Ajay
Gandhi and Anr Vs. B. Singh & Ors [2004] Insc 13 (5 January 2004)
Cji
& S.B. Sinha
WITH 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Act was repealed and replaced with the 1961 Act (hereinafter called and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." 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
:-
(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.
(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 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 (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 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 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. 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 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 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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