Brief of the case:
The ITAT president has constituted a special bench of the three members to hear the case of assessee by exercising his powers u/s 255 (3). A notice fixing date of hearing before special bench was served upon the assessee. No opportunity of hearing was provided to the assessee by president ITAT before constitution of this special bench.
Assessee being aggrieved from the order passed by president ITAT preferred this writ petition before Hon’ble High Court who after considered the law and facts of the matter and held that president acted against the principles of natural justice without hearing parties to litigation. Hon’ble HC also held that president ITAT used powers beyond limits in constituting special bench without any recommendation of regular bench.
Facts of the case:
- The petitioner is an enlisted public limited company incorporated in year 2006 who publishes a Telugu newspaper called “Sakshi” from Hyderabad, Andhara Pradesh.
- One of the promoters of the petitioner is son of former chief minister of Andhra Pradesh and was also a Member of Parliament.
- Petitioner filed its return of income for the AY 2008-09 declaring total income of Rs. 90,91,51,382/- which was picked up for scrutiny.
- AO completed assessment at Rs. 2,72,65,37,270/- by making two addtions. First on account of share premium received from subscribers to paid up capital u/s 28 (iv) amounting to Rs. 2,77,56,88,650/- and secondly on account of unexplained cash credit towards capital contribution u/s 68 amounting to Rs. 15,00,00,000/-.
- Appeal filed before CIT (A) was dismissed and Hon’ble ITAT granted a conditional stay of demand on further appeal.
- In the regular hearing of appeal assessee contended that share premium received during the previous year was of capital nature and could not be treated as income u/s 28 (iv).
- The case was adjourned on request of revenue on several occasions.
- Subsequently assessee received a notice fixing the appeal fixed for hearing under caption “other matters” for hearing as “special bench reference”. A copy of letter of the CBDT was annexed to the notice.
- In this letter a request was made to the president to ITAT to constitute a special bench in the assessee’s case. On the said letter president made a hand written endorsement as “VP-Hyderabad for comments”. Thereafter letter was produced before concerned VP who addressed a letter to regular bench to send a report of the reasons for constitution of special bench in assessee’s case.
- The regular bench forwarded its opinion to the VP with a request to forward its opinion to the president. The regular bench opined that most of the appeals that come before ITAT involve complex facts and intricate questions of law and if the argument is accepted, almost all matters will have to be referred to a special bench.
- The VP did not mention about any recommendation of the regular bench that an appropriate bench be constituted outside Andhra Pradesh
- After the hearing before the regular bench assessee did not receive any communication regarding constitution of regular bench nor the opinion formed by the regular bench.
- Assessee received a further notice of fixing date of hearing before special bench and assessee was called upon to file one more set of paper-book.
- Assessee filed a letter in the office of president, ITAT and asked for the reference for constitution of special bench from CBDT. Such a request to supply copy of reference was denied by the office of president.
Contention of the revenue:
