Jagati Publications Ltd vs. ITAT (Bombay High Court)

During the pendency of the assessee’s appeal before the Division Bench of the Tribunal, the CBDT addressed a letter to the President of the Tribunal and sought the constitution of a Special Bench u/s 255(3) for hearing the appeal. The President referred the issue to the Vice President who in turn referred it to the Division Bench. The Division Bench expressed the view that a Special Bench was not necessary though it opined that as the case was sensitive, the case should be heard by a Bench outside Hyderabad. The Vice President expressed the view that the appeal deserved to be referred to a Special Bench, which was accepted by the President. He directed that the appeal would be heard by a Bench constituted of Members who are not stationed at Hyderabad. On a Writ Petition filed by the assessee HELD allowing the Petition:

The manner in which the entire proceeding has been conducted for the purposes of the constitution of the Special Bench of the Tribunal appears to have been unfair to the petitioner. Though the appeal was before the Division Bench, the CBDT chose not to file an application to the Division Bench to refer the appeal to the President for constitution of a Larger Bench of the Tribunal but adopted a back door method of approaching the President of the Tribunal to constitute the Special Bench and that too in the interests of the Revenue. Though the President has the power in terms of s. 255(3) to constitute a Special Bench, this power cannot be exercised when a Division Bench is seized of the appeal. If this power can be exercised at any time then what would stop the President from exercising such power even in respect of appeals finally heard and where orders are awaited. S. 255(3) does not put any such limitation and/or condition for exercise of the power by the President only because it is expected that such power given to the head of the Tribunal will be exercised to aid the judicial process. It is expected and/or taken as a given that the President of quasi judicial body such as the Tribunal would act with fairness. In fact, fairness is the stock in trade of authorities deciding disputes between the parties. We also find this practice of the President entertaining and acting upon letters of CBDT and the Vice President entertaining the Counsel (likely to appear for Revenue) ex parte in respect of an appeal already siezed of by a Division Bench of the Tribunal to be wanting in propriety. This application could well have been made to the Division Bench which could then make a reference to the President for constitution of the Special Bench. Even if the CBDT, who is a party to the proceedings were to approach the Vice President in respect of a pending proceeding, the same should have been done only after notice to the other side. Similarly, in case the President wanted to act upon the letter of the CBDT the least he could have done was to call for a response from the other side in view of the appeal being siezed of by the Division Bench. This would be the most elementary requirement in a country wedded to the Rule of Law. Also, though a litigant cannot choose its forum, the department has forgotten that the CBDT, i.e. the Income-tax department is a party to the litigation before the Division Bench of the Tribunal and it chooses to have an appeal shifted to a Special Bench of the Tribunal not in the interest of justice but in the interest of the revenue. The order constituting the Special Bench is an administrative order which requires application of law and should indicate in brief that mind has been applied to the law. An administrative order must also be passed to promote the Rule of Law and cannot be on a mere whim and fancy as it can be a cause for civil consequences/prejudice to the parties. This is more particularly so in view of the Division Bench being seized of the appeal and the contest between the parties with regard to the constitution of the Special Bench. The President in these facts is prima facie obliged to give some reasons indicating why he is constituting the Special Bench of Tribunal.