How a Special Bench of ITAT was Constituted
THE President of the ITAT can constitute a Special Bench of three or more members for the disposal of any particular case. Can the parties request for a Special Bench and that too through a letter to the President?
That is exactly what the Central Board of Direct Taxes (CBDT) did.
Member CBDT wrote a letter to the President of the Tribunal on 15.11.2012, which read as:
M/s. Jagathi Publications Pvt. Ltd., incorporated in the year 2006, is engaged in publishing a Telugu Newspaper by the name 'Sakshi'. The assessment in the case of assessee company for A.Y. 2008-09 was completed on a total income of Rs.272.65 crores against the returned loss of Rs.19,91,51,380/-. The additions made by the AO were confirmed by the CIT (A). The assessee filed an appeal against the same which as of now is pending before 'B' bench, ITAT, Hyderabad and the case is posted for hearing before the ITAT on 19.12.2012.
3. The main promoter of the assessee company is Shri Y.S. Jagan Mohan Reddy, Member of Parliament and son of Late Shri Y.S. Rajasekhar Reddy, former Chief Minister of Andhra Pradesh. The assessee had allotted shares at a premium of Rs. 350/- per share (face value Rs.10/-) to several persons or entities who received benefits from the Government of Andhra Pradesh for allotment of land at concessional rates, grant of licences, allotment of Special Economic Zones, license for construction of hotel, reduction of Green belt, provision of water and other facilities, regularization of urban land, permission for transfer of land, permission for establishment of ports, etc. During the course of assessment, the AO established that the Investment in shares at high premium was made as a matter of "Quid Pro Quo" for extending the official favours. The total quantum of share premium involved from A.Y. 2008- 09 to A.Y. 2010-11 is a sum of Rs.1140 crores.
4. Similar to the above "Quid Pro Quo" arrangement, another company promoted by Shri Y.S. Jagan Mohan Reddy, M/s. Bharathi Cements Ltd. Has received share capital with share premium of Rs.430.71 crores. Total money received by various companies promoted by Shri Y.S. Jaganmohan Reddy, as a "Quid Pro Quo" arrangement is more than Rs.1700 crores.
5 Section 225(3) of the IT Act empowers the President of the ITAT to constitute a special bench consisting of 3 or more members for disposal of a particular case. The present case needs constitution of a special bench for the following reasons :
(i) The "Quid Pro Quo" arrangement is unique in nature.
(ii) The case is very complex involving legal issues having far reaching consequences for the revenue in this case and also in other cases.
(iii) In the entire group, huge tax effect is involved and identical transactions are involved in various cases and this case can set a precedent.
(iv) The modus operandi employed in bringing the illegal gratification into the books of account of the companies without payment of taxes is unique and taxation of the share premium as a revenue receipt is under a serious challenge requiring an in-depth analysis of facts and evidences partly gathered by the CBI, by the members of I.T.A.T.
(v) On the same set of facts, prosecution had been launched by the CBI and recently a couple of charge-sheets have been filed under IPC and the Prevention of Corruption Act against Shri Y.S. Jagan Mohan Reddy. The Enforcement Directorate has also launched an investigation into the money laundering against Shri Y.S. Jagan Mohan Reddy. The decision of ITAT will have a serious impact on the prosecution proceedings launched by the CBI.
(vi) The issues involved need an in-depth analysis by a Special Bench as it needs interpretation of Sec.56 and Sec.68 of I.T. Act on a complex set of facts.
(vii) This case shall set a trend in curbing the pernicious practice of conversion of black money into white and requires the attention of ITAT.
6. In view of the above facts and circumstances of the case and in the interest of revenue, it is requested that a Special Bench of ITAT be constituted urgently u/s 255(3) of the I.T. Act for hearing the appeal in the case of Jagathi Publications Pvt. Ltd. For A.Y. 2008-09 in ITANo.18/Hyd/2012, so that the next hearing takes places before such special bench.
After the Board made the above request on 15th November 2012 to the President for constitution of the special bench, the President made a handwritten endorsement on the letter on 19th November 2012 as "VP Hyd. Zone for comments". Thereafter, the letter of the Board with the endorsement of the President was placed before the concerned Vice President. The Vice President on 27th November 2012 addressed a letter to the members of the Regular Bench at Hyderabad on this issue.
The Regular Bench opined that most of the appeals that come before the tribunal involve complex facts and intricate questions of law and if the argument of Revenue is accepted, almost all matters will have to be referred to a special bench. Similarly, huge revenue implications are also not a ground for constitution of a special bench as many cases have such implications. As regard the impact of the decision of the tribunal on the pending prosecutions, the Bench observed that the Central Bureau of Investigation and the Directorate of Enforcement Department are investigating agencies, the tribunal is a quasi-judicial body, and its decisions are rendered upon consideration of facts and material before it. The Bench observed that, however, there is political sensitivity involved in the Appeal filed by the Petitioner and decision by the Tribunal on this issue would have widespread ramifications. The Bench then observed that hearing of the appeal at Hyderabad may generate widespread attention of local media and avoidable heated debate and considering the sensitivity of this case, may affect the hearing of the Bench. The Bench accordingly opined that the President may constitute an Appropriate Bench outside Andhra Pradesh to remove any doubt and apprehension in the mind of any party to the litigation as regard fairness and ultimate decision-making. The Bench accordingly forwarded its proposal with its comments to the Vice President on 19th December 2012 with a request to place the same before the President.
The Vice-President wrote to the President on 9th January 2013, “I am of the prima facie view that it deserves to be referred to a special bench consisting of three Members to decide the entire appeal in exercise of the powers vested in you under section 255(3).”
The Vice President did not mention about the recommendation of the Regular Bench that an Appropriate Bench be constituted for the hearing outside Andhra Pradesh.
The President on 5th March 2013 constituted a Special Bench of three Members.