J P Morgan Chase Bank Vs JCIT (ITAT Mumbai)
A five-Member Special Bench of the ITAT Mumbai considered whether a reference made to a three-Member Special Bench should be withdrawn because the Bombay High Court had admitted an identical question in the case of HSBC Bank Oman S.A.O.G. The underlying appeal concerns AY 1998-99 of a US-incorporated foreign bank operating through its Mumbai Branch. One issue in the appeal is whether interest received by the Indian Branch from its Head Office is income chargeable to tax, with the assessee relying on the principle of mutuality and the Special Bench decision in Sumitomo Mitsui Banking Corporation [136 ITD 66 (Bom)(SB)]. The Revenue had raised a cross objection concerning applicability of Section 14A if the interest was held non-taxable. A Division Bench, while hearing the appeal, expressed inability to concur with the view taken in Oman International Bank SAOG, where Section 14A had been held applicable in relation to such interest, and consequently sought constitution of a Special Bench. A three-Member Special Bench was constituted, but the Revenue later objected to its continuation because the Bombay High Court had admitted an identical question in HSBC Bank Oman S.A.O.G. The Special Bench referred the issue to a larger five-Member Bench.
The Revenue relied on administrative orders in M/s. Star Ltd., Hongkong and Tivoli Investment and Trading Co. (P.) Ltd., as well as Harsha Achyut Bhogle vs ITO, to contend that the reference should be withdrawn. The assessee relied principally on the Special Bench decision in DCIT vs Summit Securities Ltd., 132 ITD 1 (Mum)(SB), where a similar objection had been rejected. The assessee submitted that Summit Securities was a judicial decision, whereas the orders in Star Ltd., Hongkong and Tivoli Investment and Trading Co. (P.) Ltd. were administrative orders arising from their particular facts. The assessee also relied on Section 255(3) and Supreme Court decisions concerning the President’s power to constitute a larger Bench.
The five-Member Bench examined Summit Securities and agreed with its reasoning. It held that there was no legal or practical prohibition requiring a Special Bench to stay its proceedings merely because a similar or identical issue was pending before the High Court. The Bench distinguished Tivoli Investment and Trading Co. (P.) Ltd. and M/s. Star Ltd., Hongkong because those involved administrative orders withdrawing references in particular circumstances. Harsha Achyut Bhogle was also distinguished because the Division Bench there had not disagreed with the earlier co-ordinate Bench decision. The other decisions relied upon by the Revenue were found to turn on their own facts and were held distinguishable. The Bench also noted that Section 253 confers statutory appellate powers on the Tribunal and Section 255(3) empowers the President to constitute Benches, including larger Benches, to decide particular issues. It further observed that the Division Bench in the present case had already expressed its inability to concur with the earlier co-ordinate Bench view, and withdrawal of the Special Bench reference could create the situation that the Division Bench would have to follow that earlier decision. Considering that the dispute related to AY 1998-99 and the appeal itself dated back to 2004, the Bench found no reason for further delay. It therefore held that the Special Bench need not be deconstituted and the reference did not need to be withdrawn. The appeal and cross objection, along with the application for condonation of delay, were directed to be placed before the Special Bench for disposal according to law. The order was pronounced on 9 April 2025.
Recent Cases Discussed
- State of Himachal Pradesh & Ors vs Yogendra Mohan Sengupta and Anr (Supreme Court), (2024 SCC Online SC 36)
- State of Andhra Pradesh vs Raghu Ramakrishna Raju Kanumuru (Supreme Court), (2022) 8 SCC 156
- National Insurance Company Ltd. vs Pranay Sethi and Ors. (Supreme Court), [2017] 13 S.C.R 100
- JCB India Ltd vs Commissioner of Central Excise (Supreme Court), (Civil Appeal no. 5764 of 2014 dated 07.02.2023)
- Harihar Collections & Raj Grow Impex LLP vs U01 (Bombay High Court), 2020 SCC Online Bom 1622
FULL TEXT OF THE ORDER OF ITAT MUMBAI
A Special Bench of three learned Members by an order dated 01.02.2018 had sought for constitution of a larger bench of five or more Members to consider and decide the following question :-
“Whether in the facts and circumstances of the case the reference made to the Special Bench in the present case be withdrawn or not in the wake of the Hon’ble Jurisdictional High Court of Mumbai admitting an identical question in the case of HSBC Bank Oman S.A.O.G (earlier known as Oman International Bank S.A.O.G?”
The President by order dated 20.02.2025 has accordingly placed the above issue before the present Bench comprising of five Members.
Brief Facts
2. Although the dispute has a chequered history, the facts necessary for the disposal of the present reference lie in a narrow compass and can be stated thus.
The appellant is a foreign bank incorporated in the United States of America and having Indian operations through its Branch in Mumbai. The appellant has filed ITA No. 9189/Mum/2004 relating to assessment year 1998-99. One of the issues in the said appeal is whether the amount of interest received by the Indian Branch from its Head office can be treated as ‘income not chargeable to tax’ on the principle of mutuality. According to the appellant, such interest cannot be treated as ‘income’ on the principle of mutuality.
3. The Assessing Officer held that the same is income which is taxable as part of the business income of the appellant-assessee bank, which order has been confirmed by the learned Commissioner (Appeals) on 10.09.2004. That order is subject matter of challenge in ITA No. 9189/Mum/2004. During the course of hearing of the said appeal, reliance was placed on behalf of the appellant on the decision of a five Member Bench of this Tribunal in Sumitomo Mitsui Banking Corporation [136 ITD 66 (Bom)(SB)] claiming that the issue is squarely covered by the said decision in which the Special Bench has held that payment of interest by an Indian PE or Branch to the foreign Head office or the interest received from the Head office by the Indian PE or Branch is part of the payment to self and does not give rise to any income which is chargeable to tax in India on the principle of mutuality. It appears that although it was not disputed on behalf of the Revenue that the issue stands covered by the decision of the Special Bench, the Revenue filed a Cross Objection No. 139/Mum/2013 on 15.07.2013 raising the following issue :-
“Whether the provisions of Section 14A of the I.T. Act will be applicable in the event it is held that the interest received by the assessee from its Head Office is not taxable in the hands of Indian Branch office?”
The delay in filing the Cross Objection is yet to be condoned.
4. On behalf of the Revenue, reliance was placed on the decision of Division Bench of this Tribunal in Oman International Bank SAOG vs JCIT in a batch of appeals in ITA Nos. 335 and 336/Mum/2004 and CO Nos. 86 and 87/Mum/2004 decided on 22.03.2013 wherein the Division Bench held that the provisions of Section 14A of the Income Tax Act, 1961 (‘Act’ for short) are applicable in such a case for the purpose of disallowance of the corresponding expenditure if the interest received by the Branch office from Head office is held as non-taxable in view of the decision of Special Bench in Sumitomo Mitsui Banking Corporation (supra). Indisputably, the decision in Oman International Bank SAOG (supra) is subject matter of challenge before the Bombay High Court in Income Tax Appeal No. 1989 of 2013 which has been admitted on 28.07.2015 on the following substantial questions of law :-
(I) Whether on the facts and in the circumstances of the case and in law the Income Tax Appellate Tribunal (the Tribunal) is justified in disallowing an amount of Rs.73,21,896/- being amortized swap cost on unmatured contracts as on 31 March 1998?
(II) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in admitting the additional ground raised by the respondent on the applicability of the provisions of Section 14A of the Act on interest received by the Indian branches of the appellant from its Head Office ?
(III) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in holding that the provisions of Section 14A of the Act are applicable in relation to the interest received by the Indian branches of the appellant from its Head Office ?”
5. The regular Division Bench hearing ITA No. 9189/Mum/2004 and CO No. 139/Mum/2013 expressed its inability to concur with the view taken by the co-ordinate Bench in Oman International Bank SAOG (supra). It was in these circumstances that the Division Bench had sought for constitution of Special Bench to resolve the issue. The President initially, vide order dated 16.01.2015, declined to constitute the Special Bench and directed the Registry to fix the appeal before the Division Bench. When the matter came up before the Division Bench again, the Division Bench vide order dated 12.07.2016 sought for a reference of the following question to the Special Bench :-
“Whether an income which is not subject to tax on the doctrine of mutuality can be construed to be an “income which does not form part of the total income under this Act”, as understood for the purposes of section 14A of the Act?”
The President by virtue of order dated 09.08.2016 had referred the matter to the Special Bench comprising of three learned Members.
6. On 01.02.2018 when the matter came up before the Special Bench, late Shri Girish Dave, learned standing counsel for the Department raised an objection for the constitution/continuation of Special Bench for deciding the aforesaid question involved in the Cross Objection filed by the Department on the ground that a similar issue was pending consideration before the Bombay High Court in the case of HSBC Bank Oman S.A.O.G vs Director of Income Tax (IT)-1 (supra). It was contended on behalf of the Revenue that once a similar issue was pending before the High Court, the Special Bench deserves to be disbanded/discontinued and cannot proceed with the hearing of the issue which is already sub judice before the High Court. On behalf of the Revenue, reliance was placed on the administrative order dated 07.09.2010 passed by the President in the case of Tivoli Investment and Trading Co. (P.) Ltd. to submit that, the President had withdrawn a reference to the Special Bench in the wake of a similar issue being admitted and pending before the jurisdictional High Court. There were certain other cases cited on behalf of the Revenue, wherein the Special Bench was disbanded/discontinued and the reference was withdrawn on a similar issue being pending before the jurisdictional High Court.
7. This was countered on behalf of the appellant-assessee. On behalf of the appellant, reliance was placed on the Special Bench decision of this Tribunal in DCIT vs Summit Securities Ltd., 132 ITD 1 (Mum)(SB) in order to submit that the reference to the Special Bench cannot be withdrawn merely for the reason that the jurisdictional High Court has admitted an identical question of law in another case. It was pointed out that a similar objection raised by the assessee before the Special Bench in the case of Summit Securities Ltd. (supra) was overruled and the Registry was directed to fix the case for hearing before the Special Bench on merits.
8. Faced with this, the Special Bench found that the issue needs to be referred to a larger Bench of five or more Members. The President vide order dated 17.04.2018 has placed the issue before the larger Bench comprising of five Members. The present Bench has been reconstituted on 20.02.2025. This is how the issue has come up before us.
Submissions of the parties
9. We have heard Ms. Shilpa Goel, learned special counsel for the Revenue and Shri Percy Pardiwala, learned senior counsel for the appellant-assessee.
10. The primary contention of the leaned special counsel for the Revenue is that an identical issue as referred to the Special Bench is pending before the jurisdictional High Court in the case of HSBC Bank Oman S.A.O.G (supra) and therefore, the reference before the Special Bench of three Members be withdrawn. Reliance in this regard is placed on the order dated 22.11.2006 in the case of M/s. Star Ltd., Hongkong whereby the order constituting the Special Bench was withdrawn by the President on the ground that substantial question of law involving identical issue had already been admitted and pending before the High Court. The learned Special counsel for the Revenue also placed reliance on the order of the President in the case of Tivoli Investment and Trading Co. (P.) Ltd. (supra) where the reference to the Special Bench was withdrawn vide order dated 07.09.2010 based on the order sheet noting dated 06.09.2010 by the Special Bench. Further reliance is placed on the decision of the Division Bench in the case of Harsha Achyut Bhogle vs ITO (114 TTJ 266 (Mum) in order to submit that when a similar issue is sub judice before the jurisdictional High Court, the Special Bench need not be constituted to consider the identical issue.
Insofar as reliance on the decision of Summit Securities Ltd. (supra) by the assessee is concerned, it is submitted that the said decision is per incuriam in the wake of the orders passed by the President in the case of M/s. Star Ltd., Hongkong (supra) and Tivoli Investment and Trading Co. (P.) Ltd. (supra) and, therefore, cannot be relied upon.
11. It is submitted that the appeal in the case of HSBC Bank Oman S.A.O.G (supra) is due to come up for hearing before the High Court and, therefore, in these changed circumstances there is no need to continue the Special Bench which reference deserves to be recalled. In this regard, the learned counsel has placed reliance on the following decisions :-
(i) Harihar Collections & Raj Grow Impex LLP vs U01 – 2020 SCC Online Bom 1622
(ii) Kishor s/o Bhikansingh Rajput vs Preeti w/o Kishor Rajput — WP No.7502 of 2006 dated 07.02.2007
(iii) State of Andhra Pradesh vs Raghu Ramakrishna Raju Kanumuru (2022) 8 SCC 156
(iv) State of Himachal Pradesh & Ors vs Yogendra Mohan Sengupta and Anr (2024 SCC Online SC 36)
(v) National Insurance Company Ltd. vs Pranay Sethi and Ors. [2017] 13 S.C.R 100
12. The learned Senior counsel for the appellant-assessee has submitted that the orders passed by the President in the case of M/s. Star Ltd., Hongkong (supra) and Tivoli Investment and Trading Co. (P.) Ltd. (supra) are administrative orders unlike the decision in the case of Summit Securities Ltd. (supra) which is an order passed on the judicial side being a binding precedent. It is submitted that the issue has been elaborately considered by the Special Bench in the case of Summit Securities Ltd. (supra). It is submitted that the decision of the Special Bench in the case of Summit Securities Ltd. (supra) cannot be said to be per incuriam in the context of certain orders passed by the President withdrawing the reference, which are essentially orders passed on the administrative side in the peculiar circumstances prevailing in the case of M/s. Star Ltd., Hongkong (supra) and Tivoli Investment and Trading Co. (P.) Ltd. (supra).
13. Insofar as the reliance placed on the case of Harsha Achyut Bhogle (supra) is concerned, it is submitted that the decision is clearly distinguishable in view of the facts obtaining therein.
14. It is submitted that the Division Bench in the assessee’s case has already expressed disagreement with the view taken by the co-ordinate Bench in the case of HSBC Bank Oman S.A.O.G (supra). It is submitted that in the event the reference is withdrawn and the appeal goes back to the Division Bench, this would tantamount to requiring the Division Bench to abide by the decision in the case of HSBC Bank Oman S.A.O.G (supra). It is submitted that once the Division Bench has expressed disagreement with the earlier view expressed by the co-ordinate Bench, the only option as per Section 255(3) of the Act is to refer the matter to the Larger/Special Bench. It is submitted that the pendency of the issue before the jurisdictional High Court cannot lead to the reference being kept in abeyance which would in effect have the statutory powers conferred on the President under Section 255(3) of the Act being rendered otiose. The learned AR has drawn our attention to the decision of Supreme Court in UOI vs Paras Laminates (P) Ltd. 119901186 ITR 722 in order to submit that the President has ample power to refer a case to a Larger Bench in the wake of a difference of opinion between two co-ordinate Benches. Reliance is also placed on the decision of Supreme Court in the case of JCB India Ltd vs Commissioner of Central Excise (Civil Appeal no. 5764 of 2014 dated 07.02.2023) and the decision of Special Bench in the case of Daks Copy Services (P) Ltd., vs ITO [(1989) 34 TTJ 604 (Bombay).
15. It is submitted that the provisions of Section 158A of the Act cannot come into play in this case as the said provision is attracted only when the issue is pending before the High Court in assessee’s own case and not otherwise.
16. It is pointed out that in case of intervenor, M/s. Interglobe Aviation Ltd. the Revenue had taken an opposite stand claiming that reference to Special Bench cannot be withdrawn for the reason that an identical question of law is pending before the High Court. Lastly, it is submitted that no fetters can be placed on the statutory powers of the Tribunal under Section 250 of the Act to hear and decide the appeal on account of mere pendency of issue before the higher forum, albeit in the absence of any order of stay operating.
Consideration
17. Before adverting to the rival contentions, it may be stated that in this reference we are only concerned with the issue as to whether in the facts and circumstances of the case, the reference made to the Special Bench is liable to be withdrawn in the wake of Jurisdictional High Court admitting an identical question in the case of another assessee, viz. HSBC Bank Oman S.A.O.G. The issue on the application of Section 14A of the Act in the context of decision of the larger Bench of the Tribunal in the case of Sumitomo Mitsui Banking Corporation (supra) is sub judice before the Special Bench comprising of three learned Members. Thus, the only issue for our consideration is whether the Special Bench can proceed with the hearing of the issue in view of the fact that the Division Bench had expressed its inability to concur with the view taken by the co-ordinate Bench in the case of Oman International Bank SAOG (supra).
18. The issue before this Bench has already been considered by the Special Bench of this Tribunal in Summit Securities Ltd. (supra). It is necessary to deal with the said decision in some details in order to appreciate the controversy. In that case, the assessee had transferred its power transmission business to KEC International Ltd. for an agreed consideration of Rs.143 crores and offered an equal amount as Capital Gains arising out of slump sale. The Auditors had determined a negative net worth of the business transferred at Rs.157.19 crores. The Assessing Officer observed that the sale consideration should be taken as Rs.300 crores (the sale consideration of Rs.143 crores + additional liabilities taken over amounting to Rs. 157 crores) and as such, the entire amount was considered for computing Long Term Capital Gains. Before the First Appellate Authority, reliance was placed on behalf of the assessee on two decisions of the Tribunal in Zuari Industries Ltd. vs ACIT 12007] 105 ITD 569 and Paperbase Co. Ltd. vs CIT 12008] 19 SOT 163 (Delhi) in which it has been held that negative net worth has to be treated as zero in view of the provisions of Section 50B of the Act. The First Appellate Authority, therefore, deleted the addition made on account of negative net worth.
19. When the matter came up before the Tribunal in an appeal filed by the Revenue, the Division Bench expressed its inability to concur with the view taken by the coordinate Bench in the case of Zuari Industries Ltd. (supra) as in the opinion of the Division Bench, the judgment of Supreme Court in the case of CIT vs Attili N. Rao 12001] 252 ITR 880 was not appropriately considered. In fact, the Division Bench found that the co-ordinate Bench in Zuari Industries Ltd. (supra) was not justified in holding the decision of Supreme Court in Attili N. Rao (supra) as distinguishable. It was in these circumstances that a reference was sought for and the matter was placed before the President and the reference came to be eventually made to the Special Bench comprising of three learned Members. During the course of hearing of the reference, a preliminary objection was raised on behalf of the assessee seeking withdrawal of the reference on the ground that an identical question of law in the case of Zuari Industries Ltd. (supra) was admitted by the Bombay High Court. Reliance was also placed on the order passed by the President in M/s. Star Ltd., Hongkong (supra) and Tivoli Investment and Trading Co. (P.) Ltd. (supra) in order to submit that in a similar situation, the President in his discretion had withdrawn the reference.
20. Significantly, in that case, the Revenue claimed that it was not necessary to withdraw the reference or to deconstitute the Special Bench on the ground of pendency of a similar issue before the High Court. It may be noted that the stand taken by the Revenue in the present case is diametrically opposite to the stand taken in the case of Summit Securities Ltd. (supra). Be that as it may, the Special Bench after elaborate consideration of the matter has come to the conclusion that it is not necessary to withdraw the reference on account of pendency of a similar issue before the High Court. The conclusions reached by the Special Bench may be culled out as under :-
i) That where a subsequent Bench of the Tribunal is disinclined to follow the view taken by the earlier Bench on a particular issue, the only course open is to make a reference to the President for constitution of a Special Bench so that the issue can be finally decided by the Special Bench.
ii) The President in view of the decision of Supreme Court in the case of Paras Laminates (P) Ltd. (supra) has wide powers to make such a reference and place the issue before a Special Bench in the context of difference of opinion between two co-ordinate Benches.
iii) There are no fetters placed on the powers of the Special Bench of the Tribunal in hearing the case and rendering its decision, notwithstanding the fact of pendency of a similar issue/substantial question of law before the High Court.
iv) The situation may be different when a substantial question of law has been decided by the High Court one way or the other wherein hearing by the Special Bench would become futile and in such a case, the President can consider withdrawing reference and disband the Special Bench.
21. We find that apart from the statutory provisions, which have a bearing on the question, the Special Bench has also considered certain practical aspects which would eventually lead to incongruity if it is held that the Special Bench has to stay its hands and/or is liable to be disbanded in the event of a similar/substantial question of law being pending before the High Court. The Special Bench has noticed that such a course of action would lead to pendency of the issue before the Special Bench and eventually before the Division Bench also requiring the Division Bench to await decision of the Special Bench.
The Special Bench in para 30 of its order has clarified that this has no bearing on the powers of the President to constitute or de-constitute any Special Bench and/or withdrawing reference in the facts of each case.
It is not shown that the decision in the case of Summit Securities Ltd. (supra) was challenged any further. For all practical purposes, the said decision can be said to have attained finality.
22. The learned Special counsel for the Revenue has placed reliance on the order passed by the President in the case of Tivoli Investment and Trading Co. (P.) Ltd. (supra) and M/s. Star Ltd., Hongkong (supra) on the administrative side and the decision of the Division Bench in the case of Harsha Achyut Bhogle (supra) in support of her submissions. We find that all these three orders have already been considered by the Special Bench. We find that the Special Bench has rightly found that these decisions have no bearing on the question involved.
23. In Tivoli Investment and Trading Co. (P.) Ltd. (supra) the learned Members constituting the Special Bench vide a note dated 06.09.2010 had suggested withdrawal of the reference on the ground that the assessee’s appeal against the order of Tribunal, in assessee’s own case for earlier years, was admitted by the Bombay High Court and was pending for disposal. There was an earlier communication dated 23.06.2009 by the Member requesting the President to withdraw the reference. The President in his discretion had asked the Special Bench to consider whether it was necessary to adjourn the hearing till the appeal filed by the assessee was disposed of by the High Court. It was in these circumstances that the President had agreed to withdraw the reference by an order dated 07.09.2010 passed on the administrative side and allowed the regular Bench to decide the issue in accordance with law. It is necessary to note that the order dated 07.09.2010 is passed by the President in exercise of his administrative powers, that too on the recommendation of the learned Members of the Bench who on the judicial side found that the reference needs to be withdrawn.
24. In M/s. Star Ltd., Hongkong (supra), for assessment year 2002-03, the assessee had made an application to the President for constitution of Special Bench mainly on the ground that the view taken by the Tribunal in assessee’s own case for preceding assessment year 2000-01 was contrary to several other decisions of the co-ordinate Benches. Reference was thus sought to resolve the conflicting views.
The President, by a communication dated 17.08.2006, had sought comments of the Vice President, who by his communication dated 14.09.2006 recommended for constitution of Special Bench. It was in these circumstances that the issue was referred to Special Bench in ITA No. 4348/Mum/2005 by order dated 15.09.2006.
When the fact about constitution of Special Bench came to the notice of the Revenue, a detailed objection was filed claiming that the assessee had made an incorrect statement that the decision of Division Bench was in variance with several other decisions of co-ordinate Benches. It was pointed out that after obtaining the order of reference, a submission was made before the High Court in an appeal relating to assessment year 2000-01 for remand of the said appeal also to the Special Bench.
25. In the facts of the case, the learned President found that the assessee was not justified in asking for reference to the Special Bench and the information in respect of the proceedings before the High Court were withheld. The President found that the assessee placing reliance on the decision of Bombay High Court in the case of Dhariwal Industries (unreported) was seeking setting aside of a detailed order for assessment year 2000-01 to the Special Bench. All these aspects were not brought to the notice of the President or the Vice President before obtaining the order of reference. It was in these peculiar facts of the matter that the learned President found that there was need to “rectify the wrong committed” and withdrew the reference.
26. We find that the reliance placed on the orders passed in the case of Tivoli Investment and Trading Co. (P.) Ltd. (supra) and M/s. Star Ltd., Hongkong (supra) is misplaced for more reasons than one. First, both these matters involve an order passed by the President on the administrative side withdrawing the reference. In the case of Tivoli Investment and Trading Co. (P.) Ltd. (supra), the learned Members of the Special Bench had recommended withdrawal of the reference on account of the pendency of the very same issue before the jurisdictional High Court in assessee’s own case for preceding assessment years 1990-91 and 1991-92 while in the case of M/s. Star Ltd., Hongkong (supra), the President found that the assessee obtained the order by withholding certain material facts including about the pendency of the appeal before the High Court for earlier assessment year 2000-01.
27. In Harsha Achyut Bhogle (supra) there was a batch of appeals for assessment years 1996-97, 1998-99 to 2001-02 which involved common issues. In that case, there was an order passed by a co-ordinate Bench in assessee’s own case for assessment year 1997-98 wherein the issues were answered against the assessee. That order for assessment year 1997-98 was subject matter of appeal before the High Court at the instance of the assessee. A perusal of the order in Harsha Achyut Bhogle (supra) indicates that the assessee urged before the Division Bench of the Tribunal to make a recommendation to the President for constitution of Special Bench presumably on the ground that the co-ordinate Benches had taken a diametrically opposite view in assessee’s case and the case of Amitabh Bachchan vs DCIT (2007) 106 TTJ (Mumbai) 925. The Division Bench after considering the submissions had refused to make the recommendation. It is necessary to note that the Tribunal in para 8 of the order found that the rule of consistency and judicial discipline require the Bench to follow the earlier order for assessment year 1997-98 in order to maintain uniformity and consistency in the decision making. The Division Bench has categorically found that there was no valid reason to take a contrary view to the one already taken by the Tribunal in assessee’s own case for assessment year 1997-98.
It can thus be seen that in the absence of the Division Bench taking any contrary view to the earlier decision, there was no occasion for the Division Bench to have made a recommendation for constitution of Special Bench. The facts are clearly distinguishable.
28. We now propose to briefly deal with the other decisions on which reliance was placed on behalf of the Revenue.
29. In Harihar Collections & Raj Grow Impex LLP vs U01 & others (supra), the Petitioner, being a proprietorship firm, was engaged in the business of import and export of agricultural commodities. The Petitioner had imported Yellow Peas, which was found by the concerned authorities under Foreign Trade (Development and Regulation) Act, 1992 to be in breach of notification putting the said item in restricted category and allowing import to a certain extent only. The Petitioner feeling aggrieved by the non-release of Yellow Peas which were stored in a warehouse had filed the petition before the Bombay High Court in which time was sought on behalf of the respondent and the petition was adjourned to 06.10.2020 directing the respondent-State to file an Affidavit. In the meantime, the competent authority passed an order under Section 129D(2) of the Customs Act without informing or taking leave of the High court. In these circumstances, the High Court found that the action on the part of Commissioner (Customs) was highly improper when the High Court had taken cognizance of the grievance and was in seisin of the matter.
30. In Kishor s/o Bhikansingh Rajput vs Preeti w/o Kishor Rajput (supra), the Petitioner-husband had challenged the order of the Family Court refusing to frame an additional issue and rejecting an amendment which was granted earlier. The Petitioner sought time before the family court on the ground that the Petitioner had already approached the High Court. The family court not only refused to grant time, but even dismissed the petition filed by the Petitioner in default. It was in these peculiar circumstances that the High Court found that “normally”, when the High Court is seized of the matter, it is expected that the subordinate courts would stay their hands.
31. In Raghu Ramakrishna Raju Kanumuru (supra), the appellant had challenged the order passed by the National Green Tribunal, Principal Bench, New Delhi (NGT) by which order the appellant was prohibited from undertaking any further construction. The appellant challenged the same before the High Court of Andhra Pradesh which passed an interim order permitting the construction and other allied activities in relation to the project in question subject to the condition that the construction would be strictly in accordance with the permission granted by the Ministry of Environment, Forest and Climate Change as well as the existing master plan.
It appears that the NGT appointed an expert committee to examine the construction, which submitted its report on 29.03.2022. A second expert committee was appointed by the NGT by order dated 06.05.2022 and without waiting for the report of the second expert committee had directed the appellant not to carry out any further construction which was in the teeth of the order passed by the High Court, permitting construction on certain conditions. It was in these circumstances that the Supreme Court found that the NGT could not have passed the order, particularly in the wake of the order passed by the High Court of Andhra Pradesh as referred above.
32. In Yogendra Mohan Sengupta (supra), the Supreme Court found that despite pendency of the proceedings before the High Court, the NGT had passed an interim order. It was found that although the NGT was informed about the High Court being in seisin of the proceedings, it went on to hold that the judgment given by it was binding and, therefore, the draft development plan, which in its view was not in conformity with its judgment, was liable to be set aside.
33. We find that all these decisions turned on their own facts and are clearly distinguishable.
34. In Pranay Sethi and others (supra), which was a case arising out of a claim for compensation under the Motor Vehicles Act, 1988, there was a reference made to the Constitution Bench of the Supreme Court on account of cleavage of opinion between two three Judge Benches. It was found that in the case of Santosh Devi vs National Insurance Company Ltd. and ors. (2012) 6 SCC 421, the two Judge Bench had taken a contrary view than what was taken in the case of Sarla Verma and ors. Vs Delhi Transport Corporation and Anr. (2009) 6 SCC 121 rendered by co-ordinate Bench. It is difficult to see as to how the said decision can come to the aid of the Revenue.
35. We find that Section 253 of the Act confers statutory powers on the Tribunal to decide appeals challenging the orders of CIT(A) and other orders as are permissible under the said Section. Section 255(3) of the Act also confers statutory powers on the President to constitute Benches, including a Bench comprising of three or more Members to decide any particular issue. No provision or a decision has been brought to our notice holding that when a particular issue is pending before the higher forum, the Tribunal sitting in Division Bench or Special Bench is required to stay its hands. It is significant to note that the Revenue is only seeking withdrawal of the reference and disbanding of the Special Bench. Thus, from the submissions advanced at the Bar, it appears that Revenue has no objection for the Division Bench continuing the hearing and considering the issue. It is difficult to see as to how only the Special Bench would be precluded from hearing the matter if according to the Revenue the Division Bench can hear the same. There is one more aspect of the matter as pointed out by the learned Senior counsel for the assessee. It is pointed out that if the reference is withdrawn and the matter goes back to the Division Bench, it will be compelled to take a view and agree with the co-ordinate Bench in the case of HSBC Bank Oman S.A.O.G (supra), which would be contrary to the opinion earlier expressed by the learned Members of the Division Bench expressing their inability to concur with the view as expressed in the case of HSBC Bank Oman S.A.O.G (supra). We find that the contention is justified.
36. We also find that in the case of intervenor (appeals before the Delhi Benches, which appeals have since been disposed of on 03.09.2021) and in the case of Summit Securities Ltd. (supra), the Revenue had taken a contrary stand. We cannot appreciate the Revenue taking such contrary stand on the issue involved in this matter.
37. We have carefully gone through the decision of Special Bench in the case of Summit Securities Ltd. (supra) and we are in respectful agreement with the views expressed therein.
38. In the result, we find that there is no prohibition either in law or in practice which has been pointed to us which would require the Special Bench as a rule to stay its hands when a similar/identical issue is pending before the High Court. This is albeit subject to the considerations on the basis of propriety, which the Special Bench itself may consider depending on the facts and circumstances of each case.
In the present case, except that the appeal by another assessee, namely HSBC Bank Oman S.A.O.G (supra) has been admitted by the High Court, nothing has been brought on record to require the Special Bench to stay its hands. There is one more reason why we are inclined to hold that the Special Bench need not be deconstituted and the reference withdrawn. It is necessary to note that the dispute relates to assessment year 1998-99. The appeal itself is of the year 2004. Therefore, in our considered opinion, hearing before the Special Bench brooks no further delay. In our humble opinion, the Special Bench can proceed to hear and decide the appeal in accordance with law. Subject to this, we hold that it is not necessary to withdraw the reference and/or to deconstitute the Special Bench.
The appeal and the cross objection with the application for condonation of delay shall now be placed before the Special Bench for disposal according to law.
Order pronounced in the open court on 09/04/2025.
