S. 255(3): Action of ITAT President in forming Special Bench lacking in propriety
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.
S. 244A: Refund of self-assessment tax is entitled to interest
(i) The contention of revenue is that no interest at all is payable to the petitioner under Section 244A(1)(a) and (b) of the Act unless the amounts have been paid as tax. It would not cover cases where the payment is gratuitous as is evident from the fact that the petitioner in its computation after paying tax on self assessment of Rs.2.60 crores seeks a refund of Rs.47 lacs. According to him it has to be refund of amounts paid as tax. We find that Section 244A(1) of the Act commences with the word "when refund of any amount becomes due to the assessee under this Act…". Subclause (b) thereof commences with the words "in any other case….". The words used in Section 244A(1) of the Act are clear inasmuch as it provides that refund of any amount that become due to any assessee under the Act will entitle the assessee to interest. In any case in the present facts, the amount on which the refund is being claimed was originally paid as tax on self-assessment under Section 140A of the Act and evidence of the same in the form of challan was enclosed to the Return of Income. In fact when the Assessing Officer passed the Assessment Order on 31 December 1996, he accepted the entire amount paid as tax on self assessment as a payment of tax. One more feature to be noticed is that when any refund becomes due to an assessee out of tax paid, it becomes so only after holding that it is not the tax payable. Thus we find no substance in the first objection of the revenue that the amount paid as tax on self assessment is not tax and therefore no interest can be granted on refund of such amounts which are not tax.
(ii) In Tata Chemicals 363 ITR 658 (SC), it was held that the requirement to pay interest arise whenever an amount is refunded to an assessee as it is a kind of compensation for use and retention of money collected by the revenue. The only distinction being made in the present facts and those of Apex Court decision in Tata Chemicals is that the amount paid as tax on self assessment was paid voluntarily in the present case while in the case of Tata Chemicals Ltd. (supra) the tax was deducted at a higher rate in view of the order passed by the authority under the Act. We are unable to appreciate this distinction. This is for the reason that when an assessee pays tax either as Advance tax or on self assessment, it is paid to discharge an obligation under the Act. Not complying with the obligation under the Act visits consequences to an assessee just as non compliance of orders passed by authorities under the Act would. Thus there is no voluntary payment of tax on self assessment as contended by the revenue.
S. 80IB(10): Super built-up area cannot be equated with built-up area
The concept of "super built-up" area is used by builders to get higher price and the super built-up area includes common area of stair-case and balcony area. Since super built-up area cannot be equated with built-up area it cannot be stated in the instant case that the area of the flat is more than 1500 sq. ft. There is no doubt that it is the housing project and it does not include any commercial premises. Built-up area is also defined in section 80-IB(14)(a). The words including projections and balconies were inserted with effect from 1st April, 2005 Finance Act of 2004. The question whether the definition of built up area with effect from 1st April, 2005 was prospetive or retrospective in nature has been considered by this Court in Income Tax Appeal No.3315 of 2010 between the Commissioner of Income-Tax-15, Mumbai vs. M/s.Tinnwala Industries which holds that this definition which has been brought on the statute book with effect from 1st April, 2005 would not apply to such projects which are completed prior to 1st April, 2005. There are no distinguishing features brought on record which calls for any interference. The tribunal view is a well reasoned and cannot be said to be perverse.
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