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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  The said Act was repealed and replaced with the 1961  Act (hereinafter called and referred to for the sake of brevity the  said Act).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.

These transferred cases are 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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