IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI SPECIAL BENCH “I”, MUMBAI
Before Shri D Manmohan (V.P.), Shri R.S.Syal (A.M.),
and Shri N.V.Vasudevan (J.M.)
ITA No.4977/Mum/2009 : Asst.Year 2006-2007
The Deputy Commissioner of Income-tax
Circle 8(2)
Mumbai.
M/s.Summit Securities Limited
(Formerly known as KEC Infrastructure
Limited), Transasia House, 3
rd
Floor
Chandivali Studio Road, Andheri (East)
Mumbai – 400 072.
PAN : AAACK4279J.
(Appellant)
Vs.
(Respondent)
Appellant by : Shri Sanjiv Dutt
Respondent by : S/Shri S.E.Dastur & Niraj Seth
Date of Hearing : 28.07.2011 Date of Pronouncement : 10.08.2011
O R D E R
Per R.S.Syal (AM) :
The Hon’ble President of the Income Tax Appellate Tribunal, on a reference
made by the Division Bench, has constituted this Special Bench by posting the
following question for our consideration and decision:-
“Whether in the facts and circumstances of the case, the Assessing
Officer was right in adding the amount of liabilities being reflected in the
negative net worth ascertained by the auditors of the assessee to the sale
consideration for determining the capital gains on account of slump
sale?”
2. The factual matrix of the case leading to the recommendation for the
constitution of this Special Bench by the Division Bench is as follows :-
The assessee transferred its power transmission business to KEC International Limited
(formerly known as KEC Infrastructure Limited) at an agreed consideration of Rs.143
crore and offered the equal amount as capital gain arising out of sale of slump sale.
The Auditors determined negative net worth of the business transferred at Rs.157.19 ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
2
crore. The Assessing Officer held that the sale consideration should have been taken at
Rs.300 crore (declared sale consideration of Rs.143 crore + additional liabilities taken
over amounting to Rs.157 crore) and as such the entire amount was liable to be treated
as long term capital gain on slump sale. Before the first appellate authority the
assessee relied on two decisions of the Tribunal in Zuari Industries Ltd. Vs. ACIT
[(2007) 105 ITD 569 (Mum.)] and Paperbase Co. Ltd. Vs. CIT [(2008) 19 SOT 163
(Del.)] in which it has been held that the negative net worth has to be treated as zero in
the context of the provisions of section 50B. The learned CIT(A), following the said
decisions, came to hold that the action of the Assessing Officer in determining the
sale consideration as well as long term capital gain u/s.50B at Rs.300 crore was not
sustainable. He reversed the assessment order on this point.
3. When the matter came up before the Tribunal in an appeal filed by the Revenue,
the Division Bench was not convinced with the view taken by the co-ordinate bench in
the case of Zuari Industries Ltd. (supra) as in its opinion the judgment of the Hon’ble
Supreme Court in the case of CIT Vs. Attili N. Rao [(2001) 252 ITR 880 (SC)] was
useful for the determination of the issue which the earlier Division Bench in Zuari
Industries Ltd. (supra) found to be distinguishable. When the Bench put across its
tentative view, it was submitted on behalf of the assessee that if the Bench was not in
agreement with the earlier decision in the case of Zuari Industries Ltd. (supra), then
the issue may be referred to the Special Bench. This contention has been recorded in
para 5 of the reference. The Division Bench, not finding itself in respectful agreement
with the view taken by the co-ordinate Bench in Zuari Industries Ltd. (supra),
requested the Hon’ble President to constitute a Special Bench on the point. Pursuant to
such recommendation, the Hon’ble President constituted this Special Bench for giving
opinion on the question extracted above.
4. The hearing of the Special bench was fixed for 27.07.2011 with notice to the
parties. On receipt of notice, the assessee vide its application dated 20
th
July, 2011
addressed to the Hon’ble President submitted that the Goa Bench of the Hon’ble ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
3
Bombay High Court has admitted an appeal involving same issue in the case of Zuari
Industries Ltd. (supra). It was requested that the reference made to the Special Bench
be withdrawn as in certain other cases in the past the reference to the Special bench
was withdrawn when the Hon’ble High Court had taken steps to decide the issue. The
said application of the assessee was disposed off by the Hon’ble President with the
remarks : “Place before the Special Bench for consideration”.
5. At the time of hearing, Shri S.E.Dastur, the learned Senior Counsel for the
assessee raised the same preliminary objection to the effect that the reference to the
Special Bench be withdrawn as the Hon’ble Bombay High Court has admitted
identical question of law in the case of Zuari Industries Ltd. (supra). It was submitted
that in past the references to the Special bench were withdrawn in the case of Star
Limited and Tivoli Investments & Trading Co. Pvt. Ltd. when it came to the notice of
the President that the Hon’ble High Court had admitted questions of law similar to
those before the Special Bench. Taking us through the orders of the President in these
two cases withdrawing reference to the Special bench in view of the Hon’ble High
Court initiating the process of deciding the similar questions, the learned Senior A.R.
pleaded that the instant reference be also withdrawn. He also referred to the order of
the Division Bench in the case of Harsha Achyut Bhogle Vs. ITO [(2008) 114 TTJ
(Mum.) 266] in which the earlier year was decided by the Tribunal against the assessee
and when the subsequent year came up for hearing, the assessee relying on a contrary
order in some other case, contended that the matter be referred to the Hon’ble
President for the constitution of Special Bench to resolve the diametrically opposite
views expressed by different Benches on the issue. The Tribunal rejected the
assessee’s prayer for constitution of Special Bench on the ground that the assessee’s
own appeal against the earlier order of the Tribunal was pending before the Hon’ble
High Court. In this backdrop of the facts, the learned Senior A.R. requested that the
reference to the Special Bench in the instant case be withdrawn as the Hon’ble High
Court is already seized of the matter on identical question of law in the case of Zuari
Industries Ltd. (supra) ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
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6. The learned Departmental Representative strongly objected to the preliminary
objection raised on behalf of the assessee by arguing that it was only at the instance of
the assessee during the course of hearing before the Division Bench that the reference
was made for the constitution of Special Bench as the Members expressed reservations
in following the order in the case of Zuari Industries Ltd. (supra). It was, therefore,
argued that the assessee was not entitled to take a contrary stand at this stage of the
case. He applauded the course of action adopted by the Division Bench in making a
reference for the constitution of Special Bench in the light of the judgment of the
Hon’ble Supreme Court in the case of Union of India & Anr. Vs. Paras Laminates (P)
Ltd. [(1990) 186 ITR 722 (SC)] in which it was held that the President of the tribunal
has ample power to refer a case to Larger Bench when the Members of the Bench
doubt an earlier decision of another Bench. For the same proposition he relied on the
judgment of the Hon’ble Gujarat High Court in the case of Affection Investments Ltd.
Vs. ACIT [(2010) 326 ITR 255 (Guj.)] in which it has been held that a subsequent
Bench has no right or jurisdiction to record a decision entirely contrary to one reached
by another co-ordinate Bench on the same set of facts and circumstances. The only
course open to the co-ordinate Bench in such circumstances, as per the Hon’ble High
Court, is to make reference to the President of the Tribunal as provided in section
255(3) to constitute a Special Bench to resolve the controversy. It was also argued that
the act of the President of the Tribunal constituting a Special Bench is an
administrative act and if any party is aggrieved against such administrative decision,
then the proper way out is to approach some higher judicial forum. It was, therefore,
requested that the preliminary objection raised by the assessee be rejected.
7. We have heard the rival submissions in extenso and perused the relevant
material on record in the light of precedents cited before us. It is noticed that the
Division Bench hearing the appeal of the Revenue in the present case was not
convinced with the earlier view taken by the co-ordinate Bench in the case of Zuari
Industries Ltd. (supra). At the request of the assessee, the reference was made to the ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
5
Hon’ble President for the constitution of Special Bench. On the fixation of hearing of
the case by the Special Bench, the assessee approached the Hon’ble President through
his letter dated 20.07.2001 urging him to withdraw the reference to the Special Bench
as the question of law in the case of Zuari Industries Ltd. (supra) has been admitted
by the Hon’ble Bombay High Court. The Hon’ble President has placed the assessee’s
request before us for consideration and decision. As such the short question before us,
at this stage is : Whether the reference to the Special Bench be withdrawn in the wake
of the Hon’ble High Court admitting the identical question of law in the case of Zuari
Industries Ltd. (supra).
8. Before we venture to delve into this question, it will be imperative to go through
the judgments relied on by the parties, which are germane to the issue in question. The
Hon’ble Supreme Court in the case of Paras Laminates (P) Ltd. (supra) observed that
a Bench of two Members must not lightly disregard the decision of another Bench of
the Tribunal on an identical question. It is particularly true when the earlier decision is
rendered by a Larger Bench. The rationale of this rule is the need for continuity,
certainty and predictability in the administration of justice. Persons affected by
decisions of the Tribunals have a right to expect that those exercising judicial
functions will follow the reason or ground of the judicial decision in the earlier case on
identical matters. It was further observed that : “It is, however, equally true that it is
vital to the administration of justice that those exercising judicial power must have the
necessary freedom to doubt the correctness of an earlier decision if and when
subsequent proceedings bring to light what is perceived by them as an erroneous
decision in the earlier case. In such circumstances, it is but natural and reasonable and
indeed efficacious that the case is referred to a larger Bench.”
9. On the same lines is the judgment of the Hon’ble Gujarat High Court in Affection
Investments Ltd. (supra). In this case the Tribunal recorded that the facts before it
were identical to another case. Thereafter the Tribunal took a different view for
various reasons stated in the order. The Hon’ble High Court held that : “Once the ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
6
Tribunal had come to the conclusion that the fact situation was identical to the one
obtaining in a decided matter, no co-ordinate Bench of the Tribunal has any right or
jurisdiction to record a contrary decision, entirely contrary to the one reached by
another co-ordinate Bench of the same Tribunal on same set of facts and
circumstances.” The Hon’ble High Court further observed that the only course open to
the subsequent co-ordinate Bench would be to make a reference to the President of the
Tribunal as provided in section 255(3) of the Income tax Act, 1961 to constitute a
Special Bench to resolve the controversy.
10. The Hon’ble jurisdictional High Court in the case of CIT Vs. Goodlass Nerolac
Paints Ltd. [(1991) 188 ITR 1 (Bom.)] has also held that a subsequent Bench of the
Tribunal should not come to a conclusion totally contradictory to the one reached by
the earlier Bench of the Tribunal in the same case for an earlier year on a similar set of
facts. Their Lordships held that it is desirable that in case a subsequent Bench of the
Tribunal is of the view that the finding given by the Tribunal in an earlier year
requires reappraisal either because the appreciation in its view was not quite correct or
inequitable or some new facts came to light justifying reappraisal or reappreciation of
the evidence on record, it should have the matter placed before the President of the
Tribunal so that the case could be referred to a Larger Bench of the Tribunal for
adjudication.
11. A survey of the above judgments divulges that there should be consistency in
the approach of various Benches of the tribunal. Once a case has been decided by an
earlier Bench, the subsequent Bench should respect such decision and should not
endeavor to make departure there from unless the facts are different or the legal
position appreciated by the earlier Bench has undergone change because of some
statutory amendment or enunciation of law by the Hon’ble Supreme Court or the
Hon’ble jurisdictional High Court. Consistency in the judicial approach removes the
sword of uncertainty hanging over the heads of litigants. The Income-tax Appellate
Tribunal is an all India Body working through its Benches across the country. The ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
7
judicial discipline requires that the view taken by one Bench should be respected and
ordinarily followed by the others. This type of approach results into consistency in the
administration of justice as the parties can reasonably predict the decision of a
subsequent bench when the same issue has been decided by an earlier bench.
12. It is however not the end of the road. As the Tribunal is quasi judicial body, its
Members cannot work mechanically by following the view taken by the earlier coordinate Bench when they strongly believe that the earlier decision was not rendered
by appreciating the legal position in correct perspective. Naturally there cannot be any
fetters on the powers of the subsequent Bench of the tribunal to dispute the correctness
of the earlier order in justifiable cases. To presume that a subsequent bench, despite
having strongly entertained the doubt about the accuracy of the earlier decision should
follow the same, would make a mockery of the judicial system and act as a speed
breaker on the thinking process and flow of thoughts. The Members have freedom to
doubt the correctness of an earlier decision in deserving cases from their own point of
view. If after due application of mind the subsequent Bench comes to the conclusion
that it cannot agree with the earlier view, it should not straight away proceed to record
a conflicting decision. In such a situation the subsequent Bench is empowered or
rather duty bound to make a reference to the President on the point they perceive to be
an error of law in the earlier decision. The Larger Bench is then made up to consider
the correctness of the earlier decision on the facts and circumstances of the case before
it. The decision thus arrived at by the larger wisdom becomes a binding precedent for
all other Benches across the country unless there is a contrary judgment of the Hon’ble
jurisdictional High Court on the point. After such order, no Division Bench can or
should question the correctness of view taken by the Special Bench.
13. The learned Counsel for the assessee has raised objection to the continuation of
the Special Bench on the ground that similar question of law has been admitted by the
Hon’ble Bombay High Court in the case of Zuari Industries Ltd. (supra). The only
reason advanced by the learned A.R. for the un-constitution of the Special Bench is ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
8
the admission of the question of law by the Hon’ble High Court in March 2007. It is
not the case of the parties that any judgment has been delivered on merits by the
Hon’ble Bombay High Court on the point.
14. We are unable to accede to this request made on behalf of the assessee for the
manifest reason that the Hon’ble High Court has neither decided the point on merits
nor blocked hearing of cases involving identical question of law by the Tribunal till
the disposal of appeal pending before it. The mere fact that a superior authority is
seized of an issue identical to the one before the lower authority, there cannot be any
impediment on the powers of the lower authority in disposing off the matters
involving such issue as per prevailing law. The first appellate authorities in all
subsequent cases shall be debarred from hearing the matters involving a question
against which either the Revenue or the assessee have preferred appeal before the
Tribunal and the matter is still undecided. The same consequences will follow if the
Tribunal is proscribed from hearing the matters on the admission of identical
question of law by the Hon’ble High Court till a final decision is rendered, which may
take a couple of years. It can be seen that the substantial question of law was admitted
by the Hon’ble High Court in the case of Zuari Industries Ltd. (supra) in March 2007
and we are running through 2011. More than four years have elapsed and the matter
has still not been taken up for consideration and final disposal. If the argument raised
on behalf of the assessee is accepted and further advanced then all the Hon’ble High
Courts will have to bring to an end the hearing of appeals before them involving a
question of law on which SLP has been admitted by the Hon’ble Supreme Court,
which may again take a number of years.
15. The consequences of such a course of action suggested by the learned A.R. would
lead to a chaotic situation. The entire working of the Tribunal will come to standstill if
a reference to the Special Bench is withdrawn simply on the ground that identical
question of law has been admitted by the Hon’ble High Court. The above discussed
three judgments including that of the Hon’ble Supreme Court and that of the Hon’ble ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
9
jurisdictional High Court do not permit subsequent Bench of the Tribunal to take a
contrary view from the one expressed by an earlier Bench. Contemplate a situation in
which an earlier Bench decides an issue in favour of one party, be it the Revenue or
the assessee and the aggrieved party appeals against the said Tribunal order which is
admitted by the Hon’ble High Court. Suppose similar issue comes up before a
subsequent Bench which finds itself unable to endorse the view taken by the earlier
Bench. The only course open to the subsequent Bench, as per the afore-stated three
judgments, is to make a reference to the President for the constitution of a Special
Bench instead of recording a contrary decision at its own. On the constitution of the
Special Bench if an argument is taken that since the substantial question of law has
been admitted by the Hon’ble High Court against the earlier order of the Tribunal and
hence such reference be withdrawn, there would be a deadlock. The subsequent Bench
would land itself in a quagmire, being neither in a position to swallow the earlier view
nor spit it out. Following the earlier decision of the co-ordinate Bench would be
difficult because of its non-concurrence with it. In the like manner it would find its
hands tied to directly record a contrary conclusion because of the prevalence of the
aforestated legal position expressed by the Hon’ble Supreme Court and other Hon’ble
High Courts prohibiting adopting such a course of action. Disposal of appeal against
the earlier order by the Hon’ble High Court may take several years and during the
currency of these years the Tribunal would become defunct on such issues.
16. In order to come out of such a tricky situation, the legislature has provided a
solution by enshrining section 255(3) empowering the President of the Tribunal to
constitute the special bench, which reads as under:-
“255(3) The President or any other member of the Appellate Tribunal
…………., and the President may, for the disposal of any particular case,
constitute a Special Bench consisting of three or more members, one of
whom shall necessarily be a judicial member and one an accountant
member. ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
10
17. A bare perusal of the relevant part of sub-section (3) of section 255 transpires
that the President may for the disposal of any particular case constitute a Special
Bench consisting of three or more members. The President is empowered to constitute
a Special Bench u/s. 255(3) on his own volition if he considers any issue of a greater
significance affecting large number of tax payers or due to the importance of the issue
even if it does not affect several assessees or otherwise. The powers of the President in
forming the Special Bench at his own will are plenary, unfettered and unlimited. Apart
from making a Special Bench on the President’s own choice, such a Bench can also be
constituted by the President on a representation made either by the assessee or by the
Revenue. Further if a single member bench of the tribunal or a Division bench hearing
a particular case considers it expedient to have opinion of the Larger Bench on the
issue because of its vital implications or they feel themselves unable to agree with the
view expressed by an earlier Bench on similar point, they can request the President for
the making of a Special Bench on such issue. Besides that there may be certain other
circumstances also in which the President can constitute Special Bench u/s. 255(3)
consisting of three or more members for the disposal of any particular case.
18. Thus it can be noticed that the constitution of the special bench eases the
situation in a case where the subsequent bench finds itself unable to endorse the view
taken by the earlier bench on the point. The order of the Special Bench helps in
providing consistency qua different benches of the tribunal until the matter receives
consideration of the higher judicial forums. It is further pertinent to note that the
practice, similar to the constitution of special bench by the tribunal to resolve a
possible conflict in the views amongst various benches of the tribunal and not waiting
till the matter is finally decided by the High court, is also uniformly followed by the
High Courts as well. Whenever a view is taken on a point by a Bench of a High Court
and the subsequent Bench of the same High Court finds it difficult to accept the same,
the practice is to refer the matter to the Chief Justice of the concerned High Court for
constitution of a Larger Bench. Notwithstanding the fact that SLP against the
judgment of its earlier Bench has been admitted by the Hon’ble Supreme Court, the ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
11
Hon’ble High Court does not stop its functioning to wait for the outcome before the
Hon’ble Supreme Court for an indefinite time. The Larger Bench so constituted hears
the matter and gives its conclusion, which becomes final qua various Benches of that
High Court until the final judgment is rendered by the Hon’ble Supreme Court.
19. The Hon’ble Delhi High Court in the case of CIT Vs. Asian Hotels Limited
[(2010) 323 ITR 490 (Del.)] held that notional interest on refundable interest free
deposit received from the tenant is neither taxable as business income u/s.28(iv) nor as
income from house property u/s.23(1)(a). Subsequently similar issue came up before
the Hon’ble Delhi High Court in CIT Vs. Moni Kumar Subba [(2010) 235 CTR (Del.)
132] in which the question was whether notional interest on interest free security
deposit was to be taken in the consideration to arrive at final value of the property. The
Hon’ble Court considered the earlier judgment in the case of Asian Hotels Limited
(supra) and on observing that certain relevant aspects were not considered in the
afore-said earlier judgment, the matter was referred to the Hon’ble Chief Justice for
constituting Full Bench. Thereafter the matter came up before the Larger Bench of the
Hon’ble Delhi High Court in CIT Vs. Moni Kumar Subba [(2011) 333 ITR 38 (Del.)].
From the above discussion it can be seen that the subsequent Bench of the Hon’ble
Delhi High Court in Moni Kumar Subba (supra) did not find itself in respectful
concurrence with the view taken in the case of Asian Hotels Limited (supra). Instead
of adopting its own view contrary to the one taken earlier, the matter was placed by
the latter Bench for consideration by the Larger Bench for rendering finality to the
issue. The latter Bench did not stop the hearing to wait for the Hon’ble Supreme Court
to decide about the correctness of the earlier judgment in the case of Asian Hotels
Limited (supra). It was right because the disposal by the Hon’ble Supreme Court may
have taken several years. With the advent of the decision by the Larger Bench the
issue has now attained finality insofar as the Hon’ble Delhi High Court is concerned.
20. Similar practice is followed in the Hon’ble Supreme Court as well inasmuch as
where a Bench doubts the correctness of the view expressed by its another Bench of ITA No.4977 /Mum/2009 (SB)
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12
same strength, the controversy is referred to a Larger Bench. It can be noticed from the
judgment of the Hon’ble Supreme Court in the case of Union of India Vs. Dharmendra
Textile Processors [(2007) 212 CTR (SC) 432] that when the question of penalty came
up before it, an earlier judgment in the case of Dilip N.Shroff Vs. JCIT & Anr. [(2007)
291 ITR 519 (SC)] was cited in which the view was taken in assessee’s favour.
Finding it difficult to approve the earlier view in Dilip N. Shroff (supra), the matter
was placed before the Larger Bench to take a final decision, which has since been
decided in Union of India & Ors. Vs. Dharmendra Textile Processors & Ors. [(2008)
306 ITR 277 (SC)].
21. In the name of precedents, the ld. Sr. AR in support of his objection, apart from
relying on certain administrative orders passed by the Hon’ble President, has relied
on the solitary case of Harsha A Bhogle (supra). That case rested on the facts in which
the tribunal decided the issue against the assessee in his own case in the earlier year.
When the subsequent year came up for hearing, the assessee came out with a request
that a special bench be formulated on the subject because the tribunal in another case
had taken a different view. The Division Bench dealing with the assessee’s case for
the subsequent year observed that the facts of the other case cited by the assessee were
different. Following the view taken by the earlier bench in assessee’s own case, the
tribunal refused to accede to the request of the assessee that special bench be
proposed.
22. At the cost of repetition we reiterate that consistency in the approach of the
tribunal in the sense of following the earlier view is a rule but doubting its correctness
is an exception. No fault can be found with the tribunal following the view taken by it
in an earlier case/year when it is satisfied with its correctness. So what the tribunal
did in the case of Harsha V Bhogle (supra) was to follow the rule of consistency.
Obviously no exception can be found in the way in which the tribunal proceeded with
the matter in that case. When an issue is decided in favour of one party, the aggrieved
party may seek to get it reviewed through the route of the Special Bench. Unless the ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
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Bench really doubts the correctness of the earlier view, it does not recommend the
making of a Special Bench. Whereas the case of Harsha A Bhogle (supra) fell in the
domain of the rule of consistency, the case of the present assessee has fallen in the
ambit of exception inasmuch as the Division Bench was hesitant to follow the earlier
view in the case of Zuari Industries Ltd. (supra). Thus it is axiomatic that there is a sea
change in the facts and circumstances prevailing in the case of Harsha A Bhogle
(supra) and those presently under consideration. In that case the Division Bench was
satisfied with the correctness of the view taken by the tribunal in the earlier year and
that is how it refused to make a reference for the constitution of the Special Bench.
We are dealing with a case in which the Division Bench is not satisfied with the
correctness of the earlier view in Zuari Industries Ltd. (supra) and very graciously,
instead of imposing its own contrary view, it made a reference to the Hon’ble
President to constitute a Special Bench so that a larger view on the subject may come
on surface.
23. Thus it can be noticed that the case of Harsha A Bhogle (supra) does not
advance the case of the assessee any further. In all circumstances where the
subsequent bench finds it difficult to accept and adopt the view taken by the earlier
bench, the only course open to it is to make a reference for the constitution of the
Special Bench. Our view is fortified by the Special Bench order in the case of Daks
Copy Services Pvt. Ltd. Vs. ITO [(1989) 30 ITD 223 (Bom.) (SB)]. In that case the
point in question was decided against the assessee in an earlier year. When the
subsequent year of that assessee came up before the next Bench, it was noticed that a
contrary view was also available. In order to resolve this conflict a Larger Bench of
three Members was formed. In that case also a preliminary objection was raised on
behalf of the Revenue that since the point in controversy was already decided against
the assessee by the Tribunal in an earlier year and such matter was pending before the
Hon’ble High Court, the same view should be followed in the subsequent assessment
years as well and as such there was no need for a Special Bench. Repelling this
contention, the Special Bench held that when the subsequent Bench was not convinced ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
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with the earlier view, the constitution of the Larger Bench for resolving the
conflicting decisions of the benches of the Tribunal was in order.
24. Adverting to the facts of the instant case we find that situation is identical apart
from the change of parties. Whereas in that case the Revenue raised preliminary
objection for not proceeding with the Special Bench in view of the earlier Bench’s
decision in their favor pending for adjudication before the Hon’ble High Court, now
is the turn of the assessee to take similar objection in seeking the un-constitution of the
Special bench because the earlier decision given by the Tribunal in its favour is
awaiting adjudication by the Hon’ble High Court. As the facts and circumstances are
similar in the present case, we are not persuaded to accept the assessee’s preliminary
objection for withdrawal of the reference to the Special bench by following the view
taken by the Special bench in the case of Daks Copy Services Pvt. Ltd. (supra).
25. There is one more additional reason for not accepting the assessee’s preliminary
objection. We have noticed from the reference made by the Division Bench to the
Hon’ble President for the constitution of the Special Bench that when the Division
Bench expressed its disagreement with the earlier decision in the case of Zuari
Industries Ltd. (supra), the assessee took a plea that if the Division bench was not
agreeable with the view taken by the Tribunal in Zuari Industries Ltd. (supra), then it
should make a reference to the Hon’ble President for the constitution of Special
Bench. The Bench accepted the assessee’s request and following the judicial discipline
made such reference to the Hon’ble President. It is now that when the Special Bench
has been constituted and the hearing is fixed that the assessee has come up with a plea
that the Special Bench should be deconstituted. We are reminded of the doctrine of
approbate and reprobate which debars a person from blowing hot and cold in the same
flow. One cannot approve and reject the same thing in the same stream. The assessee
is trying to do the same in the instant case. When during the hearing of its case by the
Division Bench it found the Bench to be not accepting the decision in the case of
Zuari Industries Ltd. (supra) which was in its favour, the assessee requested the ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
15
Bench to make a reference to the Hon’ble President for constituting a Special bench.
With such a request the assessee found an escape route from the view likely to be
taken against it. Now it is pressing that the reference to the special bench be
withdrawn and the case be heard by the Division Bench so that the earlier view in the
case of Zuari Industries Ltd. (supra) may be pressed in to service once again. We are
unable to find a solution to the likely problem to arise if the assessee’s contention is
accepted and the special bench is deconstituted and again the DB finds itself unable to
agree with the earlier view. Will the assessee in that case again request the DB to
make a reference for the constitution of Special Bench and on such constitution will
again request to dismantle it? Law does not permit a person to both approbate and
reprobate. When the Special Bench has actually been constituted at the plea of the
assessee, now the assessee can not turn around and argue that the Special Bench be
deconstituted. We do not approve such a vacillating stand of the assessee.
26. It is beyond our comprehension as to what difference it makes to the assessee
when his case is heard by the Division Bench or the Special Bench. The hearing by the
special bench inter alia, is only to regularize the working of the tribunal aimed at
achieving a uniform view by different Benches on the point. The assessee’s interest is
not affected in any manner whether the case is heard by the Division Bench or the
Special Bench. The assessee’s logic for withdrawing the reference to the special
bench on the ground that similar issue is pending for adjudication before the Hon’ble
High Court would apply with full force even to the matters pending before the
Division Bench. Tomorrow someone will come out with a similar plea requesting the
keeping of the subsequent appeals in the Division Bench also on hold till the earlier
decision of the co-ordinate bench is examined and finally decided by the Hon’ble High
Court. Accepting such logic would mean making the tribunal non-operational. We
cannot accept such a contention.
27. The ld. AR failed to draw our attention towards any provision of the Act which
forbids the tribunal from going ahead with the hearing of the case in the circumstances ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
16
as are presently prevailing, which in other words implies sanction to dispose of the
cases notwithstanding the pendency of the matter before the Hon’be High Court. This
inference gains strength from the section 158A, which reads as under:-
“158A. (1) Notwithstanding anything contained in this Act, where an
assessee claims that any question of law arising in his case for an
assessment year which is pending before the [Assessing] Officer or any
appellate authority (such case being hereafter in this section referred to
as the relevant case) is identical with a question of law arising in his case
for another assessment year which is pending before the High Court on a
reference under section 256 or [before the Supreme Court on a reference
under section 257 or in appeal under section 260A before the High Court
or in appeal under section 261 before the Supreme Court] (such case
being hereafter in this section referred to as the other case), he may
furnish to the [Assessing] Officer or the appellate authority, as the case
may be, a declaration in the prescribed form and verified in the
prescribed manner, that if the [Assessing] Officer or the appellate
authority, as the case may be, agrees to apply in the relevant case the
final decision on the question of law in the other case, he shall not raise
such question of law in the relevant case in appeal before any appellate
authority or [in appeal before the High Court under section 260A or in
appeal before the Supreme Court under section 261].
(2) Where a declaration under sub-section (1) is furnished to any
appellate authority, the appellate authority shall call for a report from
the [Assessing] Officer on the correctness of the claim made by the
assessee and, where the [Assessing] Officer makes a request to the
appellate authority to give him an opportunity of being heard in the
matter, the appellate authority shall allow him such opportunity.
(3) The [Assessing] Officer or the appellate authority, as the case may
be, may, by order in writing, -
(i) admit the claim of the assessee if he or it is satisfied that the
question of law arising in the relevant case is identical with the
question of law in the other case; or
(ii) reject the claim if he or it is not so satisfied.
(4) Where a claim is admitted under sub-section (3), - ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
17
(a) the [Assessing] Officer or, as the case may be, the appellate
authority may make an order disposing of the relevant case
without awaiting the final decision on the question of law in the
other case; and
(b) the assessee shall not be entitled to raise, in relation to the
relevant case, such question of law in appeal before any appellate
authority or [in appeal before the High Court under section 260A
or the Supreme Court under section 261].
(5) When the decision on the question of law in the other case becomes
final, it shall be applied to the relevant case and the [Assessing] Officer
or the appellate authority, as the case may be, shall, if necessary, amend
the order referred to in clause (a) of sub-section (4) conformably to such
decision.
(6) An order under sub-section (3) shall be final and shall not be
called in question in any proceeding by way of appeal, reference or
revision under this Act.
Explanation.- In this section, -
(a) “appellate authority” means the [Deputy Commissioner
(Appeals)] the Commissioner (Appeals) or the Appellate Tribunal;
(b) “case”, in relation to an assessee, means any proceeding under
this Act for the assessment of the total income of the assessee or
for the imposition of any penalty or fine on him.
28. A careful analysis of section 158A, to the extent we are concerned here, makes
it palpable that where an assessee claims that any question of law arising in his case
for an assessment year which is pending before the Tribunal is identical with the
question of law arising in his case for other earlier case which is pending before the
High Court, he may make an application to the Tribunal giving his consent for
applying the final decision on the question of law in the earlier case to the case under
consideration. If the Tribunal admits the claim of the assessee, on being satisfied that
the question of law arising in the latter case is identical with the question of law in an
earlier case, it may make an order disposing of the latter case without awaiting the ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
18
final decision on the question of law in the earlier case. Later on when the decision
on the question of law in the earlier case becomes final, the Tribunal shall amend the
order passed in the latter case, if necessary, in conformity with the final decision in
the earlier case by the High Court. Sub-section (4) of section 158A is unequivocal
empowering the Tribunal to “make an order disposing of the” latter case without
awaiting the final decision on the question of law in the earlier case pending before the
Hon’ble High Court. If we look at the prescription of sub-section (4), it becomes vivid
that the Tribunal is not supposed to stop hearing of subsequent case simply on the
ground that the decision rendered by it in the earlier year involving the same question
of law is awaiting consideration by the Hon’ble High Court. Albeit section 158A is
activated at the instance of the assessee to circumvent the situation of approaching the
High Court against the order of the tribunal in the subsequent case as well involving
similar question decided adversely by the tribunal in its own earlier case which is
pending before the Hon’ble High Court, the underlying rationale is discernible that the
functioning of the tribunal should not close down merely on the ground that the
similar question of law is under consideration of the Hon’ble High Court in the same
case or an other case. If the contention raised by the learned A.R. is accepted that the
Tribunal should desist from hearing the matter in special bench on the substantial
question of law which is awaiting adjudication by the Hon’ble High Court, then the
provisions of section 158A shall become redundant. The very presence of this section
in the Act amply demonstrates that the tribunal is not bound to wait for the judgment
of the Hon’ble High Court on the point before applying it to the next cases.
29. From the above discussion it clearly emerges that if a subsequent Bench of the
Tribunal is disinclined to follow the view taken by an earlier Bench on a particular
issue, the only course open before it is to make a reference to the Hon’ble President
for the constitution of Special bench so that the issue may be finally decided by a
Larger Bench. Notwithstanding the fact that the substantial question of law raised in
the order of the earlier Bench has been admitted by the Hon’ble High Court, there are
no fetters on the Tribunal in hearing the case in Special Bench and rendering the ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
19
decision which would prevail upon and become a binding precedent for the other
Benches of the Tribunal. The learned Counsel for the assessee could not point out
even a single judgment in which the Hon’ble High Court abstained the Tribunal from
deciding the issue through Special bench during the pendency of appeal before it.
With utmost humility there cannot be such a decision for the manifest reason that the
justice delivery system has to take its own course and cannot wait in eternity for a
higher judicial body to decide the issue first. Here it is important to mention that we
are dealing with a situation in which only a substantial question of law has been
admitted by the Hon’ble High Court. It is not as if the said question of law has been
finally decided. Situation may be different where the said substantial question of law
receives consideration by the Hon’ble High Court and a final verdict is given. In such
a case the parties before the Tribunal may apply for the withdrawal of the reference
before the Special Bench provided the facts and circumstances of such case are similar
to the one decided by the Hon’ble jurisdictional High Court. Such withdrawal may
sound justified as proceeding with the matter would be an exercise in futility in the
face of the judgment of the Hon’ble jurisdictional High Court. But where only a
substantial question of law has been admitted by the Hon’ble High Court and the case
is yet to come up for hearing, which may take several years, there is no reason
whatsoever for any party to approach the Tribunal for the withdrawal of the reference
to the Special Bench on the point. We, therefore, hold that the reference to the Special
Bench cannot be withdrawn merely for the reason that the Hon’ble High Court has
admitted the identical question of law in another case.
30. Before parting, we want to make it absolutely clear that the above discussion has
been made in view of the Hon’ble President placing for our consideration and decision
the preliminary objection raised on behalf of the assessee for the withdrawal of
reference to the Special Bench. We have not touched upon, nor we have jurisdiction to
call in question the powers of President to constitute or deconstitute any Special
Bench. He has abundant powers in the matter of constituting or withdrawing reference
to the Special Bench in the facts and circumstances of each case. Our observations in ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
20
this order should not be construed in any manner as eclipsing his powers in this
regard.
31. In the result the preliminary objection raised on behalf of the assessee is
jettisoned. Ex consequenti the Registry is directed to fix the case for hearing by
Special Bench on merits.
Order pronounced in the open Court on this 10
th
day of August, 2011.
Sd/- Sd/- Sd/-
(D.Manmohan) (N.V.Vasudevan) (R.S.Syal)
Vice President Judicial Member Accountant Member
Mumbai : 10
th
August, 2011.
Devdas*
Sd/- Sd/- Sd/-
(D.K.Agarwal) (N.V.Vasudevan) (R.S.Syal)
Judicial Member Judicial Member Accountant Member
-Nominated Member-
Date : 10
th
August, 2011
Copy to :
1. The Appellant.
2. The Respondent.
`3. The CIT concerned
4. The CIT(A)- VIII, Mumbai.
5. The DR/ITAT, Mumbai.
6. Guard File.
TRUE COPY.
By Order
Assistant Registrar, ITAT, Mumbai. ITA No.4977 /Mum/2009 (SB)
M/s.Summit Securities Limited.
21
Date Initial
1. Draft dictated on 28.07.2011 Sr.PS
2. Draft placed before author 03.08.2011 Sr.PS
3. Draft proposed and placed before the
Hon’ble V.P.
4. Draft proposed and placed before the
Hon’ble J.M.
5. Draft discussed/approved by Hon’ble VP
6. Draft discussed/approved by Hon’ble JM JM/AM
7. Approved Draft comes to the Sr.PS/PS Sr.PS/PS
8. Kept for pronouncement on Sr.PS
9. File sent to the Bench Clerk Sr.PS
10. Date on which file goes to the AR
11. Date on which file goes to the Head Clerk.
12. Date of dispatch of Order.
*
