Case Note & Summary
The petitioner, M/s Jagati Publications Ltd., a public limited company publishing a Telugu newspaper, filed a writ petition in the Bombay High Court challenging the order dated 5 March 2013 passed by the President of the Income Tax Appellate Tribunal (ITAT) constituting a Special Bench to hear its appeal for Assessment Year 2008-09. The assessment had been completed under Section 143(3) of the Income Tax Act, 1961 with additions towards share premium under Section 28(iv) and unexplained cash credit under Section 68. The appeal against the Commissioner of Income Tax (Appeals)' dismissal was pending before the ‘B’ Bench of ITAT, Hyderabad. While the appeal was pending, the Central Board of Direct Taxes (CBDT) sent a letter to the President requesting constitution of a Special Bench. The President, accepting the request, constituted a Special Bench of three members. The petitioner contended that the President acted beyond powers under Section 255(3) by constituting a Special Bench on the request of the CBDT without a reference from the bench hearing the appeal, and without giving the petitioner an opportunity of hearing, thereby violating principles of natural justice. It also alleged bias and malafides, arguing that the CBDT was the opposing party in the appeal and its request influenced the President. The respondents argued that the President has absolute discretion under Section 255(3), the order is administrative and not subject to natural justice, and that no bias was established. The Division Bench of the Bombay High Court examined Section 255(3) and held that the word ‘may’ confers unfettered discretion on the President to constitute a Special Bench for disposal of any particular case, and this power is not dependent on any reference from a bench. The court held that the order is administrative in nature, dealing with internal distribution of judicial work, and does not affect substantive rights of parties, thus not attracting natural justice. The court found no evidence of bias or malafides; the CBDT’s letter was merely a suggestion and the President had independently applied his mind. The court also noted that Regulation 98A providing a proforma for reference by a bench is directory and does not restrict the statutory power. Consequently, the writ petition was dismissed and the constitution of the Special Bench was upheld.
Headnote
A) Income Tax - Appellate Tribunal - Special Bench - Constitution - Section 255(3), Income Tax Act, 1961 - The President of the Income Tax Appellate Tribunal has the power to constitute a Special Bench consisting of three or more members for disposal of any particular case. This power is not contingent upon a reference from the bench hearing the case; it can be exercised suo motu or on request of any party, including the Central Board of Direct Taxes. The word 'may' confers absolute discretion subject to proper exercise. Held that the constitution of a Special Bench in the assessee's appeal was valid. (Paras 12-19) B) Administrative Law - Nature of Function - Administrative vs Quasi-Judicial - Section 255(3), Income Tax Act, 1961 - The order constituting a Special Bench is an administrative function relating to the assignment of judicial work and is not a judicial or quasi-judicial determination. It does not decide any right or liability of the parties. Held that such an order is not required to be preceded by a hearing or notice to the assessee. (Paras 20-26) C) Constitutional Law - Principles of Natural Justice - Applicability - Constitution of India, 1950 - Principles of natural justice are not applicable to purely administrative orders unless they result in civil consequences. The constitution of a Special Bench only determines the forum and does not affect substantive rights. Held that no violation of natural justice occurred. (Paras 27-30) D) Administrative Law - Bias and Mala Fides - Allegation of Bias - The petitioner alleged that the Special Bench was constituted at the instance of the Central Board of Direct Taxes, indicating bias. The court found that the President independently exercised his mind and the CBDT's communication was only a suggestion. Held that there was no bias or malafides. (Paras 31-46) E) Income Tax - Appellate Tribunal - Procedure - Regulation 98A, Income Tax Appellate Tribunal Regulations - The proforma for reference by a bench to the President for constitution of a Special Bench is merely directory and does not mandate that a Special Bench can be constituted only on such reference. The supremacy of Section 255(3) is recognized. Held that non-compliance with the regulation does not vitiate the order. (Paras 19, 47)
Issue of Consideration
Whether the President of the Income Tax Appellate Tribunal can constitute a Special Bench under Section 255(3) of the Income Tax Act on a request from the Central Board of Direct Taxes without any reference from the Bench hearing the appeal? Whether such an order is administrative or judicial, and whether it violates principles of natural justice?
Final Decision
The Division Bench of the Bombay High Court dismissed the writ petition, holding that the President of ITAT has the power to constitute a Special Bench suo motu under Section 255(3) of the Income Tax Act, the order is administrative and not subject to principles of natural justice, and there was no bias or malafides. The constitution of the Special Bench was upheld.
Law Points
- Power of ITAT President to constitute Special Bench under Section 255(3) of Income Tax Act is administrative
- absolute discretion
- not dependent on reference from bench
- CBDT request is permissible
- natural justice not attracted
- no bias or malafides
