TaxTMI 
TaxTMI 
2011 (7) TMI 577
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....lved on two basic issues, namely, whether or not the Mumbai office was a permanent establishment in India and whether or not the income derived from the work carried outside India was taxable in India. These issues were finally settled by the Supreme Court for the assessment years 1987-88 and 1988-89 holding that the Mumbai Office was not a permanent establishment and that the revenue derived from the activities carried outside India was not taxable in India. 3. The petitioner contends that in spite of the decision of the Apex Court, the Income-tax Officer continued to levy the tax. The petitioner contended that for the assessment years 2002-03 and 2004-05, the petitioner succeeded before the Income-tax Appellate Tribunal on the aforesaid two issues. The Income-tax Deptt. did not file any appeal under section 260(A) of the Act before the High Court and instead initiated the assessment proceeding under sections 147 and 148 of the Act on the ground that income chargeable to tax had escaped assessment. 4. Pursuant to the issuance of notice under sections 147 and 148 of the Act, the Assessing Officer forwarded a draft of the proposed assessment for the assessment years 2002-03, 2004-....
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....e cases and to bring finality to the litigation of multi national companies. The learned counsel submitted that the Dispute Resolution Mechanism evolved under section 144C of the Act was an alternate judicial forum for adjudicating legal as well as factual disputes between the assessee and the Assessing Officer. The learned counsel submitted that the function of the Panel was judicial in nature and, for effective administration of justice, the Panel was required to have certain autonomy, impartiality and fair play in the discharge of their judicial functions. 7. In the light of the aforesaid, the learned counsel for the petitioner submitted that the Commissioner of the Income-tax under the Act is expected to work in the best interest of the Deptt. both as an administrative head as well as the revenue collecting head. The Commissioner also exercises statutory function of filing appeals on behalf of the department and is also involved in filing counter affidavits on behalf of the Deptt. before the superior court. The Commissioner also reviews orders of the subordinate Assessing Officer which orders could be prejudicial to the interest of revenue. The Commissioner also has the power ....
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....e same Officer who had taken a decision adverse to the assessee when he sits as a member of the collegium and decides to judge the very same issues brings into forth the rule against bias. 11. In the light of the aforesaid, the learned counsel submitted that sub-section (14) of section 144C of the Act provides that for the purposes of the efficient functioning of the Panel, the Central Board of Direct Taxation would make appropriate Rules. Rule (2) provides for the constitution of the members of the collegium. The learned counsel for the petitioner submitted that in the absence of proper guidelines, the taxing statute delegating power to the Central Board of Direct Taxation is wholly arbitrary and ultra vires of article 14 and article 19 of the Constitution of India. The learned counsel submitted that rule 3(2) of the Rules leads to an inherent conflict of interest in discharging the function of the regular Commissioner as well as being a member of the Panel, especially, when a jurisdictional Commissioner is nominated as a member of the Panel which makes the independence of the Panel questionable since the jurisdictional Commissioner supervises the draft assessment and, thereafter....
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....e of granting approval of reassessment was a different person from the person who sat on the Panel as DIT-II who gave directions to the Assessing Officer along with other members of the Panel. It was categorically stated that Shri Virendra Singh, Director [International Taxation]-II was a member of the Panel who gave direction on the draft order and that Sunil Ojha was the Director [International Taxation]-II who gave approval for reassessment of the cases under sections 147 and 148 of the Act. The respondent consequently contended that the question of personal bias in the said facts and circumstance of the present case did not arise nor any legal bias appeared. It was further contended that the DIT-II was only discharging its statutory functions provided under the Act and, therefore, the bias stood excluded. The respondents contended that the principles of natural justice and fair play had not been violated nor there is a conflict of interest. The mere fact that DIT-II had exercised his supervisory powers does not mean that there exists a bias. 14. The learned Additional Solicitor General Shri Mohan Parasaran for the respondents further submitted that even though the petition has....
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....e Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153, pass the assessment order under sub-section (3) within one month from the end of the month in which,- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:- (a) draft order; (b)&....
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....ree Commissioners of Income-tax constituted by the Board for this purpose; (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company." 18. This section is a beneficial piece of legislation, inasmuch as, it provides that after a regular assessment under section 143(3) of the Act and/or after re-assessment under sections 147 and 148 of the Act, the petitioner has an option to either file an appeal before the Commissioner of Income-tax Appeals under section 146A or to file an objection before the Panel which is provided under section 144C. This provision was introduced in order to minimize the litigation of foreign companies. 19. Sub-clause (15) of section 144C indicates that the Dispute Resolution Panel means a collegium comprising of three Commissioner of Income-tax constituted by the Board. The section provides that an Assessing Officer will forward the draft of the proposed assessment to the assessee who, if he accepts the draft assessment order, in w....
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....ether or not the application of the principle of natural justice in a given case has been excluded, wholly or in part, in the exercise of statutory power, depends upon the language and the basic scheme of the provision conferring the power, the nature of the power, the purpose for which it is conferred and the effect of the exercise of that power. 24. In Union of India v. Tulsiram Patel AIR 1985 SC 1416, the Supreme Court held:- "Not only, therefore, can the principles of natural justice be modified but in exceptional cases they can even be excluded. There are well defined exceptions to the nemo judex in causa sua rule as also to the audi alteram partem rule. The nemo judex in causa sua rule is subject to the doctrine of necessity." 25. In Union of India v. Vipan Kumar Jain [2003] 260 ITR 1/129 Taxman 1, the Supreme Court held that there was nothing unconstitutional in permitting the Assessing Officer to gather information relating to an assessee and to assess the value of the information himself. The Supreme Court held that sections 120, 124, 131(1), 132(8), (9A), 133A, 133B and 142 of the Income-tax Act indicates that the Assessing Officer by virtue of his appointment or autho....
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....hom power has been conferred may act honestly and with the best of motives. In such a case, it cannot be said that it is guilty of any personal bias or personal vice. However, if the action taken by such authority is based on extraneous considerations, which are wholly irrelevant for the purpose for which power has been conferred upon it, the resultant action would be hit by the doctrine of legal bias or legal malice." 28. In Election Commission of India v. Dr. Subramaniam Swamy [1996] 4 SCC 104, the Supreme Court held as under:- "We must have a clear conception of the doctrine. It is well settled that the law permits certain things to be done as a matter of necessity which it would otherwise not countenance on the touchstone of judicial propriety. Stated differently, the doctrine of necessity makes it imperative for the authority to decide and considerations of judicial propriety must yield. It is often invoked in cases of bias where there is no other authority or Judge to decide the issue. If the doctrine of necessity is not allowed full play in certain unavoidable situations, it would impede the course of justice itself and the defaulting party would benefit therefrom. Take th....
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....stitutional. The Court finds that in the facts and circumstances of the case, there is no conflict of interest. Alleged bias against one member of the Panel does not make the provision ultra vires. Even though, no specific prayer for the quashing of section 144C of the Act and rule 3(2) of the Rules, was made in the petition, the Court has dwelt on it since long drawn arguments were made. 32. In the light of the aforesaid, the Court does not find that the provision of section 144C of the Act and rule 3(2) of the Rules is ultra vires. The contention of the petitioner on this issue is rejected. 33. The Court finds that the jurisdictional Commissioner is one of the members of the Panel. He is the officer who approves the reopening of the assessment orders and issues directions to the Assessing Officer, which according to the averments in the counter affidavit, are supervisory in nature. The respondents admit that in the exercise of statutory functions, the Officer could have an "official bias" towards the department to which he is attached and that it is extremely difficult to insulate the officials discharging adjudicatory functions completely from "policy bias". 34. In view of th....