Report No. 12

93. The Tribunal is constituted the final fact-finding authority for four taxes,-

income-tax, wealth-tax, expenditure-tax and gift-tax, and it is also proposed to make it the final fact-finding authority under the Estate Duty Act. We are constrained to observe that men of the requisite calibre and independence are not being recruited for discharging so heavy a responsibility as that of the final fact-finding authority under the new pattern of taxation. There are many complaints that the disposal of appeals by the Appellate Tribunal is very unsatisfactory for a variety of reasons. Often, the judicial and independent approach which is necessary in the final fact-finding authority, is not displayed by the Tribunal. In several cases the determination of complicated questions of fact and law is done in a very perfunctory manner. Very often, the Tribunal does not clearly record its findings of fact or its reasons for arriving at its findings.

In a number of cases, factual or legal contentions raised by the parties are not dealt with at all resulting in applications for rectification being made subsequently to the Tribunal for considering the points omitted to be dealt with in the original order of the Tribunal. While dealing with the references under section 66(1) and section 66(2), High Courts had occasion to comment1 upon the unsatisfactory nature of the orders passed by the Appellate Tribunal and also on the unsatisfactory statements of case drawn up by them in the references under section 66. The High Courts had to remit the cases to the Appellate Tribunal for a further and better statement of the case with fuller particulars.

To give satisfaction to the large number of assessees, a decision of an independent and good appellate authority is an undoubted necessity, if justice is to be done to them. There is considerable delay in disposing of the appeals and very often it is said that they, the Tribunals, spare very little time for the appellate work with which alone they are concerned. Very often the Members of the Tribunals attend the sittings at any time they choose, therefore by not conforming to regular office hours, for the disposal of the work. A Bench of two members of the Tribunal hears the appeals, but in practice the contribution to the decision of the case by one of the members is often not appreciable.

1. See extracts given in the next para.

94. Extracts from judgments.-

The following extracts from the decisions of courts will show how unsatisfactorily the Appellate Tribunals have been functioning: -

Hanumantram Ramnath v. C.I.T., Bombay, (1945) 13 ITR 203 (206).

"This reference must go back to the Appellate Tribunal for the finding of further facts. As this is the second reference we have been constrained to send back out of the last ten which have come before us, and as in these cases not only is public time and money wasted, but there is also obviously a hardship cast upon the assessee, it is in my opinion necessary that certain matters should be stated for the guidance of the Appellate Tribunal in preparing further cases.

Hira Mills Ltd. Cawnpore v. I.T.O., Cawnpore, (1946) 14 ITR 417 (427).

"Those, as we understand them, are the facts to be gathered from the statement of the case and the accompanying judgments and orders. Perhaps we may properly observe that it would be a practice more in conformity with section 66(1) of the Act and with general convenience, if the statement of the case itself had contained all the relevant facts, rather than that they should have had to be sought for in the judgments".

Badar Shoe Stores (in re:):(1946) 14 ITR 431 (433).

"We deprecate the practice, which is becoming too common, of omitting a sufficient statement of facts from the statement of the case and of referring this Court to a miscellany of other documents for the collection of the full facts necessary for determination of the question of law submitted, and we shall take the opportunity of referring to the unfortunate consequences of this practice at a later stage.

P.M. Huthee Singh & Sons Ltd v. C.I.T., (1946) 14 IOTR 653 (659).

"I must point out here that both in the statement of case and in the judgment there are certain inaccuracies. When a fact-finding authority is in the position of the Tribunal (whose findings of fact are considered conclusive), it is always very desirable for them to be accurate in their statement of facts. I would like to join the learned Chief Justice in emphasizing the duty cast upon the Appellate Tribunal with regard to findings of facts. Under the Act it is the final fact-finding authority and I think it is the duty of the Tribunal when they submit a statement of case to the High Court to state the facts clearly, carefully and precisely. After all the High Court only exercises an advisory jurisdiction.

Its jurisdiction is to advise the Tribunal on questions of law submitted to it and that advisory jurisdiction cannot be exercised usefully unless the fact-finding authority submits the facts carefully, clearly and accurately. I am sorry to say that in the reference with which we are dealing both in the statement of case and in the judgment - there are several inaccuracies which in some cases are patent. A little more care would have been sufficient to make the Tribunal realise that the statement of facts prepared by them was not as correct and as satisfactory as it should have been. I hope that in future the Tribunal will bear this in mind when preparing the statement of case".

Messrs Gobindaram Bros. Ltd. v. C.I.T., (1946) 14 ITR 764 (770).

"The supplemental case returned to us by the Tribunal, and which is now before us is highly unsatisfactory. The Tribunal appears to be far more concerned with excusing the statements of fact in the first case, which are unquestionably contradictory, than with complying with the directions of this Court given under Section 66(4) of the Income-tax Act.

"The matter was referred back to the Tribunal to record its finding of fact more clearly, and implicit in that direction is the taking of further evidence, if there is no other way of determining facts in order that the Tribunal may make its finding clear. For the Tribunal to say that because a fact was not before it when they disposed of the assessee's appeal "we are unable to include it in the case at this stage of the proceedings", is a most surprising statement and is one which indicates that the Tribunal does not appreciate the duties cast upon it when this Court refers a matter back under section 66(4).

The reference back to the Tribunal was to record its finding more clearly and after a lapse of one year and ten months the matter now comes back with nothing new except the affidavit of Mr. Pralhadrai Brijlal, which is annexed to the supplemental case".

Bikaner Trading Company, Calcutta v. C.I.T., (1953) 24 ITR 419 (422).

"We have so far endured with patience the type of statements of cases which have been submitted to this Court in connection with the references that have come up this session, but we think that the limit has been passed and we ought to make some observations. One common feature of these statements of cases is that the appeal was heard by two members, whereas the statement of the case in almost every case was drawn up by different members. In drawing up the statement, they do not seem to have always considered it necessary to refer to the appellate order, nor necessary to be exact in the statements they made, nor necessary to make a full statement of the relevant facts.

Most of the statements of cases are sketchy in the extreme and, were one to rely upon them alone, it would be impossible to answer any question at all. It has been a frequent experience this session to find two members of a Tribunal deciding a particular case in a particular manner and one of those members, acting with a third member, stating a case for this Court which differed materially from the case made and found at the hearing of the appeal. We shall not say, out of respect for the Tribunal, that the members have acted in a careless manner, but we feel bound to say that the manner in which they have discharged their duty of drawing up statements of cases for this Court can only be called carefree".

Calcutta Co. Ltd. v. C.I.T., (1953) 24 IR 454 (459).

"Unfortunately, the treatment of the question by the authorities below has been of a somewhat summary character presumably because it was raised and argued before them in a superficial form. But even if such was the case, there is hardly any justification for the Tribunal failing to realise at least what facts were required to be found and stated. The statement of the case is sketchy and bare and like most of the statements we have had to deal with during this session has hardly any appearance of a case seriously stated".

C.I.T. West Bengal v. Hanuman Prasad Bagria, (1953) 24 ITR 495 (497, 498).

"In our opinion, the statement in the case referred are clearly insufficient to enable us to determine the question raised. The appellate order passed in the case is a striking example of what appellate orders should not be and the statement of the case itself is an example of the consequences that must sometimes follow when the appeal is heard by two particular members of the Tribunal and the reference is made by two other members".

"This finding of the Income-tax Officer and the Appellate Assistant Commissioner was reversed by the Appellate Tribunal by an order which reads like an order passed by Honorary Magistrates at summary trials".

(Italics are ours).

Dhirajilal Giridharilal v. C.I.T., Bombay, (1954) 26 ITR 736( 739) (SC).

"It is apparent from the following quotation from the judgment of the Tribunal that not only was its approach to the question raised before it tainted with suspicion, but it took into consideration a number of circumstances based purely on conjectures and surmises and for which there was not a scintilla of evidence on the record".

Shantikumar Narotham Morarji v. C.I.T., (1955) 27 ITR 69 (80) (Bom HC).

"There is a finding given by the Accountant Member in the following words: "We understand that no part of the borrowings were utilised in the agency firm business and therefore the interest paid was not incurred for the purposes of the business". Mr. Palkhivala has rightly quarrelled with the nature of this finding. With respect to the learned Accountant Member, it is difficult to understand how a Judicial Tribunal can record a finding in the language in which this so-called finding has been recorded. The duty of a fact-finding Tribunal is to find facts, and not to understand that certain facts may exist or may have been established".

Indian Steel and Wire Product Ltd. v. C.I.T., (1955) 27 ITR 436 (445, 446) (Cal HC).

"Before parting with this case, I find necessary, to repeat once again what I had occasion to say during the last sittings of this Bench. If this Court cannot depend on the Tribunal even for the accuracy of the summary of the orders passed by itself, it becomes difficult to deal with these references, particularly as this Court is bound by the statements contained in the statement of the case and should not be put to the necessity of verifying and if necessary correcting the summaries given of the various orders. What makes the inaccuracy strange in the present case is that one of the members who was responsible for the statement of the case was himself a member of the Bench which had passed the appellate order relating to the first of the two chargeable accounting periods".

The Bhopal Trading Co., Kanpur v. C.I.T., (1955) 28 ITR 478 (485) (All HC).

"We are not undertaking the responsibility of framing the questions ourselves as the statement of the case as also the appellate orders are, as is too frequently the case, wholly unsatisfactory".

C.I.T. v. Malchand Surana, (1955) 28 ITR 684 (687, 690, 696) Cal HC).

"I confess I do not feel altogether happy the way in which the facts have been found in this case or the manner in which the case has been stated".

"Before I take up the question on the merits, I would say a word in passing as regards the appellate order of the Tribunal. The whole of it appears to be based upon a misconception of both facts and law.....

"It is perfectly clear that the Tribunal failed to apply themselves to the real question before them and indeed their order, one regrets to find, does not indicate that they had any appreciation of what the real question was I/

95. The present procedure leads to delay also. If the Tribunal refuses to make a reference to the High Court where it should have done so, the assessee or the department have had to go to the High Court under section 66(2) and this has led to considerable delay in giving a finality to the assessment. The extracts given above would also show that the statements of cases submitted by the Tribunals to the High Court are scrappy, with the result that the High Court has had to ask for a supplementary statement in several cases.

96. Abolition of the Appellate Tribunal proposed.-

For these reasons we are strongly of the opinion that the Appellate Tribunal should be abolished and that a direct appeal should be provided both on questions of fact as well as of law to the High Court from the orders of the Appellate Assistant Commissioner. The assessee should have the satisfaction that the facts of the case and the law applicable to it have been examined by a competent authority. It would also save the time of the High Court, as it would avoid the necessity for a reference to the High Court on a question of law either under section 66(1) or under section 66(2). We have, therefore, provided1 an appeal to the High Court from the decisions of the Appellate Assistant Commissioner. Where the amount in dispute is Rs. 7,500 or more, the appeal will be on fact as well as on law. In other cases the appeal will be only on questions of law.

1. Vide clause 260, App I.

It is stated that the disposal by the High Courts may cause delay, particularly as the rules of the High Courts require printing in first appeals. To obviate this difficulty, we suggest that by a rule made by the appropriate authority the printing of records in such cases may be dispensed with, and the Department and the assessee may be allowed to furnish typed copies of papers on which they intend to rely at the time of the hearing of the appeal before the High Court.

97. We have also examined the financial implications of the proposal and we are satisfied that it does not involve the States in any extra expenditure, as all expenditure necessitated by the appointment of more Judges in the High Court and the necessary staff can be met by the fee that will be levied on the appeals instituted in the High Court. At present the fee is Rs. 100 in case of appeals to the Appellate Tribunal and, the amount realised in the year 1955-56 by the Tribunal is Rs. 8,46,390, which, of course, includes also fees for Reference Applications. (The department does not pay any fee when it files an appeal or asks for a reference). The expenditure incurred in that year for the Appellate Tribunal: is Rs. 8,74.684. We have not got the figures for 1956-57. Even if the fee is restricted to Rs. 100 per appeal and if 10,000 appeals are filed, all the States will get an income of Rs. 10,00,000. If 20 Judges are appointed for all the High Courts, the total salary payable per year will be Rs. 8,40,000 leaving a surplus for the expenditure on the additional staff that would be required by the appointment of additional Judges.

If we consider the position State-wise, the highest institution of appeals is in Bombay and may be taken roughly at 2,000 appeals per year. The Bombay State will get a fee of Rs. 2,00,000. Even if four more Judges are appointed their total salary per year will be Rs. 1,68,000, leaving a surplus for the additional staff. Similarly, Madras may require three Judges. Bengal may require two Judges and Uttar Pradesh may require two or three Judges. In other States like Bihar and Punjab an additional Judge may be required. It will, therefore, not entail any additional expenditure from State funds which could not be met from the fee leviable on the appeals instituted in the respective State High Courts. As observed already, the work in which the High Courts are now engaged namely disposing of references either under section 66(1) or under section 66(2) will pro tanto be reduced, and this is an additional advantage for the High Courts.

98. Rules will necessarily have to be made to regulate the procedure for the disposal of the appeals expeditiously. Delay is occasioned by the printing of records which will not be necessary. If the rule making power is conferred on the various High Courts there may not be uniformity in that behalf. We, therefore, think that it will be more appropriate to confer the rule making power upon the Supreme Court1 as was done in the case of the Companies Act, 1956. As regards the levy of the fees and the scales which are to be prescribed, it may not be possible for the Centre to prescribe the fee. Some method should be adopted to make the Court-fee payable on the memoranda of appeal presented to the High Court in such matters uniform in all the States. We have not therefore made any definite proposal in this behalf.

1. See clause 277, App I.

99. Appointment and training of Appellate Assistant Commissioners.-

In view of the recommendation made by us for the abolition of the Appellate Tribunal, and as appeals would henceforth lie to the High Court from the Appellate Assistant Commissioners' orders, we consider that Government should ensure that the posts of Appellate Assistant Commissioners are held by experienced and senior officers.

100. It will be more satisfactory if experienced and senior officers of the Department hear appeals.

101. The Appellate Assistant Commissioner should also, in our opinion, be given some training in judicial practice and procedure by being attached to a Judge of a Civil Court, i.e., a District Judge, for a period of, say, three months. This will be very necessary because the order of the Appellate Assistant Commissioner should be written, more or less, like a judgment and should make mention of the points for determination, and the findings thereon. We consider that if Appellate Assistant Commissioners are given this type of training, it will inspire greater confidence in the litigant public.

102. It may be recalled in this connection that when the Appellate Tribunal was not in existence, i.e., prior to 1939, the reference to the High Court, though directed against the order of the Assistant Commissioner, was made by the Commissioner of Income-tax himself. Though an officer of the status of Commissioner of Income-tax may not hear all appeals, it would be desirable if appeals against assessments of incomes in excess of rupees one lakh were heard by the Commissioner of Income-tax or by an officer of equal status. If this recommendation is accepted, the necessary amendments may be made in the Act. Other appeals should be heard by senior officers whose scale of pay is attractive. We would recommend for Appellate Assistant Commissioners a scale of pay intermediate between the present Appellate Assistant Commissioner's scale and the present Commissioner's scale.