Full Judgment Text
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CASE NO.:
Transfer Case (civil) 5 of 1997
PETITIONER:
Ajay Gandhi and Anr.
RESPONDENT:
B. Singh and Ors.
DATE OF JUDGMENT: 05/01/2004
BENCH:
CJI & S.B. Sinha
JUDGMENT:
JUDGMENT
W I T H
T.C. NO. 6 OF 1997
V.N.KHARE, CJI.
The Income Tax Act was first introduced in the country in the
year 1922. The said Act was repealed and replaced with the 1961
Act (hereinafter called and referred to for the sake of brevity the
said Act). Section 5A of the 1922 Act was in pari materia with
sub-sections (1) to (3) of Section 252 as it originally stood. The
provision of appeals to the Appellate Tribunal as contained in
Chapter XX thereof came into being in the year 1941. Section 252
of the Act mandates the Central Government to constitute an
Appellate Tribunal consisting of as many judicial and accountant
members as it thinks fit to exercise the powers and discharge the
functions conferred on the Appellate Tribunal. The said provision
lays down the qualification of a judicial member and an accountant
member. The President of the Tribunal is to be appointed ordinarily
from the judicial member of the Tribunal. The Central Government
is also authorised to appoint one or more members of the Appellate
Tribunal as Vice-President and in the event there are more than one
Vice-Presidents, it may appoint a Senior Vice-President. The
Senior Vice-President or a Vice-President may be delegated by the
President such functions of the President as may be delegated to
him by a general or special order in writing.
Several notifications have been issued whereby and whereunder
the President, Income Tax Appellate Tribunal delegated the powers
to Vice-presidents.
Sub-section (1) of Section 255 provides that powers and
functions of the Appellate Tribunal may be exercised and discharged
by Benches constituted by the President of the Appellate Tribunal
from amongst the members thereof. Sub-section (5) of Section 255
reads thus :
"Subject to the provisions of this Act,
the Appellate Tribunal shall have power to
regulate its own procedure and the procedure
of Benches thereof in all matters arising
out of the exercise of its powers or of the
discharge of its functions, including the
places at which the Benches shall hold their
sittings."
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The Tribunal is functioning since 21.5.1941. From its very
inception, the President of the Tribunal has been exercising the
power of transfer of the judicial members and the accountant
members to the places where different Benches are functioning. The
second respondent herein, however, in purported exercise of its
power under Rule 10 of the Delegation of Financial Powers Rules,
1958 read with the Ministry of Finance O.M. No.F.10(13) B-Coord/79
dated 10.4.1975 and 8.3.1976 and in partial modification of the
Department letter No. F.3(18)/75 Admn. III(LA) dated 26.6.1978
directed the President of India had been pleased to decide that
President, I.T.A.T. shall thenceforth submit all proposals for
postings and transfers of members including Senior Vice-President
and Vice-Presidents of the Income Tax Appellate Tribunal to the
Ministry for prior approval. It was further stated :
"The President, ITAT shall issue orders
regarding posting and transfer of the
members after approval of the Ministry
indicating therein that they have been
issued after approval of the competent
authority. A copy of all such orders shall
invariably be endorsed to the Ministry.
The President of India is further
pleased to decide that the Ministry may also
issue orders of posting and transfers of
Members when considered necessary."
Questioning the validity of the said order, the Appellant
herein has filed this writ petition claiming, inter alia, for the
following reliefs :
"In this circumstances, the petitioners
pray this Hon’ble Court may be pleased to
issue an appropriate writ, direction or
order declaring that the impugned order
contained in letter No.F.No.A.60011(54)/96-
Admn.III(LA) dated 15..11.96, copy whereof
is Ex. ’A’ to the petition and the impugned
order passed by the Hon’ble President of
India referred to therein is without
jurisdiction and is liable to be treated as
non-est for all purposes and pass such other
order(s) as may be deemed fit and proper."
The records of the proceedings shows that the efforts were
made to the effect that the parties to arrive at a consensus as
regard the extent of the power as also the guidelines therefor so
as to enable the President to discharge the said functions. The
Union of India in an affidavit filed on 16.2.2001, suggested the
following guidelines :
"1. Upon appointment of a Member, his
initial posting will be done by the
Government in consultation with the
President, ITAT having regard to the
following :-
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(i) A Member shall not be given initial
posting at a place where he was earlier
practicing as an Advocate or Chartered
Accountant in taxation matters as the
case may be;
(ii) A Member shall not be posted at a place
where his spouse, son, daughter,
grandson or granddaughter is practicing
either as an Advocate or Chartered
Accountant in taxation matters.
2. The transfers shall be made by the
Government on the advice of the President,
ITAT ordinarily having regard to the
following guidelines :
(i) A Member shall not be posted at a place
for a period exceeding five years;
(ii) A Member shall not be posted at a place
where his spouse, son, daughter,
grandson or granddaughter is practicing
as an Advocate or Chartered Accountant
in taxation matters;
(iii) A Member shall not be posted at a place
where he has earlier served as a Member
unless he has cooled off for a period
of two years.
3. Advice of the President, ITAT shall
have primacy unless it is against any of the
guidelines or results in any hardship."
The writ petitioners, however, did not agree thereto and
their suggestions, in terms are in the following terms :
"I. Initial posting of a member shall be
done by the Government in consultation
with the President ITAT.
II. Postings to different benches shall be
by the President having regard
ordinarily to the following :
(i) A member may not be given initial
posting at a place where he was
earlier practicing as an Advocate or
a Chartered Accountant as the case
may be.
(ii) A member may not be posted at a
place where any of his parents,
spouse, son, daughter or other close
relation is practicing as an
Advocate or a Chartered Accountant
in taxation matters.
(iii) A member may not be posted at a
place for a period exceeding 5
years.
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(iv) A member may not be posted at a
place where he was earlier posted
unless a period of two years has
elapsed.
(III)The Government shall have the liberty to bring to
the notice of the President, ITAT relevant facts
requiring the transfer of a member from a
particular bench in public interest."
The learned counsel for the parties have addressed us at
length as ultimately no consensus could be arrived at. The
submissions of the learned counsel appearing on behalf of the
petitioners are : (1) Having regard to the fact that there are 48
Benches of the Tribunal and having regard to the provisions
contained in sub-section (1) of Section 255 read with sub-section
(5) thereof, the President is to constitute Benches, by necessary
implications, it must be held that he alone had the power to
transfer the members thereof; (2) As the President of Tribunal had
been exercising the said power since the inception of the Tribunal,
no interference therewith at the hands of respondent was called
for.
The Appellate Tribunal constituted under the Act is not an
income-tax authority. It is the ultimate fact finding authority
under the Act and only a reference to the High Court or this Court
on a question of law from its orders can be made. (See Udhavdas
Kewalram Vs. Commissioner of Income-Tax, Bombay City I. [1967] 66
ITR 462) The President in the matter of constitution of benches
exercises his both judicial and administrative powers. While the
President exercises administrative jurisdiction even no writ
petition would be maintainable thereagainst. (See Income-Tax
Appellate Tribunal Vs. Deputy Commissioner of Income-Tax
(Assessments) and Others [1996] 218 ITR 275). The position of the
appellate tribunal is the same as of Court of Appeal under the
Civil Procedure Code and its powers are identical with the powers
enjoyed by the appellate court thereunder. (See New India Life
Assurance Co. Ltd. Vs. Commissioner of Income-Tax, Excess Profits
Tax, Bombay City, [1957] 31 ITR 844]). In any event, the Central
Government cannot usurp the power of the President in purported
exercise of its functions under the delegation of the financial
rules which were issued only for certain purposes.
The submission of the respondent on the other hand are : (1)
The Central Government has the necessary administrative control
over the Tribunal having regard to the power to constitute the
same; (2) The power of appointment of a member of the Tribunal
would include a power of his transfer and posting; (3) Such a power
of the Central Government is implicit from the scheme of the Act.
There are a large number of instances where such a power of
the President has been misused and having regard thereto, the
impugned decisions had been taken.
The Income Tax Appellate Tribunal exercises judicial
functions and has trapping of Court.
It may be true that the Tribunal functions under the Ministry
of Law and Justice and the Law Secretary is the member of the
Selection Board. The Ministry of Law and Justice, Department of
Legal Affairs, it is accepted, exercises a disciplinary power over
the members of the Tribunal. The Allocation of Business Rules of
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the Government of India in respect of the Tribunal is placed under
the Department of Legal Affairs, Ministry of Law and Justice. Does
it mean that the Ministry of Law and Justice exercises a
supervisory jurisdiction over the Tribunal? Supervisory control
under the Rules of Allocation of Business relates to the
administrative matters and not the judicial ones. The functions of
the Tribunal being judicial in nature, the public have a major
stake in its functioning, for effective and orderly administration
of justice. A Tribunal should, as far as possible, have a judicial
autonomy. The provisions of Sections 252, 254 and 255, as noticed
hereinbefore, confer a statutory power upon the President to
constitute Benches. The Appellate Tribunal is a National Tribunal.
The President subject to delegation of powers to Senior Vice-
President or the Vice-President, exercises the administrative
control over the members thereof. The Benches are to be
constituted only by the President. No other authority is empowered
to do so.
The primal question, therefore, which arises for
consideration is as to whether the Central Government can be said
to have any power of transfer and posting of the members of the
Tribunal. It is true that ordinarily the power of transfer vests
in the employer. Such power, however, would be subject to the
statutory provisions operating in the field.
For the aforementioned purpose, the scheme of the Act plays
an important role. In the instant case, having regard to the
provisions contained in sub-sections (1) and (5) of Section 255 of
the Act, we are of the opinion that the President has the requisite
power of transfer and posting of its members. For construction of
a statute, it is trite, the actual practice may be taken into
consideration.
In CORPUS juris secondum, Volume 82, PP. 761, it is stated
that the controlling effect of this aid which is known as
’executive construction’ would depend upon various factors such as
the length of time for which it is followed, the nature of rights
and property affected by it, the injustice resulting from its
departure and the approval that it has received in judicial
decisions or in legislation.
In Francis Bennion Statutory Interpretation, Fourth edition,
the law is stated in the following terms at page 596:
"Section 231. The basic rule: In the period
immediately following its enactment, the
history of how an enactment is understood
forms part of the contemporanea expositio,
and may be held to throw light on the
legislative intention. The later history
may, under the doctrine that an ongoing Act
is always speaking, indicate how the
enactment is regarded in the light of
developments from time to time.
COMMENT
On a superficial view, it may be though that
nothing that happens after an Act is passed
can affect the legislative intention at the
time it was passed. This overlooks the two
factors stated in this section.
Contemporanea expositio The concept of
legislative intention is a difficult one.
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Contemporary exposition helps to show what
people though the Act meant in the period
immediately after it was passed. Official
statements on its meaning are particularly
important here, since every Act is
supervised, and most were originally
promoted, by a government department which
may be assumed to know what the legislative
intention was."
In R. vs. Wandsworth London Borough Council, Ex parte,
Beckwith [(1996) 1 All E.R. 129], the House of Lords has held that
a departmental circular is entitled to respect. It can only be
ignored when it is patently wrong. The said principle has also
been followed in Indian Metals and Ferro Alloys Ltd. vs. Collector
of Central Excise [AIR 1991 SC 1028, p. 1034]; Keshavji Ravji and
co. vs. Commissioner of Income Tax [AIR 1991 SC 1806, p. 1817],
Raymand Synthetics Ltd. vs. Union of India [AIR 1992 SC 847, p.
859] Kasilingam vs. P.S.G. College of Technology [1995 (2) SCALE
387, p. 397] and Collector of Central Excise, Vadodra Vs. Dhiren
Chemical Industries [(2002) 2 SCC 127].
The Central Government admittedly never exercised its
purported power of transfer and posting in its capacity as an
employer or otherwise. From the impugned order, furthermore, it
would appear that even therein the source of power had not been
traced from the provisions of the Income Tax Act but to the
Delegation of Financial Powers which have no nexus therewith. By
reason of amendment to certain circular letters also, the Central
Government cannot confer upon it such statutory power of transfer
and posting of the members of the Appellate Tribunal.
Having regard to the fact that the Central Government had
acted sub silentio and even allowed the President to delegate his
power to constitute benches to various Senior Vice-Presidents over
a number of years is itself a pointer to the fact that the Central
Government was also of the opinion that the power of transfer and
posting is a part of the administrative function of the President
as an ancillary power of constitution of benches.
Keeping in view the fact that the independence of the
Tribunal is essential; for maintaining its independence any power
which may be conferred upon the executive authority must be proved
to be in the interest of imparting justice. We are of the view that
this long standing practice should be allowed to prevail over the
stand of the respondents herein. However, we are of the opinion
that by reason thereof, the President cannot be said to have an
unguided, unfettered and unlimited jurisdiction as the same may be
flawed with great consequences. We are, therefore, of the opinion
that the following guidelines could serve the said purpose:
(i) Initial posting of a member shall be done by the
Government in consultation with the President of
ITAT.
(ii) Postings to different benches shall be done by the
President having regard ordinarily to the
following:
(a) A member save and except for sufficient and cogent
reasons shall not be posted at a place where he
had earlier been practising as an advocate or a
Chartered Accountant, as the case may be.
(b) A member may not be posted at a place where any of
his parents, spouse or other close relation is
practising as an Advocate or a Chartereted
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Accountant in taxation matters.
(c) Save and except for sufficient and cogent reasons,
the Member shall not posted at a place of a period
exceeding five years. Ordinarily, a Member may
not be posted at a place where he was earlier
posted unless a period of two years has elapsed.
(iii) The President shall keep the Government informed
about the orders of posting. The Government, if
it so thinks fit, shall have the liberty to bring
to the notice of the President, ITAT relevant
facts including that transfer and posting of a
member is not in conformity with the
aforementioned guidelines. It shall also be at
liberty to bring to the notice of the President
any case of extreme hardship which may be faced by
a member by reason of such an order of transfer
and posting.
(iv) The Government shall have further liberty to
request the President to transfer a member from a
particular bench when it is in public interest or
in an exceptional circumstances. The President,
ITAT, it goes without saying, shall consider the
same in proper perspective. If the President
refuses to comply with the request of the Central
Government, although the transfer is in public
interest in such a cases it would be open to the
Central Government to pass order of transfer.
Although, it is not necessary that the President should
consult the Senior Vice-President, we are of the opinion that he in
all fairness should consult them keeping in view the fact that a
large number of members are functioning at different places and,
thus, it may sometimes becomes impossible for the President to know
about the intellect or otherwise of the member for the purpose of
his posting, including his efficiency, disposal and other relevant
factors.
During the course of discussions, it was suggested that in
exercise of the aforementioned powers, the President must consult
the two senior Vice-presidents by forming a collegium therefor.
Although we are of the opinion that such a course of action may not
be necessary but we hasten to add that the President, in all
fairness, should consult two Senior Vice-Presidents before passing
such orders of transfer and posting. Such a measure may be
necessary having regard to the fact that the President may not be
aware of the efficacy or otherwise in relation thereto. In view of
the fact that the large number of members are functioning at
different places and, thus, the advice of the senior Vice-
Presidents as regard the functioning of a particular member
including his efficiency, disposal and other relevant factors may
be considered by the President in ultimately passing such orders of
transfer and posting.
This Writ Petition is allowed on the aforementioned terms.
In the facts and circumstances of this case, there shall be no
order as to costs.
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