Administrative power to constitute a Special Bench upheld where conflicting Tribunal views required resolution.

The Supreme Court held that the President's power under section 255 of the Income-tax Act to constitute Benches and Special Benches is administrative in nature. A reference by a Bench under the Tribunal's regulations is only one way of bringing a matter to the President's notice, and the President may also act on other relevant information to constitute a Special Bench where important or conflicting questions need resolution. Judicial review under article 226 is limited to illegality, arbitrariness, or mala fides. As there was a conflict of views between Benches and no arbitrariness or bad faith was shown, the Special Bench was validly constituted.

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Issues: Whether the President of the Income-tax Appellate Tribunal was legally competent to constitute a Special Bench for hearing the three appeals and whether the Special Bench was validly constituted.

Analysis: The power to constitute Benches and Special Benches under section 255 of the Income-tax Act is administrative in character. A reference by a Bench under the Tribunal's regulations is one mode of bringing the matter to the President's notice, but it is not the only mode. The President may also act on relevant information and, in a bona fide exercise of administrative power, constitute a Special Bench where important or conflicting questions require resolution. Judicial review under article 226 is confined to cases of illegality, arbitrariness, or mala fides. On the record, there was a conflict of views between Benches, and the constitution of the Special Bench for the appeals in question was not shown to be arbitrary or mala fide.

Conclusion: The President was competent to constitute the Special Bench and the Special Bench was validly constituted, in favour of the Revenue.

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