21 May 2121

Transfer of an Appeal or an Application from one Bench to another Bench within the same headquarters is allowed but not outside the headquarters under Rule 4 of the Income Tax Appellate Tribunal Rules, 1963 - Bombay High Court

Case : MSPL Limited v. Principal Commissioner of Income Tax-1 and Ors Writ Petition (L) No. 3865 of 2020

Court : Bombay High Court

Bench : Justice Ujjal Bhuyan and Justice Milind N. Jadhav

Decided on : 21 May 2121

Relevant Statues

Article 226 of the Constitution of India, 1950

Sections 10B, 44AB, 132, 143(3), 153A, 255 of the Income Tax Act, 1961

Rules 4, 13, 28 of the Income Tax Appellate Tribunal Rules, 1963

Brief Facts & Procedure History

1. Petitioner is a company incorporated under the Companies Act, 1956 on having its registered office at Mumbai who is engaged in the business of mining where two mining divisions were at Karnataka. A search and seizure operation under section 132 of the Income Tax Act, 1961 was carried out in the business premises of the petitioner on 26.10.2007. Later, proceedings were initiated under section 153A of the Income Tax Act, 1961 where assessment proceedings were drawn up in respect of four assessment years i.e. assessment years 2005-06, 2006-07, 2007-08 and 2008-09. Separate assessment orders were passed by the Assessing Officer i.e. Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore on 31.12.2009 for the above four assessment years. The first three assessment years were made under section 143(3) read with section 153A of the Income Tax Act, 1961. However, for the assessment year 2008-09, the assessment was made under section 143(3) of the Income Tax Act, 1961.

2. In the assessment proceedings, the petitioner filed a report under section 10B of the Income Tax Act, 1961 for claiming a deduction for the assessment years 2006-07, 2007-08 and 2008-09 along with audit report under section 44AB of the Income Tax Act, 1961. Petitioner also claimed deduction on account of expenditure and depreciation for use of aircraft for all the four assessment years. Assessing officer vide the assessment orders dated 31.12.2009 held that petitioner would not be entitled to deduction under section 10B in respect of the assessment years 2006-07, 2007-08 and 2008-09 and in a claim of expenditure and depreciation for use of aircraft is concerned, the Assessing Officer disallowed 50% of the operational expenses as well as depreciation.

3. Aggrieved by the orders of the Assessing Officer dated 31.12.2009, the petitioner filed four separate appeals before the Commissioner of Income Tax (Appeals)-VI, Bangalore where they upheld the decision of the Assessing Officer with respect to the disallowance of deduction and regarding disallowance of operational expenses and depreciation of aircraft to the extent of 50% by the Assessing Officer, the same was upheld for the assessment year 2005-06. However, for the remaining three assessment years certain reliefs were granted to the petitioner. Hence, the appeal for the assessment year 2005-06 was dismissed and the appeals for the assessment years 2006-07, 2007-08 and 2008-09 were partly allowed.

4. Aggrieved by the order passed by the Commissioner of Income Tax (Appeals), Petitioner filed four appeals on 06.04.2011 before the Income Tax Appellate Tribunal, Bangalore Bench for the four assessments years. In view of the transfer of the accountant member to Ahmedabad Bench, the four appeals were released from part heard on 08.09.2011. The Bangalore Bench of the Tribunal in its order dated 11.02.2013 had directed the departmental representative to produce the satisfaction note for initiating search under section 132 of the Income Tax Act, 1961 before the Tribunal and the departmental representative had prayed for transferring the appeals from Bangalore to Mumbai, the application for transfer was filed by Commissioner of Income Tax-1, Mumbai before the Vice President of the Tribunal on 12.08.2013. However, from 12.08.2013 no steps were taken by the revenue to pursue the transfer application so that the Bangalore Bench of the Tribunal in its order dated 19.03.2019 was constrained to pass adverse observations on the revenue. On 22.10.2019, the assessee objected to transferring of appeals vide letter dated 30.06.2015 and reiterated on 27.06.2019.

5. Hence by the order dated 19.03.2020, Bangalore Bench of the Income Tax Appellate Tribunal passed a speaking order that request made by the revenue for the transfer of the said appeals from the Bangalore Bench of the Income Tax Appellate Tribunal to Mumbai Benches of the Income Tax Appellate Tribunal is justified and to enable the President of the Income Tax Appellate Tribunal to pass orders on the request for transfer of the appeals from the Bangalore Bench to Mumbai Benches. By order dated 20.08.2020 President of Income Tax Appellate Tribunal directed that the above appeals pending in the Income Tax Appellate Tribunal, Bangalore Bench should be heard and determined by the Income Tax Appellate Tribunal, Mumbai Benches at Mumbai. Therefore, this writ petition was filed under Article 226 of the Constitution of India, where the petitioner seeks quashing of orders dated 19.03.2020 and 20.08.2020.

The Issue of the Case

Whether the Petitioner is entitled to quashing the two orders dated 19.03.2020 and 20.08.2020?

The Observations of the Court

The Honourable Bombay High Court observed the following:

1. On critical analysis of Section 255 of the Income Tax Act, 1961, the Court opined that the power of the President to transfer appeals from one Bench to another Bench which is not within the same headquarters cannot be discerned.

2. Concurred that a proceeding before the Income Tax Appellate Tribunal shall be deemed to a judicial proceeding within the meaning of sections 193, 196 and 228 of the Indian Penal Code, 1860 and it shall also be deemed to be a Civil Court for the purpose of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1973.

3. After the analysis of Rule 4 of the Income Tax Appellate Tribunal Rules, 1963 passed in the order dated 20.08.2020, the Court explained that a transfer of an appeal or an application from one Bench to another Bench within the same headquarters is allowed but not outside the headquarters.

4. It further explained that just because the Assessing Officer was at Mumbai prior to the assessment year 2005-06 or subsequent to the assessment year 2008-09, it would be of no ground to transfer a pending appeal or appeals pertaining to assessment years 2005-06 to 2008-09 from one Bench of the Tribunal in a different State / Zone to another Bench of the Tribunal in another State / Zone.

5. By referring to the case of Rajkumar Sabu v. M/s.Sabu Trade Pvt. Ltd., Transfer Petition (Criminal) No.17 of 2021, the Court explained that the convenience of a party in a case cannot be considered as criteria for transferring a case out of a State.

6. Took cognizance of the fact that neither the Commissioner of Income Tax-1, Mumbai nor the Chief Commissioner of Income Tax (OSD), Mumbai who had filed the applications for transfer are respondents in the subject appeals. Therefore, they were not competent to make the applications for transfer.

7. Observed that under Article 226 of the Constitution of India, the Court has jurisdiction to entertain the writ petition. But with respect to the filing of Appeal instead of a writ petition is concerned, the Court stated that since the order dated 19.03.2020 is not on the merit of Appeal such an order lies beyond the scope of Article 260A(1) of the Constitution of India.

The Decision Held by the Court

The Honourable Bombay High Court allowed the writ petition and set aside the orders dated 19.03.2020 and 20.08.2020.

Click here to view/download the judgement >