Relevant References.

Constitution of India

Article 226 and Article 227

Income Tax, 1961

Section 131 and Chapter XIX-B

Issue

In recent case [U.A.E. EXCHANGE CENTRE LTD. Versus U.O.I. & ANR. [2009 -TMI - 32984 - DELHI HIGH COURT], petitioner sought to challenge the advance ruling of the Authority For Advance Rulings (Income Tax), New Delhi (hereinafter referred to as "the Authority") dated 26.05.2004 passed in A.A.R.No.608/2003 pursuant to an application made by the petitioner under Section 245Q(1) of the Income Tax Act, 1961, before the Honorable High Court of Delhi.

But, the respondent (Revenue) challenged the writ petition on the following grounds:

Respondent has raised a preliminary objection, which is that, in view of Section 245S, which provides, that the advance ruling pronounced by the Authority under the provisions of Section 245R shall be binding on the petitioner/applicant, the Commissioner and the Income Tax authorities subordinate to him in respect of the application and the transactions on which ruling has been sought - this Court ought not to exercise its extra ordinary jurisdiction under Article 226 of the Constitution of India as, there is no case made out by the petitioner that the Authority has acted either without jurisdiction or in breach of the principles of natural justice.

Threfore, honorable HC, before disposing off the writ petition has answer the two question (i) whether AAR is a tribunal for the purpose of Article 227 and (ii) Reasons for exercising extra ordinary power under Article 226

(i) Whether AAR is a Tribunal?

Honorable HC found that AAR is a tribunal for the purpose of Article 227 of the Constitution of India on the following grounds:

"7. This brings us to a question as to whether the Authority is a Tribunal within the meaning of Article 227 of the Constitution. The broad test which has been laid down by the Courts are that an Authority shall be construed to be a Tribunal within the meaning of Article 227 of the Constitution of India if it is invested with the judicial power of the State, which is, that it should act judicially after ascertaining the facts placed before it and upon application of the relevant law applicable to the facts obtaining in a case. Broadly, the expression used in various judgments rendered by various Courts is that an Authority would be a Tribunal if it has the 'trappings of a Court'. What are the indices of the expression 'trappings of a court' are best illustrated in the judgment of the Supreme Court in the case of Jaswant Sugar Mills Ltd, Meerut vs. Lakshmi Chand & Ors; AIR 1963 SC 677, Justice Shah (as he then was) at page 685 (paras 19 & 20) observed as follows:- "Their primary function is administrative and not judicial. In deciding whether an authority required to act judicially when dealing with matters affecting rights of citizens may be regarded as a tribunal, though not a court, the principle incident is the investiture of the "trappings of a court" - such as authority to determine matters in cases initiated by parties, sitting in public, power to compel attendance of witnesses and to examine them on oath, duty to follow fundamental rules of evidence (though not the strict rules of the Evidence Act), provision for imposing sanctions by way of imprisonment, fine, damages or mandatory or prohibitory orders to enforce obedience to their commands. The list is illustrative; some, though not necessarily all such trappings will ordinarily, make the authority which is under a duty to act judicially, a 'tribunal'. 20. Mahajan, J., in Bharat Bank Ltd. v. Employees of Bharat Bank Ltd. [(1950) S.C.R. 459] observed at p. 476 :

"As pointed out in picturesque language by Lord Sankey L.C. in Shell Co. of Australia v. Federal Commissioner of Taxation [[1931] A.C. 275], there are tribunals with many of the "trappings of a Court" which, nevertheless, are not Courts in the strict sense of exercising judicial power. It seems to me that such tribunals though they are not full-fledged Courts, yet exercise quasi-judicial functions and are within the ambit of the word 'tribunal' in article 136 of the Constitution. It was pointed out in the above case that a tribunal is not necessarily a Court in this strict sense because it gives a final decision, nor because it hears witnesses on oath, nor because two or more contending parties appear before it between whom it has to decide, nor because it gives decisions which affect the rights of subjects, nor because there is an appeal to a Court, nor because it is a body to which a matter is referred by another body. The intention of the Constitution by the use of the word 'tribunal' in the article seems to have been to include within the scope of article 136 tribunals adorned with similar trappings as Court but strictly not coming within that definition."

8. Seen in the light of the principles enunciated above, it is clear that the Authority constituted under Chapter XIX-B of the Act is a Tribunal as it is invested with powers of a civil court by virtue of provisions of Section 131 of the Act; which includes all such powers a court is vested with under the CPC when trying a suit in respect of matters relating to discovery, inspection, enforcing attendance of persons including officials of banking company and examining such persons on oath, compelling production of books of accounts, summons of accounts etc. Under the provisions of 245R, there is a requirement to give an opportunity of hearing to the applicant and to give reasons for rejecting an application. The cumulative effect of the powers invested and the attributes of the Authority, when gleaned from the provisions of Chapter XIX-B, leave no doubt in our minds that it has the 'trappings of a court' and hence, would undoubtedly qualify as a Tribunal within the meaning of Article 227 of the Constitution of India. Thus, the Authority would be amenable to the jurisdiction of this court under Article 227, and more so, under Article 226 of the Constitution of India which, without doubt, has a wider reach being conferred with jurisdiction to issue appropriate writ order or direction to any "person or Authority" for enforcement of fundamental rights under Part-III of the Constitution as also for any other purpose. [See: Kihoto Hollohan vs. Zachillhu and Ors; 1992 Supp (2) Supp 651 at 706 to 712 (paras 98 to 111)]"

(ii) Reasons for exercising extra ordinary power under Article 226

Based on various grounds and judicial pronouncements and scope of Article 226,  honorable HC observed that:

"9.3 The difficult part is as to how to differentiate between the error of law as against the error of jurisdiction as in most cases errors of law impinge upon the jurisdiction of the court. However, this distinction has disappeared with the judgment of House of Lords in the case of Anisminic vs. Foreign Compensation Commission; (1969) 2 AC 247 as also in O' Reelly vs. Mackman; (1983) 2 AC 237 at Page 278. The position which has emerged is that, in so far as, errors of fact are concerned the Courts will quash a decision which is based on an erroneous but a decisive fact which goes to the root of jurisdiction, or is based on no evidence or is wrong, misunderstood or ignored. Similarly Courts would also quash decisions of the Tribunal which is a decisive error of law since all errors of law are considered as errors of jurisdiction (See: Administrative Law 8th Edition by H.W.R.Wade and C.F.Forsyth at Page 286). What has, however, been accepted, is that, the Writ Courts in India have power to issue the writ of certiorari, in respect of, errors apparent on the face of the record committed by a subordinate Court or a Tribunal."

Final Decision on Admission of Writ Petition against the order of AAR

10. In the light of the aforesaid well entrenched principles of law it would be appropriate to consider the decision of the Authority in the facts of the present case.

For full text of judgment - visit

U.A.E. EXCHANGE CENTRE LTD. Versus U.O.I. & ANR. [2009 -TMI - 32984 - DELHI HIGH COURT]

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