphasis supplied). 15. On 27 November 2012, the Regular Bench sent a notice to the Petitioner annexing a copy of the letter of the Board dated 15 November 2012 stating that the hearing before the Tribunal was fixed on 14 December 2012 .....

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ative the president, in the appropriate case, can constitute a special bench and it is not necessary that there must exist conflicting judicial pronouncements. According to the Departmental Representative, since the issue involved in the Appeal was of national importance, having large scale of ramifications, the matter was required to be resolved by a special bench. According to him, Y.S. Jagan Mohan Reddy who was the main promoter had misused his political position and various prosecutions were .....

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teps to constitute special bench were taken. 16. The Regular Bench forwarded its opinion to the Vice president with a request to forward the same to the president. The Regular Bench opined that most of the appeals that come before the tribunal involve complex facts and intricate questions of law and if the argument of Revenue is accepted, almost all matters will have to be referred to a special bench. Similarly, huge revenue implications are also not a ground for constitution of a special bench .....

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by the Tribunal on this issue would have widespread ramifications. The Bench then observed that hearing of the appeal at Hyderabad may generate widespread attention of local media and avoidable heated debate and considering the sensitivity of this case, may affect the hearing of the Bench. The Bench accordingly opined that the president may constitute an Appropriate Bench outside Andhra Pradesh to remove any doubt and apprehension in the mind of any party to the litigation as regard fairness an .....

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s Pvt. Ltd. I have gone through the Tribunal order passed by the division Bench of ITAT Hyderabad as well as the appeal papers in the case of M/s. Jagathi Publications Pvt. Ltd. Since these papers were forwarded to me for my comments by your good-self, I have gone through the papers to appreciate if it is a fit case for reference to special bench. Considering the complexity of the issues involved, as detailed in the order passed by the Division Bench, I am of the prima facie view that it deserve .....

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hasis supplied). The Vice president did not mention about the recommendation of the Regular Bench that an Appropriate Bench be constituted for the hearing outside Andhra Pradesh. 18. The proposal for constitution of special bench in the case of the Petitioner was placed before the president by way of a note, which stated that, if approved, may be placed before the president for perusal and constitution of special bench. The Registry of the president called for the original papers in the case of .....

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vocate for the Petitioner, Mr.A.J. Rana, learned senior advocate for respondent No.1 and Mr.Girish Dave, learned advocate for respondent Nos.2 and 3. 20. Mr.J.D.Mistri, learned senior advocate for the petitioner contended: Irrespective of any other aspect of the matter, the impugned order needs to be set aside as the decision making process was vitiated by clear attempt on the part of the Board to influence the decision making. The Special Counsel, who was to be engaged by the revenue, meeting t .....

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ore forwarding it to the president. The fact that the respondents have chosen not to clarify the identity of the counsel creates serious doubt about the decision making. It is troubling as to how the special counsel knew that the matter was sent to the Vice president for comments. The Board could not have requested the president to constitute a special bench and the president could not have done so as the regular bench was seized of the matter. The request made by the Board was for collateral pu .....

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td. that was relied upon, does not lay down this proposition. If so, it is open to the Revenue to distinguish the decision before the Regular Bench. There are no compelling reasons as to why the Board could not have moved the Regular Bench and followed the procedure laid Regulation 98A framed by the tribunal. The order passed by the president is amenable to judicial review and it must pass the test of fairness and nonarbitrariness. There are several issues, which raise more questions than answer .....

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e, the impugned order be quashed and set aside. 21. Mr.A.J.Rana, learned senior advocate appearing for the president submitted: The power of the president to constitute a special bench under Section 255(3) is administrative and not amenable to judicial review unless it is malafide or purely arbitrary. It is not necessary that when the regular bench is seized of the appeal, one must approach the Regular Bench to refer and the president is not denuded of his powers to constitute a special bench. T .....

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en it opined that an Appropriate Bench be constituted. All the files and the opinion of the Regular Bench were before the president when he passed the order and in absence of any malafides the order of the president ought not to be interfered with. Even though the Regular Bench, in the earlier part of the opinion negatived some of the contentions of the Revenue, it used the phrase, however to hold that there will be widespread ramifications, which means that it expressed a view contrary to its e .....

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Supreme Court have observed that there is a prima facie case against Y.L. Jagmohan Reddy, the Chief Promoter of indulging in quid pro quo to distribute state largesse in return for paying premium to acquire shareholding of the Petitioner Company. The Andhra Pradesh High Court in a Public Interest Litigation has issued directions to the Central Bureau of Investigation to investigate the case. In view of the various directions issued by the High Court and the Apex Court, the Board bonafide believ .....

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Section 255(3) of the Act. The learned counsel for the parties have accepted the position that a judicial review of the order passed by the president constituting a special bench is maintainable, but it lies in extremely narrow compass. There was however considerable debate at the bar as regard the nature power of the president to constitute a special bench. According to Mr.Rana, the power of the president under Section 255(3) is purely administrative. According to Mr.Mistry, the manner in which .....

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allenge to the order passed by the president of the Tribunal, constituting a special bench and requires detailed discussion. 25. In the case of I.T.A.T. (1990) 218 ITR 275 (SC) some companies called Surana Steels Pvt. Ltd., Binjusaria Metal Box Co. (Pvt) Ltd. and Agroha Extraction Ltd. were the assessees and appellants in three income tax appeals before the Income Tax Appellate Tribunal at Hyderabad. The Tax Bar Association of Andhra Pradesh addressed a letter to the president of the Tribunal on .....

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e same to the president. In the reference, the senior member and accountant member recorded their opinions that, to seek uniformity in judicial decision and avoid uncertainties on vital point of public importance, constitution of special bench was necessary. They also formulated questions to be resolved. The president accepted the reference and constituted a special bench. After the special bench rendered the decision, the appeals were disposed of. The revenue challenged the decision by filing t .....

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as no reason to constitute a special bench. The High Court also disapproved the procedure adopted by the tribunal. The assessee's thereafter filed special leave petitions. The Income Tax Appellate Tribunal in the Apex Court challenged the finding of the High Court regarding the power of the president. The proceedings filed by the Income Tax Appellate Tribunal were delinked from other matters filed by the assessee and was decided by the decision of the Apex Court in the case of I.T.A.T. 26. T .....

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ident to constitute a special bench. The Apex Court, after considering the provisions of the Act and the regulations, proceeded to hold as under: ......... As we have already noted above special benches can be constituted by the president both in exercise of his administrative powers under section 255(1) read with section 255(3) as also on the basis of a judicial order passed by any Bench of the Tribunal making a reference to the president in that connection under regulation 98(A) by passing a j .....

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administrative exercise can be demonstrated to be unreasonable, capricious or mala fide on a given set of facts. But, in our view, the present case was not of that type. There was a conflict of opinion between the two Benches of the Tribunal, namely, the Madras and Hyderabad Benches. It is, however, true that the Madras Bench decision was by a single member while the Hyderabad Bench decision was by a Division Bench. Still it could not be said that there was no conflict of decisions between the .....

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ise of its judicial function make a reference to constitute a special bench. The president can also, Suo moto, if it is brought to his notice that if any important point is pending for decision, constitute a special bench. The Apex Court did not approve the finding of the Andhra Pradesh High Court that reference can only be made by way of a judicial order. The Apex Court also held that, when the president exercises its suo moto powers on the ground that the matter is of all India importance, suc .....

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xercised his suo moto powers to constitute a special bench when the regular Bench was seized of the matter and without giving hearing himself to the Petitioner. Thirdly, the president completely disregarded that Regular Bench did not recommend a special bench, and did not give any reason of his own. 29. According to Mr.Rana, it is not necessary to consider any of these points as the Regular Bench had suggested constitution of a special bench and the observations made by the Regular Bench were su .....

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e decision of the Tribunal would have far reaching consequences in similar matters. It is also the case of the Revenue that the case of the assessee is very sensitive and involves peculiar features of quid pro quo and so on and the view that the Tribunal may take in this appeal, would have its impact on the investigation being carried out by CBI and Enforcement Directorate and so on. Last but not the least, the Revenue impact on the appeal is also very huge and the matter requires in depth and e .....

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arned Departmental Representative that a decision of the division Bench of the Income Tax Appellate Tribunal is not followed by another Bench of Income Tax Appellate Tribunal and, therefore, the appeal has to be heard by a special bench is also not correct. The decision of a Division Bench certainly has a binding effect and is generally followed by other division benches of the ITAT unless it is factually distinguishable or there is a contrary decision of a higher court. Huge revenue impact also .....

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isions of the Tribunal rendered upon considering the facts and materials on record, the statutory provisions and the law laid down by the Supreme Court and High Courts and also different benches of the Tribunal. The degree of appreciation of evidence varies between the proceedings before the Tribunal and the proceedings initiated by the CBI and Enforcement Directorate. 18. At the same time, however, there is enormous political sensitivity involved in the present appeal filed by a company, whose .....

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espread attention of the local media as well as certain sections of the general public, and may even generate avoidable heated debate over the subject, because of the sensitivity of the case and the personalities involved, which would, in turn, may have an effect on the smooth hearing and decision making by a regular bench of the Tribunal. 20. For this reason, and considering totality of facts and circumstances of the case, we are of the considered view that in order to ensure wide spread consid .....

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slightest doubt and apprehension in the mind of any of the party to the litigation with regard to the fairness of the proceedings and the ultimate decision making process. 21. With the above comments, this proposal is forwarded to the Hon'ble Vice president, to place the same with his comments, before the Hon'ble president, for appropriate decision in the matter. (emphasis supplied) Based on those observations Mr.Rana submitted that when the Regular Bench stated that an 'Appropriate .....

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Bench was not expected to use this term in vague sense leaving the reader to debate as to whether when it said an Appropriate Bench it actually meant a 'special bench'. In fact, the reading of order shows that the Regular Bench negatived almost all grounds urged by the Board for constitution of a special bench. Thereafter it stated that since there was 'political sensitivity' and the decision would have widespread ramifications. The Regular Bench opined that it will be advisable .....

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mean a bench outside Andhra Pradesh. special bench is a specific term under the Act and having made a reference to it throughout the opinion, the Regular Bench specifically recommended an 'Appropriate bench' and deliberately chose not to employ the phrase special bench . We are not considering whether the Regular Bench was right in arriving at this conclusion but we are considering this opinion in the context of the submission of Mr.Rana that the opinion of the Regular Bench was so clea .....

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#39; before stating 'widespread ramifications' and 'political sensitivity'. According to him, these grounds were sufficient for the president and it is not that no grounds exists. We are unable to agree. Having rejected the request for special bench the Regular Bench has not thereafter used the phrase special bench but consciously chose to use the phrase Appropriate Bench. These two are different. The words 'widespread ramifications' were in the context of 'political .....

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we now come to the second material placed before the president, that is the recommendation of the Vice president. 34. This is the most distressing part. The president forwarded the letter of the Board to the Vice president for his comments. This was purely an internal movement of the file. It was not that the matter was judicially assigned to the Vice president and notified on his board. There was no indication for any litigant to know that the file was now before the Vice president. In spite of .....

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and the Vice president. Permitting a party to the litigation to meet privately in absence of other side in respect of an ongoing litigation and then base an opinion on such meeting ,was most improper on the part of the Vice president. The Vice president did not even find it improper and he has proceeded to place the said private meeting on record as if nothing was wrong about the same. Not only holding such private meetings is opposed to judicial conduct, but not knowing that it is an improper .....

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ved the file from the president for his opinion, he suggested that the Regular Bench should give their opinion. He asked them to consider formation of a special bench and for that purpose hold a hearing, if necessary. When the opinion was received from the Regular Bench, he gave his own comment that the Bench had recommended a special bench, omitting to mention that the Bench had recommended a bench outside Andhra Pradesh. The Vice president, therefore, was an integral part and in fact played a .....

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influence a judicial body by non-judicial methods can be permitted and tolerated. If a litigant, be it the State, indulges in such acts, it shall not derive any benefit therefrom. Such tainted process must be obliterated and undertaken again. This course of action is necessary to retain the faith of litigants in the quality of justice rendered by the Tribunal. It is also necessary to send a strong signal to all the litigants, including the State, to make no attempts to influence a judicial body .....

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of the State. The Revenue is entrusted with collecting the tax and employ all legitimate methods to bring the tax evaders to book. The Tribunal is established to adjudicate disputes arising from the application of the Act. In the scheme of the Act, political affiliation of an assessee is irrelevant. The Vice president thought the case was politically sensitive. This was after the private meeting with the representative of the Board. So are we to presume that politics was discussed in the meeting .....

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f tax and the adjudication must move unconcerned with political identity. 38. The Income Tax Appellate Tribunal is one of the oldest and most reputed tribunals in the country. The qualification for appointing a Judicial member broadly are at least 10 years in the judicial office or advocate for at least 10 years. The qualification for appointment as an Accountant Members is broadly are that he should be a Chartered Accountant for at least 10 years,Member of Indian Income Tax Service with the pos .....

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tice is an important facet in the administration of justice. That justice must not only be done but also seen to have done, is not a cliché but is one of the most basic principle. The role of the Tribunal is emphasized by the former Chief Justice of India Mr.A.K. Sarkar in his speech, which is highlighted on the official website of the Tribunal. We quote - There may be people who feel that the Tribunal is not in the full sense a judicial body/venture to think that none of them is an asses .....

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e Ministry of Finance which is in charge of the collection of taxes has no control over that body or the Tribunal. The Tribunal is under the Ministry of Law for the purposes of administrative control only. That Ministry is not interested in the collection of taxes and does not exercise any control over the judicial work of the Tribunal. The members of the Tribunal are divided into two classes, called Judicial and Accountant. They are selected from members of the legal profession who have special .....

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ner and senior Appellate Assistant Commissioners and from the practising Chartered Accountants. So far as the later are concerned, there can be no reason to think that they cannot be independent. The independence of the members recruited to the Tribunal from the officers of the Income Tax Department is secured by so arranging things that they cannot look forward to anything from the Income Tax Department or the Ministry of Finance they cannot go back to higher posts in that Department. Their pro .....

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ions of the Andhra Pradesh High Court and the Apex Court, in the cases of P. Shankar Rao v/s The Govt. of Andhra Pradesh, Writ Petition Nos.794, 6604 and 6979 of 2011, dated 10 August 2011; M/s.Jagathi Publications Ltd. v/s Central Bureau of Investigation, Hyderabad, Criminal Petition No.4593 of 2012, dated 2 June 2012; Central Bureau of Investigation v/s V. Vijay Sai Reddy, Criminal Appeal No.729 of 2013, dated 9 May 2013; and Y.S. Jagan Mohan Reddy v/s Central Bureau of Investigation, AntiCorr .....

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e have been levied against its promoters, it does not mean that the Petitioner is not entitled to be treated fairly in the judicial proceedings. Judicial and quasijudicial proceedings must be conducted in a manner that is fair and impartial. Ultimately, what is of a paramount importance is the Rule of Law. 41. In the replies the Revenue has taken completely evasive stand and has tried to obfuscate the issue. Mr.Dave, during the course of hearing, went on to state that it is only the version of t .....

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y the Board and the revenue are as vague as it can be. If the conduct of the Board was bonafide as sought to be urged, surely the Board would be candid with the Court. Instead, it has chosen to be vague. 42. The Board addressed a letter to the president citing various reasons. The underlined theme of the letter was that the Chief Promoter of the Petitioner was a politician who abused his position, indulged in quid pro quo and what the Department unearthed was a huge financial fraud. Except emplo .....

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r alone. The petitioner has levied a charge, which has gone unanswered, that similar allegations were made in the case of Ramojirao Group, but their matters were not referred to a special bench and only the Petitioner is singled out. Why the Board did not choose to invoke the judicial power of the Bench is not been informed to us in spite of our repeated queries. There is a clear methodology laid down under the Regulation 98(A) to make a reference by judicial order to the president. These regula .....

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from the Board as to why it did not adopt this methodology is not an irrelevant point. 43. This only gives credence to the serious grievance made by the Petitioner that the entire attempt of the Board to get the special bench constituted was a part of political vendetta targeted at the Petitioner. We, therefore, cannot accept the contention of Mr.Dave that the Board acted in a bonafide manner and it had no personal interest in it. The Board has shown more than active interest in targeting the Pe .....

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ecision. However, we proceed to consider whether the order of the president can be sustained otherwise. Mr. Mistri contended that, whenever an appeal bench is seized of the appeal, the president is precluded from exercising his administrative powers. In the present case, the appeals filed by the Petitioner were pending before the Regular Bench and they were adjourned from time to time at the request of the Revenue. The Bench had also passed interim orders in the matters. It was asserted by Mr. M .....

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dministrative powers. The absolute proposition that is advanced by Mr. Mistri that moment the bench is seized of the matter, the president is denuded of his powers to act independently, is not discernible from the scheme of the Act. There could be various situations where the president may be called upon to exercise his administrative powers. There is also no warrant for us to examine such an absolute proposition since all that we are concerned with is the exercise of the power by the president .....

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ity of principles of natural justice. According to Mr.Rana, requirement of hearing the parties is not contemplated while exercising the power under Section 252(3) by the president, and even otherwise, the president, adopting a fair course of action, has permitted the parties to present their case before the Regular Bench. According to Mr.Mistri, in the peculiar facts of the present case, the principles of natural justice ought to have been strictly followed and the president ought to have given .....

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Apex Court in Kraipak has observed that, the distinction is being gradually obliterated. The requirement of acting judicially is a requirement to act justly and fairly. After the decision in Kraipak A.I.R. 1970 SC 150 the Courts have further leaned in favour of applying principles of natural justice in a situation where a party is affected even by an administrative decision. 48. Mr. Rana, relying upon the decision of the Apex Court in the case of Gullapalli Nageswara Rao & ors. v/s Andhra Pr .....

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road transport corporation established under a statute implementing a scheme of nationalization by trying to take over the routes plied by the private bus operators. In fact this decision lays down contrary position of law to the argument advanced. 49. The present case is completely different. The president of a quasi-judicial tribunal in a pending litigation has passed the order. Constitution of the special bench of three members, which can overrule the law by which appellate tribunal - the re .....

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the Petitioner, by trying to place the matter before the special bench of three members, the Petitioner was systematically sought to be deprived of the position of law in its favour. Whether a special bench would continue with upholding the position of law in favour of the Petitioner or differ is not the question but the perception of the Petitioner of having suffered an order without hearing, would be the most relevant factor. The Apex Court in I.T.A.T. did refer to the order of the president a .....

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what is the shade of the power exercised as to whether it is purely an administrative exercise or has trappings of it being quasijudicial. For determining whether a power is an administrative power or a quasi-judicial power one has to look to the nature of the power conferred, the person or persons on whom it is conferred, the frame work of the law conferring that power, the consequences ensuing from the exercise of that power and the manner in which that power is expected to be exercised. 51. A .....

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pure question of law to be decided by a special bench, where other litigants who may wish to address the special bench can debate the question of law to be uniformly applied. Such an order is not targeted at a particular party, though in the end the a particular matter gets referred to a special bench. The object is not to single out a party for a different treatment but to settle a position of law generally. Object in such case is to decide a question of law, which will then apply to all genera .....

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cases when the power used by the president is focused on the entire appeal of one party, then principles of fairness and natural justice are attracted. Such order is passed ad hominem. If the entire appeal of the assessee is selected for hearing in the circumstances as in the present case, he must know why his case alone is being selected for a different treatment, that too at the instance of the rival. No litigant should carry an impression that the opposite side has been able to secure a marc .....

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signing any reason. Laying down that even such purely adhominem circumstances, the president is not obliged to give an opportunity to the concerned parties and pass unreasoned orders, will be conferring a non-transparent and un-correctable power on the president. In such circumstances, in our opinion, it is in the interest of administration of justice that the president should give an opportunity of hearing to both the parties before referring the matter to a special bench. 54. Laying down such .....

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furnishing. We were informed that in some matters entire appeal is referred but we were not informed whether other two ingredients were present. We proceed to presume therefore that the case at hand is the only of its kind. In any case, it does not seem to be a regular practice of the Tribunal and it certainly is a deviation. 55. Mr.Rana submitted that, assuming hearing is required to be given in the facts of the present case; opportunity of hearing was in fact given by the Regular Bench. It is .....

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nless the reference had emanated by judicial order following the Regulation 98. Furthermore, the Regular Bench had not recommended a special bench. We therefore hold that the order of the president was vitiated on the count of breach of principles of natural justice and was lacking in fairness. 56. Mr.Mistri also sought to rely upon various entries in the record to bolster up an argument that the procedure adopted by the president was not transparent. Most of these issues raised by him are proce .....

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s, on the major issues, which we have discussed above, the impugned decision-making is vitiated. 57. To sum up, the president was under obligation to give hearing to the parties. The Regular Bench had not unequivocally recommended constitution of the special bench and it had merely recommended that the matter be heard outside Andhra Pradesh. Since the Regular Bench had not recommended constitution of the special bench, no reason at all is found in the order of the president in constitution of th .....

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