1971 PLP 530 (PTD)

Income‑tax‑Appellate Tribunal‑Constitution‑Order passed by Bench of four members‑Validity of‑Whether question of law Indian Income‑tax Act, 1922, Ss. 5‑A(6) & 66(1). Section 5‑A(6) of the Indian Income‑tax Act, 1922, which pro vides for the constitution of Benches of the Appellate Tribunal, does not authorise a Bench consisting of four members and hence an order made by a Bench of four members is invalid, even though one member was sitting on the Bench only in, order to gain experience. The validity of the constitution of the Tribunal is a question of law arising out of such an invalid order for the purpose of section 66(1) of the Act. K. L. Misra (Advocate‑General) for the Assessee. Shand Bhushan and Dr. R. R. Misra for the Commissioner. JUDGMENT V. G. OAK, C. J.‑The Income‑tax Appellate Tribunal, Allahabad Bench, has referred the following two questions of law to this Court. "(1) Whether, on the facts and circumstances of the case, and having regard to the deed executed by the assessee on August 13, 1936, the whole of the income from the business styled as Radha Vilas Karyalaya is the income of the assessee and assessable in its hands or that half of the income belongs to a separate trust styled as Sri Ram‑Lakshman‑Janki ? (2) Whether the order passed by the Tribunal dated July 8, 1958, under the signature of four of its members is valid in law ?" This reference governs six assessment years, viz., 1951‑52, 1952‑53, 1953‑54, 1954‑55, 1955‑56 and 1956‑

57. For the first five assessment years, Sita Ram, deceased, was assessed as an individual. He died on April 1, 1955. An association of persons under the style of Messrs Radha Vilas Karyalaya was assessed for the 6th assessment year 1956‑

57. For the same assessment year 1956‑57, Sita Ram, deceased, was also assessed for a part of the accounting period. For each of these assessment years the question arose whether the assessee was liable for the whole of the income from a certain business styled as Radha Vilas Karyalaya. The assessee took up the position that half of the income belongs to a separate trust styled as Sri Ram -Laskhman‑Janki. This contention raised by the assessee was overruled by the Income‑tax Officer. The assessee was assessed for the whole of the income from the business styled as Radha Vilas Karyalaya. This view of the Income‑tax Officer was upheld in appeal and in further appeal by the Appellate Assistant Commissioner and the Income‑tax Appellate Tribunal, respec tively. Radha Vilas Karyalaya applied for reference to Court on a number of questions. The Tribunal was satisfied that two questions of law did arise out of its appellate decision dated July 8, 1958. The Tribunal accordingly referred to this Court the two questions of law quoted above. We find it convenient to take up question No. 2 first. Annexure "G" to the statement of the case is a copy of the judg ment of the Income‑tax Appellate Tribunal dated July 8, 1958. The judgment has been signed by four Members Sri P. C. Mehrotra was the President and Accountant Member ; while Sri S. C. Manchanda, Sri Vidya Sankaran and Sri Sriramulu were Judicial Members. The applicant's contention is that four Members could not constitute a Bench of the Appellate Tribunal. The answer of the department is that, in the first place, the appeal was actually decided by three Members, and not by four Members. In the alternative, it is suggested that the irregularity does not render the judgment of the Tribunal invalid. The Tribunal in the statement of the case has described the circumstances under which the appeal before the Tribunal was disposed of in July 1958 : "The Bench before which this case came up for hearing consisted of the President (Accountant Member) and Sri Manchanda (Judicial Member). When it came to the knowledge of the President that this case had been previously dealt with by another Bench, he constituted a special Bench. At that time a new Judicial Member (Sri Sriramulu) had joined the Tribunal and was allowed to sit on the Bench with a view to again experience. It is regretted that the President lost sight of the fact that he should not have been a party to the order. The main order is by the President and all the other members have signed that order. No one has differed with the view taken by the President." As already mentioned, the judgment of the Tribunal is signed by four members. Sri Mehrotra, President, signed it on July 6, 1958. The three Judicial Members including the new member, Sri Sriramulu, signed the judgment on July 8, 1958. It is thus clear that all the four members including Sri Sriramulu participated in the disposal of the appeals before the Tribunal. "Within sixty days of the date upon which he is served with notice of an order . . . . . . . the assessee. . . . . . may, by application in the prescribed form . . . . . . require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall . . . . . . draw up a statement of the case and refer it to the High Court . . . . ." Under subsection (1) of section 66 of the Act, the Tribunal has to refer to the High Court any question of law arising out of such order. Now, if the applicant's contention is correct, it would mean that the judgment of the Tribunal was invalid due to the defect in the constitution of the Bench. This circumstances alone would vitiate the judgment of the Tribunal. We overrule the preliminary objection raised by Dr. Misra, and hold that question No. 2 referred to this Court does arise out of the judgment of the Tribunal dated July 8, 1958. Chapter II‑A of the Act provides for Appellate Tribunal section 5‑A empowers the Central Government to appoint an Appellate Tribunal consisting of as many persons as it thinks fit. The Appellate Tribunal consists of Judicial Members and Accountant Members. Subsection (6) of section 5‑A provides for constitution of Benches of the Appellate Tribunal. Subsection (6) of section 5‑A states: "Save as hereinafter provided a Bench shall consist of one Judicial Member and one Accountant Member: Provided that the President or any other Member of the Tribunal specially authorised in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a Member and which pertains to an assessee whose total income as computed by the Income‑tax Officer in the case does not exceed Rs. 15,

000. Provided further that the President may, for the disposal of any particular case, constitute a special Bench consisting either of two Judicial Members and one Accountant member or of one Judicial Member and two Accountant Members." It will be seen that subsection (6) of section 5‑A contemplates constitution of Benches in three different ways. Ordinarily, a Bench should consist of two Members‑one Judicial Member and one Accountant Member. The two provisos to subsection (6) provide exceptions in certain cases. According to the first proviso, the President or any other Member of the Tribunal specially authorised by the Central Government may sit alone, and dispose of cases of small valuation. The second proviso permits constitution of special Benches. A special Bench consists of three Members. There are two ways of constituting special Benches. A special Bench may consist of two Judicial Members and one Accountant Member. Or, a special Bench may consist of one Judicial Member and two Accountant Members. It will be seen that neither the main provision of sub section (6) of section 5‑A, nor neither of the two provisos contemplates a Bench or a special Bench of four Members. Disposal of an appeal by a Bench consisting of four Members is not authorised by the statute. The applicant is right in his contention that the disposal of the appeals by a Bench of four Members was invalid. The Tribunal in the statement of the casa has remarked that Sri Sriramulu was there merely for the purpose of training. But we note that Sri Sriramulu, Member, was not content with watching the proceedings by the special Bench consisting of three Members. He actually participated in the proceedings, and signed the judgment dated July 8, 1958, as a Member of the Tribunal. It must, therefore, be held that the appeals were disposed of by four Members of the Appellate Tribunal sitting together. We hold that the order passed by the Tribunal, dated July 8, 1958, under the signatures of four Members is invalid. In view of our answer to question No. 2, the various connected appeals filed by the assessee will have to be reached by a Bench of the Appellate Tribunal properly constituted. The newly constituted Bench will have to reconsider the question whether the assessee is liable for the whole of the income from the business styled as Radha Vilas Karyalaya. Since the Tribunal will have to deal with question No. 1 afresh, we need not answer question No. 1 at all. Question No. 1 may be left open. We do not answer question No. 1 for the reasons given above. Our answer to question No. 2 referred to this Court is in the negative. The applicant shall receive from the Commissioner of Income‑tax, Lucknow, Rs. 200 as costs of this reference.