Powers conferred to President of ITAT in transfer of live appeals from outside the headquarters

MSPL Ltd Vs PCIT (Bombay High Court)

Is the President of ITAT immune from transferring live appeals from one bench of the ITAT to the other bench outside the headquarters?

The Hon’ble Bombay High Court in a very recent judgement has decided the bar on the transfer of live appeals from one bench of the tribunal to the other which exceeded the headquarters jurisdiction.

The question that was decided in MSPL Ltd Vs PCIT (2021) 127 Taxmann.com 379 (Bombay)

When an appeal or a bunch of appeals are being heard by a Bench of the Tribunal in one State, can an order on the administrative side be passed by the President transferring a live appeal from one Bench to another Bench that too in a different State outside the headquarters?

Facts  

• The Assessee is a company incorporated under the CA,2013 having its registered office at Mumbai which is engaged in mining, running gas unit and generating power through windmills. It has 2 mining division situated at Hospet, Karnataka from where it carries its business objectives.

• Pursuant to a search operation u/s.132 of the IT Act, separate orders of assessment u/s.153A were framed by the ACIT, CC-2(1), Bangalore. Aggrieved, an appeal before CIT(A) was unsuccessful and therefore, further appeal was preferred before the ITAT Bangalore. In the meantime, when the appeal was pending disposal with the ITAT, the jurisdiction of the Assessing officer stood transferred to Mumbai – DCIT-1(2)(2), Mumbai due to decentralization of search cases and corresponding CIT-1, Mumbai was given charge over the jurisdiction.

• The said appeals were partly heard on 02.06.2011 and was adjourned for further submissions from the parties. On 28.06.2011, written submissions were filed by the Department. Subsequently, on 08.09.2011, the Accountant member was transferred.  

• The impugned orders in the instant WP are the order of the ITAT Bangalore transferring the appeal to Mumbai ITAT vide order dated 19.03.2020 and the order of the President of ITAT passed under Rule 4 dated 20.08.2020.

ITAT’s interpretation of Sec.255 of the IT Act & Rule 4 of the ITAT Rules, 1963:

• The power of the president to transfer appeals from one bench to the other even to the bench not within the headquarters are traceable by a cogent reading of Sec.255 and Rule 4.

• Similarly, the power to transfer can be exercised at the request of either party to the proceedings before it, be it the Appellant or Respondent.

Arguments of the Revenue before the HC:

• That the Assessee didn’t object to the transfer of the assessment proceedings u/s.127 of the IT Act.

• Post transfer of jurisdiction the assessee has been regularly filing its return of income at Mumbai and certain appeals before the Mumbai Appellate bodies.

• That the WP is not sustainable on the fact that the said WP seeks to challenge administrative decision of ITAT which falls within the realm of subjective satisfaction.

• That the power to transfer the appeals between the tribunals is clearly traceable in Sec.255(5) of the IT Act and that when read in consonance with Rule 4 of the ITAT Rules, 1963 that the transfer of appeals are permissible.

• That a WP is not sustainable and that too before the Bombay HC isn’t sustainable in so far as the impugned order is the order of ITAT Bangalore.

• That an appeal u/s.260A ought to have been filed by placing emphasis on the word “every order” as contemplated in Sec.260A.

Findings of the High court:

The HC discussed various provisions of the Income Tax law as well as drawing analogy from various branches of law to answer the question raised by the Assessee.

Chapter XX deals with Appeals and Revision. Part B specifically deals with appeals to the Appellate Tribunal comprising of Sec.252 to 255.

It is pertinent to extract sub-sec(5) & (6) of Sec.255;

(5) 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.

What Sec.255(5) stipulates is that the Tribunal has powers to regulate its own procedures while discharging its functions. This includes notifying the places at which the Benches shall hold their sittings e.g., a particular Bench at Mumbai may hold its sittings at, say, Thane for a particular period for administrative reasons. This provision cannot be interpreted in such a broad manner to clothe the President of the Tribunal the jurisdiction to transfer a pending appeal from one Bench to another Bench outside the headquarters in another State.

Sub-Sec(6) of Sec.255:

(6) The Appellate Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income-tax authorities referred to in section 131, and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860), and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898 (5 of 1898).”

This sub-section clearly states that the proceedings of the Tribunal are deemed to be JUDICIAL PROCEEDINGS within the meaning of sections. 193, 196, 228 of the Indian Penal code. More importantly, it is deemed to be a CIVIL COURT for the purpose of Sec.195 and Chapter XXXV of the Code of Criminal Procedure, 1898.

Therefore, it is clear that there is no such power of transfer is discernible u/s.255 of the IT Act. Such power would amount to interference in a judicial proceeding of the tribunal.

Rule 4 of ITAT Rules, 1963:

“Power of Bench.

4. (1) A Bench shall hear and determine such appeals and applications made under the Act as the President may by general or special order direct.

(2) Where there are two or more Benches of the Tribunal working at any headquarters, the President or, in his absence, the Senior Vice-President/Vice-President of the concerned zone or, in his absence, the seniormost member of the station present at the headquarters may transfer an appeal or an application from any one of such Benches to any other.”

Sub rule (1) empowers the President to direct hearing of appeals by a Bench by a general or special order, sub rule (2) is more specific which merely prescribes rules on transfer of cases within the same headquarters.

The High court also took note of Rules 13 – who may be joined as Respondent and Rule 28 – Power to remand an appeal. Also drawing analogy from Sec.20 of the Civil Procedure Code, 1908 which ultimately states that the place of institution of the suit would be where the defendants reside or works for gain and in case of appeal under the Tribunal Rules where the Assessing Officer is located

It is pertinent to take note of the parties to the WP. The Respondents PCIT-1, Mumbai and ITAT Mumbai.

Adverting to the question of maintainability of WP itself and that too before in a different jurisdiction, the Bombay HC laid emphasis on Article 226(2) of the constitution of India and held;

“Clause (2) of Article 226 makes it clear that the power to issue directions, orders or writs by any High Court within its territorial jurisdiction would also extend to a cause of action or even a part thereof which arises within the territorial limits of the High Court notwithstanding the fact that the seat of the authority is not within the territorial limits of the High Court. Therefore, in the light of the above and having regard to the mandate of clause (2) of Article 226 of the Constitution of India, this Court certainly has the jurisdiction to entertain the writ petition”.

Also, the counsel for the respondents placed emphasis on the words “every order” as contemplated in Sec.260A and submitted that the Assessee ought to have filed an appeal against the order of the ITAT and not a Writ petition. The Court held that the word “every order passed by the tribunal” means an order passed in appeal and has to deal with merits whereas the impugned orders are on transfer of appeals without adjudication on merits of the appeals.

SALIENT POINT:

The President of the Income Tax Appellate Tribunal doesn’t have powers to transfer live appeals from one bench to another bench in a different headquarters. The Rules ascribe for such transfer within the same headquarters and not different headquarters. This act of transfer of live appeals from one Bench to the other in a different headquarters cannot be termed as an administrative decision and it would amount to interference in a judicial proceeding of the tribunal.

Chronology of events: