TaxTMI 
TaxTMI 
2010 (3) TMI 798
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....ion, which had become unrealizable and written off in the books of account, without considering the objects of the company and the provisions of s. 36(2)(i) and the fact that interest income from these loans have been accepted in the earlier year as business income in the hands of the appellant. (III) The learned CIT(A) has erred in sustaining the disallowance of the inter-corporate loan of Rs. 27,00,000 to Asia Constructions which had become unrealizable and written off in the books of account, without considering the objects of the company and the provisions of s. 36(2)(i) and the fact that interest from these loans have been accepted in the earlier years as business income in the hands of the appellant. (IV) The learned CIT(A) has erred in sustaining the disallowance of unrealized interest without considering the fact that not only the unrealized interest amount of Rs. 7,15,781 is outstanding but also the whole interest receipt of Rs. 21,45,046 is unrealizable and accounted in the books of account and subsequently it is written off. Hence the entire unrealizable interest should be allowed. (V) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of in....
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..... 3,08,59,280. On appeal, the CIT(A) has rejected the plea of assessee on this issue in para 5.4 as under: "From the above points raised in paras 5.1 to 5.3, it is seen that the validity of the proceedings initiated under s. 147 validity of the notice issued under s. 148 and consequently the validity of the order of the assessment for the asst. yr. 2002-03 dt. 15th March, 2006 have been challenged. From the records of the assessment, I find that the proceedings under s. 147 were initiated only after the return of income for the asst. yr. 2002-03 was processed under s. 143(1). The Hon'ble apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500 (SC) held that an intimation under s. 143(1) is not an assessment and that it does not debar the AO from issuing a notice under s. 148, if the conditions for initiating proceedings under s. 147 are satisfied and material was available for taking up assessment proceedings. The Hon'ble Court noted that 'the acknowledgement is not done by any AO but mostly by ministerial staff. Can it be said to be assessment done by them? The answer is an emphatic 'no'. The intimation under s.....
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....y the decisions of the Hon'ble Supreme Courts and High Courts including the jurisdiction High Court. He has relied upon the following decisions: (i) Hon'ble Supreme Court in Trustees of H.E.H. The Nizam's Supplemental Family Trust vs. CIT (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC); (ii) Hon'ble Madras High Court in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad); (iii) In the decision of the Hon'ble Delhi High Court in the case of KLM Royal Dutch Airlines vs. Asstt. Director of IT (2007) 208 CTR (Del) 33 : (2007) 292 ITR 49 (Del); (iv) In the case of CIT vs. Qatalys Software Technologies Ltd. (2009) 308 ITR 249 (Mad). (c) Hence, when the revised return was filed on 23rd March, 2004, it substitutes the original return and that any proceeding should be made on the basis of the revised return filed and not, on the original return. Hence, in the instant case, there was time to issue notice under s. 143(2) and complete the assessment till 31st March, 2005 however he had not done the same and had proceeded with issuing notice under s. 148 on 9th July, 2004, thus to extend the time-limit for completing the assessment. Hence, following the abovesaid deci....
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.... the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. sustained the reopening and reversed the decision in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad). He has further contended that in view of the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., the power of AO is not fettered for reopening the assessment even if the time for issuing notice under s. 143(2) of the IT Act, 1961 is still available and not expired. He has relied upon the order of lower authorities as well as the following decisions: (1) In the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd.; (2) In the case of CIT vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad). 6. After considering the rival contentions and the materials on record and the decisions cited and relied upon by both the parities, the question arises regarding the validity of the notice issued under s. 148 of the IT Act, 1961 prior to the expiry of the period for issuing notice under s. 143(2) of the IT Act, 1961. This issue is purely legal in nature and there is no dispute regarding the facts relating to this issue. As per the provisions of ss. 147 and....
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....ovinces Manganese Ore Co. Ltd. vs. ITO (1991) 98 CTR (SC) 161 : (1991) 191 ITR 662 (SC), for initiation under s. 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome to the proceeding is not relevant. In other words, at the initiation stage, what is required is 'reason to believe', but not the established fact of escapement of income. At the stage of issue of notice, the only question is I whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction [ITO vs. Selected Dalurband Coal Co. (P) Ltd. (1996) 132 CTR (SC) 162 : (1996) 217 ITR 597 (SC). Raymond Woollen Mills Ltd. vs. ITO & Ors. (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC)]. The scope and effect of s. 147 as substituted w.e.f. 1st April, 1989, as also ss. 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of....
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.... Dutch Airlines vs. Asstt. Director of IT, the decision is dt. 12th Jan., 2007 which means the said decision is prior to the decision of the Hon'ble apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., which is dt. 23rd May, 2007 and thus the Hon'ble Delhi High Court had no occasion to consider the said decision of the Hon'ble Supreme Court. 8. Similarly, the decision of Hon'ble jurisdictional High Court in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad) has been passed without considering the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. We note that in the subsequent decision of ITO vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad), Hon'ble jurisdictional High Court after considering the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. has decided the issue in paras 5 to 10 as under: "Sec. 147 authorizes or empowers the AO to assess or reassess any income chargeable to tax, if he has reason to believe that the income for the assessment year has escaped assessment. The powers so vested with the AO have to be exercised subject....
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.... different points of time, that the intimation under s. 143(1)(c) was deemed to be a notice of demand under s. 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery of the amount indicated to be payable in the intimation became permissible. And nothing more could be inferred from the deeming provision. The Kerala High Court held that so long as the ingredients of s. 147 are fulfilled, the AO was free to initiate proceedings under s. 147 and failure to taken steps under s. 143(3) would not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued. The Punjab & Haryana High Court in the case of Punjab Tractors Ltd. vs. Jt. CIT (2002) 173 CTR (P&H) 84 : (2002) 254 ITR 242 (P&H) held that if the AO had reason to believe that any income chargeable to tax had escaped assessment for any assessment year, he could proceed to assess or reassess such income. Thus, the condition precedent for proceeding under s. 147/148 was that the AO should have reason to believe that income had escaped assessment. Nothing more. It was not necessary that assessment shoul....
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....e that income has escaped assessment it confers jurisdiction to reopen the assessment......... So long as the ingredients of s. 147 are fulfilled, the AO is free to initiate proceedings under s. 147 and failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued.' For the reasons stated above and in the light of the pronouncement of the Supreme Court and the judgments of the High Courts referred to supra, we are of the considered view that the order of the Tribunal impugned in this appeal has to be set aside and the same is set aside by allowing the appeal." The subsequent decision of the Hon'ble jurisdictional High Court in the case of ITO vs. K.M. Pachayappan (2009) 311 ITR 31 (Mad) has rendered the earlier decision as no more good law on the point. In the case of CIT vs. Qatalys Software Technologies Ltd., the Hon'ble jurisdictional High Court by following the decision in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad), has held as under: "After hearing the parties, the Tribunal held in favour the assessee on the issue or reopening of the assessment when th....
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....n is reversal/overruling of the earlier decision, then the decision in the case of CIT vs. Qatalys Software Technologies Ltd. would not help the assessee. 9. When there is diversion of views of the Hon'ble High Court on the same issue, then the decision which laid down the principle of law and based on the latest decision of the Hon'ble Supreme Court shall be followed by the lower authorities. Though, this Tribunal is no authority to distinguish the decision of the Hon'ble High Court but when there are decisions taking different views, then the lower authorities have to follow the latest decision which has laid down the law more elaborately and logically. In this respect, we may take help of the decision of the Full Bench of the Hon'ble Andhra Pradesh High Court in the case of Ushodaya Enterprises Ltd. vs. CST 111 STC 711 (AP). The Hon'ble Andhra Pradesh High Court has observed in para No. 12 as under: "12. We may also notice a Full Bench decision of the Punjab & Haryana High Court in Indo Swiss Time Ltd. vs. Umrao AIR 1981 P&H 213, in which the majority Judges took the view similar to the one expressed by Jagannatha Shetty, J. It was observed: 'When judgments of the super....
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....ring of yarn and not moneylending activity, these advances of the assessee were investments made by utilizing its surplus funds and the same were capital in nature. The AO thus disallowed the claim in respect of Rs. 25 lakhs to Mercantile Credit Corporation Ltd. and Rs. 27 lakhs to M/s Alsa Constructions. On appeal, the CIT(A) has confirmed the order of the AO on this issue by taking similar view. 12. Before us, the learned Authorised Representative has submitted that the assessee offered interest on these advances as income in the earlier years which was accepted. He has further submitted that as per cl. 15 of the memorandum and articles of association the assessee has been authorized to make the advance. Therefore, once the amount has become bad and written off by the assessee, the same is allowable under s. 36(2)(i) of the IT Act, 1961. He has relied upon the order of the Hon'ble Bombay High Court in the case of Director of IT (International Taxation) vs. Oman International Bank SAOG (2009) 223 CTR (Bom) 382: (2009) 21 DTR (Bom) 193 : (2009) 313 ITR 128 (Bom). On the other hand, the learned Departmental Representative has submitted that the regular business of the assessee wa....
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....e assessee is not doing banking or a moneylending business. Therefore, by the provisions of s. 36(2), the claim of the assessee is not allowable. The case referred by the assessee is regarding a bank. Therefore, the decision of the Hon'ble Bombay High Court in the case of Director of IT (International Taxation) vs. Oman International Bank SAOG is not applicable in the facts and circumstances of the present case. Even otherwise, the said decision is on the point of writing off the bad debts in the books of account and in view of the amendments, the assessee is not required to establish that the concerned debt has actually become bad. 14. In view of the above discussion, we are of the considered view that in the facts and circumstances of the present case, the claim of the assessee is not allowable with respect to the unrecoverable advances. Accordingly, the orders of the lower authorities, qua this issue are upheld. Ground No. IV: Regarding disallowance of unrealized interest: 15. While disallowing the advance to two companies, M/s Mercantile Credit Corporation Ltd. and M/s Alsa Constructions the AO allowed the interest return of Rs. 7,15,781 out of Rs. 21,45,047 on the gro....
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....ivity of the assessee or not. As far as the netting of interest expenditure against the interest income is concerned, the same is covered against the assessee by the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. V. Chinnapandi (2006) 201 CTR (Mad) 13 : (2006) 282 ITR 389 (Mad), wherein the jurisdictional High Court has held that while computing the income under the head 'Profits and gains of business or profession', if any receipt by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature is included in such profits, the same has to be reduced by 90 per cent from the profits computed as aforesaid. The deductions to be made are from the amount of profits so computed and not from the amount computed under any other head of income of that assessee. No reference of net interest is mentioned in cl. (baa) of Explanation to s. 80HHC of the IT Act, 1961. Their Lordships have observed that what they have to see is only the nature of receipt as contemplated under the clause. No deduction is permissible. Once the receipt of the interest is known, 90 per cent of the same is to be reduced from the profits without deducting any ....
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.... 11th Sept., 2009 22. I have gone through the order proposed by learned Brother in this appeal and have also discussed the issues with him. I am unable to persuade myself to subscribe to the view proposed by learned Brother relating to the ground No. 1 in paras 6 to 10 of his proposed order and therefore, I hereby pass a separate dissenting order, in relation to this issue alone. And in respect of the other grounds/issue I am in agreement with the order proposed by learned Brother. 23. The aforesaid ground is about the validity of the notice issued by the AO under s. 148 of the Act, and it has to be examined in the light of the decisions of the jurisdictional High Court and of the Supreme Court in the following cases: ------------------------------------------------------------------- S.No. Name of the case Date of order ------------------------------------------------------------------- 1. Rajesh Jhaveri Stock Brokers (P) Ltd. &....
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....nbsp; 09.07.2004 ------------------------------------------------------------------- 25. In the case of Rajesh Jhaveri Stock Brokers (P) Ltd. the return was filed on 30th Oct., 2001, and the time available for issuing notice under s. 143(2) expired on 31st Oct., 2002. The notice under s. 148 was issued on 12th May, 2004, much after the time for issuing notice under s. 143(2) had expired on 31st Oct., 2002. These facts are presented below: Rajesh Jhaveri Stock Brokers (P) Ltd. (Date of judgment: 23rd May, 2007) ------------------------------------------------------------------- S.No. Particulars Date ------------------------------------------------------------------- 1. Return filed (asst. yr. 2001-02) &....
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....sp; 15.03.2000 ------------------------------------------------------------------- 26.1 In the above case of K.M. Pachayappan (2008) 304 ITR 264 (Mad), the AO's action of initiating proceeding under s. 147 was not upheld by the Madras High Court. 27. In case of K.M. Pachiappan (2009) 311 ITR 31 (Mad), the return for asst. yr. 1994-95 was filed on 28th March, 1996, and the time for issuing notice under s. 143(2) was available upto 31st March, 1997. The notice under s. 148 was issued on 18th June, 1996, when the time for issuing notice under s. 143(2) had not expired. These facts are presented below: K.M. Pachiappan (2009) 311 ITR 31 (Mad) (Date of judgment: 16th Aug., 2007) ------------------------------------------------------------------- S.No. Particulars Date ----------------------------------------....
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....bsp; Yes (20.12.2003) 3. Time available for issuing notice under 30.11.2004 s. 143(2) 4. Notice under s. 148 05.10.2004 ------------------------------------------------------------------- 28.1 In the case of Qatalys Software Technologies Ltd., the AO's action of initiating proceeding under s. 147 was not upheld, on the ground that the time for issuing notice under s. 143(2) had not expired. 29. It is seen that in the present case the notice under s. 148 was issued before the expiry of the time available for issuing notice under s. 143(2), whereas in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. the notice under s. 148 was issued after the expiry of the time available for issuing notice under s. 143(2). This is the crucial difference in facts, because of which the decisio....
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....8, dt. 9th June, 2004, was valid? 2. Whether, on the facts and circumstances of the case, the AO could initiate proceedings under s. 147 of the Act when the time for issuance of notice under s. 143(2) had not expired?" PRADEEP PARIKH, VICE PRESIDENT (AS THIRD MEMBER): 22nd Dec., 2009 There being a difference between the two Members who originally heard the appeal, the Hon'ble President was pleased to nominate the zonal Vice President as the Third Member by his order dt. 13th Oct., 2009. Accordingly, I proceed to resolve the points of difference referred to the Third Member which are as follows: "1. Whether, on the facts and circumstances of the case, the proceedings initiated by the AO under s. 147 of the Act for asst. yr. 2002-03, vide notice issued under s. 148 on 9th July, 2004, was valid? 2. Whether, on the facts and circumstances of the case, the AO could initiate proce....
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....that case the time-limit for issuing notice under s. 143(2) had expired. My attention was drawn to the meaning of the expression "assessment proceedings" which according to the Advanced Law Lexicon, Third Edition meant the entire process of assessment starting from the stage of filing of return under s. 139 or issuance of notice under s. 142(1) till the making of the assessment order. For this proposition, reliance was placed on the judgment of the Supreme Court in the case of Auto & Metal Engineers vs. Union of India (1997) 7 SCC 734. The learned counsel after referring to several other judgments contended that it is a settled proposition that the proceedings under s. 148 can be initiated when no assessment under s. 143(3) can be made. 4. The contention of the learned Departmental Representative was that the assessee should not have any grievance as to whether the assessment is made under s. 143 or 147 or whether it is rectified under s. 154 or revised under s. 263 of the Act as ultimately the assessee is going to pay the tax at the same rate. Hence, in the present case if the assessment is made under s. 147 instead of s. 143, there is no damage to the assessee. It was contende....
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....(SB) 461 : (2005) 95 ITD 152 (Asr)(SB). The gist of the observations in the said decision is that s. 147 deals with "income escaping assessment". The process entails the reopening of a completed assessment. This infringes on the sanctity of a completed assessment. Therefore, it is incumbent upon the AO to act in a fair manner and not in a partisan manner. There is no jurisdictional fact in existence which straightaway empowers the AO to enter jurisdiction. He can assume jurisdiction to reopen a completed assessment only on the basis of his own honest belief. Therefore, though s. 147, in essence, is a machinery section, it also affects the substantive right of the assessee which had accrued to him on completion of original assessment. This is an example of what Chief Justice Venkatachaliah said in the case of CWT vs. Sharvan Kumar Swamp & Sons (1994) 122 CTR (SC) 380 : (1994) 210 ITR 886 (SC) that a substantive right can be found secreted in the interstices of procedure. This is one principle which we shall keep in mind while adjudicating the matter on hand. 7. As mentioned earlier, in s. 147 we are concerned with income escaping assessment. The Law Lexicon by P. Ramanatha Aiyar ....
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....his juncture, it is very emphatically reiterated that as per the judgment in the case of Ranchhoddas Karsondas, once a return is filed, the assessment proceedings become pending. 8. In the light of the above principles let us examine cl. (b) of Expln. 2 to s. 147 which is relevant in this appeal. The same is reproduced below: "Explanation 2: For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely,- (a).............. (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c)..............." The Department wants to interpret the expression "no assessment has been made" in the above clause to mean that it also includes situation where assessment under s. 143(3) is still possible but not yet made. If this interpretation is to be accepted, it will set at naught the fundamental principles underlying s. 147 of the Act and which principles have been followed till date. These principles are applicabl....
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....t it to be a complete law declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. In this context, we proceed to examine the judgment in the case of Rajesh Jhaveri. 10. The facts in the said case have been noted by the learned AM in para 25 of his order which clearly show that the notice under s. 148 was issued much after the time for issuing notice under s. 143(2) had expired. In other words, action under s. 147 was initiated only on the termination of the proceedings under s. 143(3) of the Act. Therefore, the said action was upheld by the Supreme Court which is in consonance with the earlier judgments of the same Court referred to in para 7 above. The observation in placitum 18 of the Supreme Court judgment has to be understood in the right perspective. It is mentioned that failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued. The failure of the AO which the Court is talking about will be deemed to have occurred only when the hands of the AO are tie....
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....ed JM is also in para 6 which says that failure to take steps under s. 143(3) will not render the AO powerless to initiate proceedings under s. 147 of the Act even when the return was processed under s. 143(1) only. This observation is borrowed from the judgment in the case of Rajesh Jhaveri with which we have already dealt in para 10 above. The third observation is in para 10 of the order. It reads as follows: "The Hon'ble Supreme Court has emphatically made it clear that the power of the AO is not fettered for initiating the proceedings under s. 147 by issuing notice under s. 148, even prior to the expiry of the period for issuing notice, the under s. 143(2)" (sic). The judgment of the Supreme Court referred to in the above observation is that in the case of Rajesh Jhaveri. I have read the said judgment more than once. Unfortunately, I have not found anywhere in the judgment the above observation made by the Court either directly or indirectly. Nowhere in the judgment is there any reference about the time-limit of notice to be issued under s. 143(2) of the Act. 12. Coming to the three decisions of the jurisdictional High Court, there is indeed a divergence of opinion in ....
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....wance of unrealized interest without considering the fact that not only the unrealized interest amount of Rs. 7,15,781 is outstanding but also the whole interest receipt of Rs. 21,45,046 is unrealizable and accounted in the books of account and subsequently it is written off. Hence, the entire unrealizable interest should be allowed. (V) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of insurance receipts from the profits while computing deduction under s. 80HHC. (VI) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of miscellaneous income (scrap sales, etc.) from the profits while computing deduction under s. 80HHC. (VII) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of interest income from the profits while computing the deduction under s. 80HHC, without first netting off the interest expenditure against the interest income. (VIII) The learned CIT(A) in his order has erred in not considering the following ground raised before him: "The learned AO has erred in assessing the interest receipts amounting to Rs. 59,27,318 under the head 'Income from other sources' without considering the facts and ci....
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....e his order dt. 22nd Dec., 2009. The relevant portion of the order of the learned Third Member is reproduced as under: "11. Now we deal with certain observations of the learned JM made in his order. In para 6 of the order, it has been observed that there is no bar for issuing notice under s, 148 before expiry of the time available for issuing notice under s. 143(2) of the IT Act, 1961, if the other conditions for reopening of the assessment and initiation of proceedings under s. 147 are satisfied. In this connection, the scheme of the Act has to be appreciated. Chapter XIV of the Act deals with the procedure for assessment. Secs. 139 to 140A deal with the filing of return and matters connected with the return. Secs. 142 to 145A deal with assessment procedures. It is only after s. 145A the subject of reopening of assessment follows. This is one indication that an assessment can be reopened only on the termination of the procedure prescribed in the preceding provisions viz., from ss. 142 to 145A. Further, s. 147 uses the expression 'assess or reassess'. The word 'reassess' is used to indicate the termination of proceedings as a result of an assessment made under s. 143(3) of the A....
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....3. In the light of the above discussion, I agree with the conclusion reached by the learned AM and quash the order dt. 15th March, 2006 passed under s. 143 (3) r/w s. 147 of the Act. 14. The matter shall now be put before the regular Bench for the disposal of the appeal in accordance with the opinion of the majority." 7. Therefore, the view of the learned AM has become the majority view and accordingly, the issue of validity of the proceedings initiated under s. 147 and notice under s. 148 stands allowed in favour of the assessee. 8. Now, this appeal is placed before us for the purpose of passing consequential order as per the majority view. The order of the learned Third Member appears to us as if it had been passed by an appellate authority sitting over the orders of the Members of the regular Bench of the Tribunal. This has necessitated and persuaded us to discuss the power, authority and jurisdiction of the learned Third Member under s. 255(4) of the IT Act. 9. Secs. 255(4) confers jurisdiction upon the Third Member in case of difference of opinion between two Members constituting the Bench that originally heard the appeal. Sub-s. (4) of s. 255 of the IT Act reads a....
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....n the additional points raised by the assessee. But without doing so, the Third Member has remitted the matter to the original two Members of the Tribunal for a fresh decision. We are of the view that the Third Member, who is functioning under s. 255(4) of the Act does not have such a power as to direct the two Members of the Tribunal who had differed on the point referred to the Third Member, to decide a particular point of the Act in a particular manner. Such a power vests only with an appellate or revisional authority, if there is any. The power of the Third Member to whom the points of difference have been referred cannot act as if it were an appellate authority over the two Members of the Tribunal and direct them to rehear and dispose of the matter afresh. No doubt, the Third Member, in this case happened to be the Vice President. But that will not clothe him with the power to give directions or remit the matters while functioning under s. 255(4) of the Act. The learned Advocate General appearing for the assessee would say that s. 255(4) of the Act should be read in conjunction with s. 254(1) of the Act which deals with the powers of the Tribunal. According to him, the Third M....
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....ecting them to rehear the matter will be clearly outside the jurisdiction of the Third Member. Hence, we cannot sustain legally the order of the Third Member, in this case, remitting the matter to the two Members of the original Tribunal without expressing any opinion on the question which he had to consider.' 16. Similar view was also taken by the Allahabad High Court, in the case of Jan Mohammed vs. CIT (1953) 23 ITR 15 (All), and considered the scope of the provision of s. 5A(7) of the Act, corresponding to s. 255(4) of the new Act wherein it was held that the Third Member can decide only the point that had been referred to him and he cannot formulate the new points himself and reads as follows: The Third Member could, therefore, decide only the point that had been referred to him and he could not formulate a new point for himself on which he could base his decision. It appears to us to be further clear from a reading of the sub-section quoted above that, after the decision of the point or points referred to him by the Third Member, the case should go back to the original Tribunal because so far as we can see the Third Member has not been given any right to decide the appe....
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....eal. Therefore, the jurisdiction of the learned Third Member under sub-s. (4) of s. 255 of the IT Act is confined and limited to the point of difference and concurrence with the view of either of the differing Members. The learned Third Member has to decide the point in support of and in agreement with one of the dissenting views, and, while functioning as a Third Member, he cannot travel beyond his jurisdiction by assuming the powers or acting as having powers of appellate authority over the Members constituting the Bench. Since the Third Member is not sitting on the orders of the differing Members of the Bench as a superior Court in appeal, he has no jurisdiction to find fault or criticize the orders of the differing Members. The point of difference has to be decided on positive reasoning and assertion or by supporting the reasoning of either of the dissenting Members but should not be on the basis of finding fault in the orders of the differing Members. The resolution of difference of opinion by the Third Member shall be based on fair and positive assertion and appreciation of facts and law and shall not be guided by any personal likes and dislikes. The judicial order shall not ....