THE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD SPECIAL BENCH, HYDERABAD vs. THE DEPUTY COMMISSIONER OF INCOME-TAX (ASSTTS.) III , HYDRABAD , ANDHRA PRADESH AND ORS.

CIVIL APPEAL No. 2039/1996Supreme Court[1996] 1 S.C.R. 63017 January 1996Bench: 2 JudgesAuthor: B.P. JEEVAN REDDY, S.B. MAJMUDAR L J.21 pages
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What were the facts?

The Income Tax Appellate Tribunal (ITAT) constituted a Special Bench to decide appeals involving the interpretation of Section 115-J of the Income Tax Act, 1961. The Special Bench ruled in favour of the assessees. The Revenue challenged this decision in the High Court via writ petitions, arguing that the President of the ITAT was not justified in constituting the Special Bench without a judicial reference from a regular Bench, and that the Tribunal wrongly refused an adjournment to the Revenue. The High Court allowed the Revenue's writ petitions on these grounds. The ITAT filed appeals against the High Court's decision on the constitution of the Special Bench and the refusal of adjournment. The assessees also filed separate appeals on the interpretation of Section 115-J, which were delinked.

What did the Supreme Court hold?

The Supreme Court held that the High Court erred in its conclusions. Firstly, the President's power under Section 255(1) read with Section 255(3) of the Income Tax Act to constitute Benches, including Special Benches, is an administrative power. This power can be exercised suo motu if an important point requires decision by a larger Bench, and it is independent of Regulation 98-A. The Court found that the President acted bona fide in constituting the Special Bench based on recommendations and information about conflicting opinions on Section 115-J. Secondly, the High Court, in its writ jurisdiction under Article 226, cannot sit in appeal over the administrative decision of the President to constitute a Special Bench unless the order is mala fide, which was not alleged. Therefore, the High Court's interference was unjustified. Regarding the refusal of adjournment, the Court noted that while the High Court's view that the Tribunal was not justified in insisting on hearing the matter and refusing written submissions appeared well-sustained, the decision on the merits of Section 115-J was pending in other delinked appeals. The Supreme Court quashed and set aside the High Court's judgment on the two points concerning the constitution of the Special Bench and the refusal of adjournment, allowing the appeals filed by the ITAT. The issue of Section 115-J interpretation was left open.

What were the issues?

1. Whether the President of the Income Tax Appellate Tribunal has the administrative power to constitute a Special Bench, independent of a judicial order or reference from a regular Bench, under Section 255(1) read with Section 255(3) of the Income Tax Act, 1961. - Assessee (ITAT): Contended that the President's power to constitute a Special Bench is administrative and can be exercised suo motu or based on recommendations, not requiring a judicial order. Relied on Section 255(1) and 255(3). - Revenue: Argued that the constitution of the Special Bench was invalid as it was not based on a judicial order or reference from a regular Bench, as implied by Regulation 98-A framed under Section 255(5). 2. Whether the High Court, in its writ jurisdiction under Article 226 of the Constitution, was justified in interfering with the administrative decision of the President of the ITAT to constitute a Special Bench. - Assessee (ITAT): Argued that the High Court cannot sit in appeal over the administrative decision of the President except in cases of mala fide. - Revenue: Did not record specific arguments on this point, but their writ petition challenged the constitution of the Special Bench. 3. Whether the Tribunal was justified in refusing an adjournment to the Revenue and in not accepting their written submissions, thereby violating principles of natural justice. - Assessee (ITAT): Implicitly argued that the refusal of adjournment was justified given the numerous prior adjournments and the need to decide the important issue of Section 115-J. - Revenue: Contended that the Tribunal was not justified in refusing adjournment and accepting their written submissions.

Which sections of the Income-tax Act were involved?

Section 255,Section 115-J,Section 255(1),Section 255(3),Section 255(5),Section 143(1)(a)

AI-generated summary — verify with the full judgment below

y L J. - A THE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD SPECIAL BENCH, HYDERABAD v. THE DEPUTY COMMISSIONER OF INCOME-TAX (ASSTTS.) III, HYDERABAD, ANDHRA PRADESH AND ORS. B JANUARY 17, 1996 ...- [B.P. JEEVAN REDDY ANDS. B. MAJMUDAR, JJ.] • Income Tax Act, 1961 : c S.255 and Regulation 98-A of Regulations framed under s.255(5)-ln- come Tax Appellate Tribunal-President-Power to constitute Special Bench Held, Power of President to co1utitute Special Bench wider sub-sec(l) read j with sub-section (3) of s.255 is an administrative power which can be veer- ~ cised even suo motu in appropriate cases-This power is independent of D reference by Judicial order of a Bench of Tribunal under Regulation 98-A.

Constitution of India Article 226-Held, in writ furi iction High Court cannot sit in appeal over administrative decision of the President of the Income Tax Appellate E T1ibu11a/ to constitute a Special Bench crcept in crtraordinary cases wherein the order is shown to be a ma/a fide one.

Practice and Procedure : Income Tax Appellate Tribunal-Grant of adjoumments to parties and F accepting their written submissions-Pmpeiiety of-Explained.

The assessee-companies, r

The order continues below.

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