On this historic day of 25th of January, the Income-tax Appellate Tribunal was constituted in 1941. It completes sixty years and celebrates its Diamond Jubilee today. The Income-Tax Appellate Tribunal .(hAT) is one of the oldest temple of justice in our country. It is said that the older the temple, the greater is its sanctity and reverence. On this solemn occasion  rededicates itself to the lofty ideals which inspired its creation, namely, "Sulabh Nyay & Satwar Nyay'~ which means easy and quick justice. It has adopted the following criteria for the working of the Tribunal

Inexpensive;
Accessibility;
Freedom from technicalities;
Expedition; and
An expert knowledge of their particular subject.

RETROSPECT
 

2.In India tax was introduced initially by the Act of 1860. It was then assessed by a panchayat and an assessee feeling aggrieved by the assessment could appeal to the Collector of the district, whose order was final. The Act of 1868 (which replaced the Act of 1860) made an improvement in the position by providing, in the first Instance, for a petition of objections to the Collector, and then, for an appeal from the order of the Collector of the district to the Commissioner of Revenue of the division. The order of the Commissioner of Revenue was final. No reference was available to the High Court under these Acts. The same basic position continued under the successor Acts of 1869.1870, 1872, 1886, 1916 and 1917.

3. "Income-tax Act" as such was, for the first time, instituted by the Act No. VII of 1918". it was more elaborate than its predecessors both as regards procedural and substantive law, It brought the High Courts into the picture in an advisory capacity. Under this Act, an appeal lay to the Commissioner against an assessment and, from the order of the Commissioner, a revision petition lay to the Chief Revenue Authority. A provision was, however, inserted providing for a reference to the High Court by the Chief Revenue Authority on points of law. The subsequent two Acts of 1920 made no change in the position. On revision of the designations of the officers of the Revenue department in 1921 creating a hierarchy starting with the Board of Inland Revenue at the top, then the Commissioner of Income-tax, then the Assistant Commissioner of Income-tax and then the Income-tax Officer, the Act Xl of 1922, provided for an appeal from the order of the Assistant Commissioner of Income-tax to the Commissioner but only in cases involving penalty and enhancement of assessment. The Commissioner was also given a power of revision which he could exercise in favour of the assessee. The subsequent enactments amending the 1922 Act introduced no basic change.

4 There was thus no independent forum for redress of the aggrieved assesees under the Income Tax Act. Civil Courts of the land were prohibited by Section 67 of the Indian Income-tax Act to entertain litigation in tax matters and the broad interpretation of this prohibition by the Privy Council in the Raleigh Investment Co.'s case (15 I.T.R 332 (RC.)] held the field until the Supreme Court, much later, restrict tin the State of Tripura [19 I.T.R. 132] Sharat Kala Bhandar (59 Tn. 73] and other cases. Further section 226 of the Government of India Act, 1935 specifically forbade interterence in revenue matters by High Courts in exercise of their original jurisdiction. The scope of judicial review in tax matters was thus very limited. This perhaps gave birth to the wide-spread desire of the assessees for an appeal to an independent body on important questions of fact.

5. A committee for investigation of the Indian Income-tax system consisting of MIs. C. W. Ayres and S. R Chambers of the Board of Inland Revenue of the United Kingdom and Khan Bahadur J.B. Vachha. Commissioner of Income-tax, Bombay was constituted. Their report gave birth to the idea of setting up the ncome-tax Appellate Tribunal and it was first mooted in the Income-lax Enquiry Report, 1936. Finding the desire of assesses to appeal to an independent forum not unreasonable they recommended that one All India Tribunal be set up consisting of six persons chosen by the Governor-General-in-Council to hear appeals on questions either of fact or at law against decisions of the then Appellate Assistant Commissioners. They also considered that, subject to the condition that at least two members should be persons who have acted as High Court Judges for say, at least three years to secure adequate consideration of cases on points of law, the choice of the Governor -General- in- Council in this matter should be unfettered by statute. They, however, opined that it would be desirable to include two persons who have had wide experience in the Income-tax Department and two with accountancy or business experience.It was contemplated that there would be one Tribunal only for the whole of India and that appropriate centers would be visited by Members of the Tribunal on circuit. The arrangements were to be sufficiently elastic to allow the hearing of most cases in which only questions of tact were involved by single members of the Tribunal, while cases of greater importance were to be dealt with by a bench of two or more members. The Tribunal decisions on questions of fact were to be final but its decisions on questions of law were to be subject to an appeal only to the Privy Council.This gives an impression that the original idea to set up the Tribunal was more or less synonymous to that of a Tribunal of the nature referred to presently in Article 3238 of the Constitution of India.

6. The Select Committee appointed to consider the Bill to amend the Indian Income-tax Act, 1922, reviewed the proposal in a somewhat modified form and recommended the constitution of the Tribunal on IO~ November, 1938, in the following terms :-

                   " We are of the opinion, that the Bill should contain provisions for the introduction of a further appellate authority of an independent nature for the hearing of appeals from the decisions of the Appellate Assistant Commissioner.

7. It was recommended that after the Tribunal came into operation, the revisionary powers exercised by the Commissioner of Income-tax should disappear but that he should have a power to direct the tiling of appeals to the Tribunal, against decisions of the Appellate Assistant Commissioner. The Commissioner's power of stating a case to the High Court was substituted by a like power conferred on the appellate Tribunal which could be moved for the making of such a reference either by the assesssee or the Department within a prescribed period of limitation. It will be noticed here that, in this last respect, the Select Committee made a departure from the suggestion made by the Enquiry Report, whereunder the appellate Tribunal was to have the last word, save only for an appeal to the Privy Council, on questions of law. It is this United advisory jurisdiction thai the High Courts continued to exercise with respect to orders passed by the Tribunal before 1-10-1998 under the Direct Taxes Acts1 subject however to a right, for either party, to appeal to the Supreme Court, from the Nigh Courts judgments in reference, where the questions involved are of great private or public importance. With the introduction of section 260A an appeal lie to the Nigh Court instead of a reference as earlier though only if a substantial question of law arises from the order of the Tribunal passed after 1-10-1998.

EMERGENCE OF TRIBUNAL
 

8. In pursuance of the recommendations made by the Select Committee, the Legislature introduced Chapter il-A (Section 5A) in the Indian Income-tax Act in 1941 and 25.1.1941 was notified as the appointed date from which the Tribunal came into being. Subject to minor variations consequent on the expansion of the Tribunal and extension of its jurisdiction the secfion remained unchanged in its essentials till the repeal of the Income-tax Act, 1922 with effect from 1.4.1962. In the lncome-tax Act of 1961, the constitution and functions of the Tribunal have been set out in sections 252 to 255. There is no fundamental change either in the constitution or in the functions of the Tribunal due to enactment of the new Income-tax Act.

9. The Constitution of India promulgated the mandate of Article 265 that "No tax shall be levied or collected except by authority of law". This further rendered the provisions of taxing enactments liable to be tested on the touchstone of fundamental rights and laid open executive, administrative and quasi-judicial action under taxing statutes also amenable to judicial review under Articles 32, 136, 226 and 227 of the Consvtution .

FORMATION OF BENCHES
 

10. Bench as a rule is to consist two-members--one Judicial and one Accountant Member. Wealth tax Act and the Gift Tax Act introduced in sixties however did not specifically require the Bench of one members each of a class and it may a bench of any two members, Judicial or Accountant. A provision was also made for the constitution of special three-member Benches (consisting of two members of one class and one of the other) and enabling a single member (judicial or accountant) authorised in that behalf, to dispose of small appeals. Appeals against assessments, which concerned a total income of less than Rs, 15000/- fell in this category previously but, in the 1961 Act, the above figure was raised to Rs.25,000/-. from 1.4.1971 to Rs.40000, from 1-4-1989 to Rs. 100,000 and from 1-10-1998 to Rs. 5,00,000. To start with six Members constituted only three benches, one at Delhi having jurisdiction over Northern India, UP. and Delhi; another at Kolkata (Calcutta). which had jurisdiction over Bihar, Bengal, Orissa, Assam and Madras; and the third at Mumbai (Bombay). The first sitting of the Benches was on 2~ April, 1941. The fourth Bench was created at Allahabad in 1942. The number of benches has since progressively gone up. The Tribunal has at present 53 Benches at 25 different stations covering almost every city having a seat of the High court (APPENDIX 3.)

QUALIFICATIONS FOR APPOINTMENT OF MEMBERS

11. The newly added Chapter constituting the Tribunal provided under sub-section (3) of section 5A,as to what would be the qualifying requirements for the classes of members. A Judicial Member was required to be a person who has exercised the powers of a District Judge or who possessed such qualifications as are normally required for appointment to the post of a District Judge; and an Accountant Member, a person who has, for a period of not less than six years, practiced professionally as a Registered Accountant registered under the Auditors Certificate Rules,1932. Central Govt. was given the power to appoint any other person, an Accountant Member, on its satisfaction that the person had the qualification and experience of a character rendering him suitable for appointment to the Tribunal. Appellate Assistant Commissioners were to be considered under this category.

12. In 1953, the originally required qualifications were recast. A Judicial Member would be a person who has for at least ten years either held a civil judicial post or been in practice as an advocate of a High Court; and an Accountant Member to be a person who has for at least ten years been in the practice of accountancy as a Chartered Accountant under the Chartered Accountants Act, 1949 or as a registered accountant under any law formerly in force or partly as a registered accountant and paitly as a Chartered Accountant. Power of the Central Govemmeni tç appoint as an Accountant Member of the Tribunal any person not possessing the prescribed qualifications was retained. Thus a Judicial Member had to fulfill the qualifications necessary for appointment as a High Court judge [See Article 217(2) of the Constitution ol India] and an Accountant Member from the profession had to have ten years' practice.

13. The 1961 Act introduced a third category of persons as a source for recruitment ol Judicial Members and, in the place of the far-reaching proviso to section 5A(3), defined the category ol officers of the Income-tax Department who could be taken in as Accountant Members. Section 252(2) reads:

           "A judicial member shall be a person who has for at/east ten years held a civil judicial post or who has been a member of the Central Legal Service (not be/ow Grade Ill) for at least three years or who has been in practice as an advocate for at least ten years; and an accountant member shall be a person who has for at least ten years been in the practice of accountancy as a Charte red Accountant under the Chartered Accountants Act, 1949 oras a registered accountant under any law formerly in force or partly as a registered accountant and partly as a Chartered Accountant; or who has sewed as an Assistant Commissioner of Income-tax Act for at least three years"

14. It will be noticed that, as a result of the changes referred to above, an officer of Grade Ill of the Central Legal Service with three years' service became eligible to be appointed a Judicial Member. Again. though initially attempts were made to appoint Accountant Members from the accountancy prolession, the response was apparently not encouraging and so the proviso to section 5A(3) was availed of till 196210 appoint Assistant Commissioners and some Commissioners as Accountant Members and the 1961 Act directly enabled Assistant Commissioners with three years' standing to be considered for the appointment.

15. The qualifications for recruitment of members were again revised by the Finance Act, 1981. Section 252, as substituted by this Act, reads as follows:

(2). A judicial member shall be a person who has for at least ten years held a judicial office in the territory of India or who has been a member of the Central Legal Service and has held a post in Grade I of that Service or any equivalent or higher post for at least three years or who has been an advocate for at least ten years.

(i) in computing the period during which a person has held judicial office in the territory of India, there shall be included any period, after he has held any judicial office, during which the person has been an advocate or has held the office of a member of a Tribunal or any post, under the Union or a Stale, requiring special knowledge of law;

(ii) in computing the period during which a person has been an advocate, there shall be included any period during which the person has held judicial office or the office of a member of a Tribunal or any post, under the Union or a State, requiring special knowledge of law after he became an advocate

This is substantially the same if compared with Article 217(2) of the Constitution of India, as it stands after the 44h Amendment of 1978 providing for the qualification for appointment of a judge of the High Court)

(2A) An accountant member shall be a person who has for at least ten years been in the practice of accountancy as a chartered accountant under the Chartered Accountants Act, 1949 (38 of 1949], or as a registered accountant under any law formerly in force or partly as a registered accountant and partly as a Chartered Accountant, or who has been a member of the Indian Income-tax Service, Group A and has held the post of Commissioner of Income-tax or any equivalent or higher post for at least three years."

16. In 1998 the qualifying conditions were revised entitling even an Additional Commissioner of Income tax with 3 years standing and also a Grade II officer in Indian Judicial services to be appointed as member of the Tribunal. Mixed reactions are there for this lowering down of the eligible criteria for appointment of the members of the Tribunal. One section says it gives a wider scope for selection and to find the talent suitable for the Tribunal. The other section however maintains that it lower down the status of the Tribunal more particularly when an appeal is provided against its orders to the High Court as against the reference for opinion on a question of law and its decision on facts continue to be final.

17. Originally, the Members of the Tribunal were appointed on tenure basis, the contract being for a period of five years. The selection of the Members of the Bench was at that by requesting the Chief Justice of the various High Courts and also Commissioners of the provinces asking them to nominate a person who is qualified to be a High Court Judge and who's not immediately required to be on the Bench of the High Court at least for a period of one year. The Chief Justices of the various High Courts sent the names of the Members of the Bar whom they considered eligible. Similarly the Commissioners of the Provinces also sent the names of such persons who were, in the opinion of the Commissioners concerned, eligible for appointment from their status in the Bar. and from their income point of view and erudition. The request was also for nomination of Accountant Members and this was addressed to only Commissioners as the they were the more likely persons who were to know about the Chartered Accountants. The names were to be finally selected by the Law Member and the Finance Member on the recommendation of their respective Secretaries who were to put up a note after perusal of the various recommendations. Sir John Sheedhy was the Chairman of the Central Board of Revenue whose voice finally counted in the selection of the Accountant Members and as far as the Judicial Members were concerned the Law Member was the person to have the final say. Chief Justices of the various High Courts made the recommendations.' The selection of Members for the Tribunal took a considerable time and it could not be constituted earlier than the 15th of Januaiy, 1941. The announcement of the Members selected was made sometimes in September on the All India Radio. This manner of announcement was due probably to the important role which the Tribunal was to play in the field of taxation laws.

18. Since 25.2.1950. the appointment is made on a permanent basis in a regular cadre. The President, and its member now hold office till the date of their superannuation namely., on attaining the age of 62 years. The other staff retire on attaining the age of 60. The recruitment was by a High Powered Selection Committee constituted for the purpose which included sometimes a member of the Union Public Service Commission and sometimes the Minister or Minister of State for Law. Finance Member Sir Jeremy Raisman in reply to a question asked by one of the Hon'ble Members of the Central Legislative Assembly-'On what basis the selection of the Judicial Members was made' stated 'it depend upon the warmth with which the Chief Justices of the various High Courts made the recommendations.

PRESENT RULES FOR SELECTION

19. In 1963, the rules were revised and the recruitment is now made by a Selection Board presided over by a sitting judge of the Supreme Court nominated by the Chief Justice of India, and having, as its other members, the Secretary to the Ministry of Law and the President of the Tribunal. Law Minister has been given an option to nominate two more members on the Selection Board. After the constitution of such a high powered Selection Board, no one could have any valid criticism of selections and appointments. it may also be mentioned that many of these members have distinguished themselves in various ways. A number of Accountant Members also studied and acquired the Master's degree and Doctorate in Law. Some of the members and other staff have received other assignments and deputations.

20. For smooth and better running the Tribunal is divided in various zones. The headquarter being at originally at New Delhi but since 1952 at Mumbai. At the top there isa President, followed by a Senior Vice President Vice Presidents and members in the judicial functioning and thereafter the supporting stan. These are:

i) PRESIDENT: The Tribunal is headed by a President who administer its functioning, constitute various Benches and decide their places of sitting. Originally as provided in sub-section (4) of section SA only a Judicial Member could become the President of the TribunaL An amendment of the year 1953 also removed the previous restriction that only a Judicial Member could become the President and provided, nstead, that ordinarily' a Judicial Member should be appointed President, thus making it possible, in certain circumstances, for an Accountant Member also to be appointed President. Shri P C Malhotra became the first president out of the Accountant Member. Since then there has been no distinction is made between a Judicial Member and an Accountant Member. The present President of the Tribunal Mr. V Dongzathang is a'so an Accountant Member. The names of the Members of the Tribunal and their period of tenure are given in annexure. The successive Presidents of the Tribunal since its inception is given in APPENDIX 12.

U) SENIOR VICE PRESIDENTS & VICE PRESIDENTS In 1972, the section was amended to create the posts of Vice-Presidents. Four such posts were created and the four Vice- Presidents were placed in charge of four zones, namely, North, East, West and South. The administration decentraljsed to some extent by delegation of certain powers by the President to the Vice Presidents. In 1984 to further decentralise the administration the post of a Senior Vice President with equivalent pay and status to that of a President of the Tribunal was created. In 1997 four more zone and four more post of vice presidents were created- one each at Ahmedabacj, Hyderabad, Chadigarh and Banglore. Due to the low pendency and administration of work the last mentioned zone was abolished in 2000 and was shifted to Mumbal .The list of Senior Vice Presidents and that of Vice Presidents is given in APPENDIX 13 and APPENDIX 14 respectively.

iii) MEMBERS OF THE TRIBUNAL: Originally the constitution and appointment of the members of the Appellate Tribunal as provided in section 5A is that the Tribunal was to consist of not more than ten persons, made up of an equal number of judicial and Accountant Members. In exercise of this powers, the Central Government appointed four persons including Shri Mohammad Munir, as President and three others as Members of the Income-tax Appellate Tribunal, with effect from 25°' January, 1941. Two more Members were appointed with effect from 24°' February, 1941. One of them died before he could sit on the Bench and a third person was appointed in his place with effect from 18°' April, 1941. In 1949 an amendment was made removing the ceiling on the number of members. There have been so far a total number of members (APPENDIX 15) with a present sanctioned strength of 106 members actual strength being 83 as on day. (APPENDIX 16)

OTHER SUPPORTING STAFF: Apart from the President, Senior vice president, Vice- Presidents and Members, the work of the Tribunal is carried on by a loyal and sincere staff consisting of about 900 persons, headed by a Registrar. The Registgrar is assisted, in the regional offices by the Deputy Registrars and, in each station, by one or more Assistant Registrars depending upon the number of Benches. The total sanctioned personnel strength of the Tribunal at present is 1010 including the President and the members. (APPENDIX I)

21. To begin with, the Finance Department oi the Government of India (the Central Board ot Revenue) was initially in charge of the Appeflate Tribunal. However, irom 30th May, 1942 in respect to public opinion, the Appellate Tribunal was put in the charge oi the Legislative Department, the predecessor of the present Ministry of Law, Justice & Company Affairs ci the Government of India. As slated by Shri R. S. Gae, Law the then Secretary Ministry of Law, the Appellate Tribunal is functioning as an independent authority without any interference by any Ministry or Department of the Government of India in the discharge of the functions entrusted to it by law or otherwise. This is now affirmed by the Supreme Court of India in the case of TAT vs. V K Aggarwal 235 ITR 175 (SC) wherein the proposition that the Tribunal's functioning was under the administrative conrail of the executive wing of the Govt. i.e.. Ministry of Law, Justice & Company Affairs was not accepted and it was held that the Union Law Secretary has no control over the judiciat functioning ci the TribunaL It was conceded before the Supreme Court in this case that Tribunal did perform judicial function and 'I was court subordinate to the High Court. Rajasthan High Court has equated the Tribunal members to the members of judicial services i.e., District Judges.

22. On the Tribunal's Silver Jubilee inaugural address, the Hon'ble Shri Amal Kumar Sarkar the then Chief Justice of India also stated:

There may be people who feel that the Tribunal is not in the full sense a judicial body / venture to think that none of them is an assessee. I also venture to think that such a notion is superficial and stems from the want of knowledge of the actual working of the TribunaL The judges who preside over the Tribunal are capable men, men of character and integrity. Anything that is unjudicial is quite foreign to them. The presiding Officers of the Tribunal are selected by a body of experienced men presided over for some years now by a Judge of the Supreme Court. This should be a guarantee that the r~ht type of men are selected. The Ministry of Finance which is in charge of the collection of taxes has no control over that body or the Tribunal. The Tribunal is under the Ministry of Law for the purposes of administrative control only. That Ministry is not interested in the collection of taxes and does not exercise any control over the judicial work of the Tribunal. The members of the Tribunal are divided into two classes, called Judicial and Accountant. The Judicial Members are selected from members of the legal profession whà have specialised in tax matters, and also from the State Civil Judiciary. The present President of the Tribunal, Mr. T P., Mukerjee, before he joined the Tribunal, was an illustrious member of the State Judñ~iary of Bihar, having last held the office of a District and Sessions Judge in that State. I suppose people so selected can be expected to be as independent as anybody else. The Accountant Members of the Tribunal are selected from among the higher officers of the Income Tax Department, usually Commissioner and senior Appellate Assistant Commissioners and from the practising Chartered Accountants. So far as the later are concerned, there can be no reason to think that they cannot be independent. The independence of the members recruited to the Tribunal from the officers of the Income Tax Department is secured by so arranging things that they cannot look forward to anything from the Income Tax Department or the Ministry of Finance they cannot go back to higher posts in that Department. Their promotion and tenure of office are not control/ed by the Ministry of Finance. These are in the hands of the Ministry of Law".

23. Presenlly even the selection and promotions both are by the same high powered committee headed by a senior judge of the Supreme Court nominated by the Chief Justice of India. Tenure of the office of the Members as aforesaid is a fixed tenure, namely, the age of superannuation (62 Years). Therefore neither the selection nor the tenure nor the promotions are in exclusively under the control the control of Ministry of Law, Justice & Company Affairs.

PAY SCALE and Service Conditions in the Tribunal

24. If the process of strengthening the Tribunal by increasing the number of its Benches was slow in catching up with the increase in the magnitude of work before it, the process of improvement of the salary and conditions of service of the members and staff also did not keep pace with the needs of the situation. The Government, no doubt, had sanctioned increase of pay of the members from lime to lime but, at one stage, there was a feeling among the members that their salary was not commensurate with their increasing responsibilities under several enactments and the fact that, consequent on the amendments to the Income-tax Act, they had become empowered to hear and dispose of appeals against the orders of the Commissioners of Income-tax in appeals and revisions. However, a revision effected in 1973 and another sanctioned thereafter in 1981,1986 and in 1996 seem to have set right any imbalances that may have prevailed earlier. The chronology of the revisions is briefly referred to below for the sake of completeness.

BENCH-WISE JURISDICTION

25. To start with, the Tribunal had jurisdiction over the provinces of British India. After the Partition, the provinces or parts of provinces which were transferred to Pakistan were excluded from its jurisdiction. Thereafter as a result of the integration of the Princ&y Slates with and the merger of the funnier French and Portuguese Possessions in the Indian Union, the jurisdiction of the Tribunal extends to the whole of the territory of India. For facility of work different Benches are assigned specified territories. The original three benches were at Delhi, Calcutta (Kolkata) and Bombay (Mumbai). Messrs. Mohd. Munir and Sahgal sat over Delhi Bench which had jurisdiction over Northern India, UP. and Delhi. Messrs. Ram Prasad Varma and P.N.S.Aiyar were members of the Calcutta Bench which had jurisdiction over Bihar, Bengal, Orissa, Assam and Madras. Messrs. Malhotra and Gundil had their sittings at Bombay. The headquarters of the Tribunal was at Delhi [it was later shifted to Bombay and is still located therej. Each bench had to do extensive travelling to do the work at several places. The territorial jurisdiction of the Tribunal under went changes from time to time The details of territorial jurisdiction of each Bench at presents given in APPENDIX 5.

RULES & REGULATIONS

26. The announced designated members mel initially in New Delhi under the designation of Special Officers for a period of one month, during which the rules of the Tribunal were framed and the places of sitting decided upon. The rules were notified in the gazette of India dated 1St February, 1941 These were amended from time to time and the same are now find reported in all leading law books. Broadly these deal with sitting of Benches, powers of bench and registrar, procedure of filing appeals, stay applications, misc, applications etc., of filing paper book, evidences in support of facts relied upon including additional evidence, additional grounds, hearing of appeals and misc, petitions, authorised representatives, their dress code etc. etc.

REPRESENTATION PROCEDURE

27. The Tribunal would mould its own rules of procedure and dispose of appeals and reference applications with the assistance of the "'authorised representaliyes"of the parties. Section 61 of the Act permitted an assessee to be represented before the Tribunal by (a) a relative of the assessee, (b) a person regularly employed by the assessee , (c) a lawyer, (d) an accountant or (e) an income-tax practitioner. This last category gave continued recognition to persons who had been attending before Income-tax authorities prior to 1-4-1938 on behalf of assessees otherwise than as an employee or relative. It also gave recognition to persons who pass a recognized accountancy examination or acquire certain prescribed educational qualifications, The Tribunal provided by its rules that the Income-tax authority , which was a party before ii, could be represented by a person (usually an Income-tax officer) [in recent years, an Additional / Deputy Commissioner assisted by an Income-tax Officerl duly appointed for the purpose by the Central Government by a Gazette notification or any other person acting on his behalf. Thus came into being a quasi-judicial institution whose members provided the accountancy as well as legal expertise needed for an effective scrutiny of accounts and financial documents and the application of the relevant law to the facts of the case. The easy accessibility of the Tribunal not only to lawyers but also to accountants and other less qualified laymen combined with the simplicity and directness of the few rules framed by the Tribunal was calculated to provide an informal atmosphere and facilitate the smooth functioning of the Tribunal.

OFFICAL PUBLICATION or TRIBUNAL DECISIONS I.e., "ITD"

28. consultation with the Tribunal, for the reporting of the decisions of the various benches. This suggestion, made n 1944. posed several practical hurdles.only in 1982 the then president of the Tribunal Sb. TO Sugla was succesful and gave shape to the idea of pñnting of Tribunal’s orders with the help Mr. Shargava of the Taxman. Itis with a view to avoid’ng/ minimising conflicting decisions at different benches, to bring uniformity in its decisions and reducing the unnecessary wastage of time in repetitive arguments. It is continuing since then very successfully and affording a very valuable guide to the appearing counsel and the litigating public. An editorial board is constituted at Delhi for editing various orders received from various centers and marked by the bench concerned or the vice president, senior vice president or the president as the case may be. Every year tour volumes are published and volume 76 is in current these days. Each volume contain about 60-70 decisions of the benches including the Special Benches and Third Members. Besides Taxman and CTR publications, the ITR publication has started publishing the Special Bench and Third Member decisions in their reports along with decisions of High Courts and Supreme Court

ELEVATION FROM TRIBUNAL

29. Mr. Mohammad Munir who was the first President of the Income-tax Appellate Tribunal was within two years elevated to the Lahore High Court; later he became the Chief Justice of the Lahore High Court and ultimately rose to the position of the Chief Justice of the Pakistan Supreme Court which chair he adorned for many years. The next President Khan Bahadur Yahya Au was also elevated to the Madras High Court in March, 1945. His successor Mr. A. N. Shah, CS. was twice offered a place an the Nagpur High Court, as it then was, but he declined the offer. Mr. S. C. Manchanda was the President of the Tribunal until the 4th August, 1961, on which date he became Judge of the Allahabad Nigh Court. There has been elevation of 30 judges to various High courts so far, the last being Mr. S A Anand Reddy in High Court of Andhra pradesh. (APPENDIX ii). It is significant to note that the qualifications to becomea member in the Income Tax Appellate Tribunal are almost the same which are prescribed for appointing a High Court judge, and the tribunal members posses the required qualifications to be considered for the appointment as Judge of High Courts within the meaning at Article 217 of the Constitution of India. Explanations (a) & (aa) thereto provide thai in computing the period during which a person has been an Advocate or held any Judicial Office, the period during which he has held the office of a Member of a Tribunal after he has become an advocate is to be added. Many at the members fo the Tribunal besides holding the Bachelor of Law and Master of Law Degrees have also been qualified as Chartered Accountants and joined as Members after they became advocates and have thus indepth understanding of both the law and accountancy in dealing with tax litigation.

AREA OF OPERATION

30. Primarily, the Tribunal was set up to dispose of appeals arising from assessments under the Income-tax Act. When other direct taxes, viz. Excess Profits Tax, Business Profits Tax, Wealth’ tax Act, Gill Tax Act, Expenditure Tax Act, Super Profits Tax Act were introduced from time to time, orders of the Appellate Assistant Commissioner under all these Acts were made appealable to the Tribunal. Orders passed by the Appellate Controller of Estate Duty are also appealable to the Tribunal. Orders prejudicial to assessees passed by the Commissioner in exercise of his Revisional Jurisdiction also come up in appeal to the Tribunal. The Tribunal is thus functioning at present as the appellate Tribunal for all direct taxes including Estate Duty.

AWARDING COST

31. The Investigation Commission under the chaimanship of Sir Srinivasa Vardhachariar was in favour of the Tribunal having the power to award costs in the appeals before it and also to grant refunds of the whole or pail of the lest paid by an appellant or applicant for reference, depending upon the degree of success obtained by him. The first part of the suggestion has been implemented in 1998 by the Finance (No.2) Act but the other recommendation has not been accepted so far.

VISION OF TRIBUNAL FOR THE NEXT FIVE YEARS

32. With the increase in the number of Benches thus sanctioned, with an organised planning of tours of Members and by a determined effort to speed up its work, the Tribunal has to contain the doc1cet-expIosiOn” in this important field of law. Itis greatly heartening to note that, for the years 1999, the figures of disposal by the Tribunal have exceeded the figures of institution. The total pendency, as on 1-1 -2001 was only 2.65 Lac which is just about 5 year’s figure of effective annual disposal by the 35 Benches of the Tribunal, at an average of about 150 cases per Bench per month, making allowances for regular leave vacancies- The time lag between the institution and the disposal is would be reduced to about one year in heavy stations and even less than a year in various other benches of the Tribunal. Single Member cases would generally come up for hearing within three to tour months of their institution. This is no mean would be an achievement.

The president of the Tribunal has submitted the following vision statement of the Tribunal for the next 5 years to the Govt. in response to the call of the then cabinet secretary Shri Parbhat Kumar:

"1.To make al/the 53 Benches functional by setting up the remaining newly sanctioned Benches and to fill up a/I the vacancies of both Judicial and Accountant Members.

2. To liquidate a/I the pending appeals which have accumulated since the past two decades numbering about 2.5 lakhs.

3. To fully computerise all the Zonal offices of the Tribunal and other stations to the extent possible.

4. To purchase land and construct accommodation for office and residence at (east at three to four stations of the Income-tax Appellate Tribunal.

5. With a view to attract best talent as Members of the Tribunal, the Income-tax Appellate Tribunal endeavours to provide one Staff Car and an independent Telephone connection with STD facility to each of its Members.

6. Streamlining the functioning of the Income-tax Appellate Tribunal by providing effective training to the various cadres of the stall and also by arranging continuous updating programmes for Members."

REVIEW OF ITS WORKING

33. The work of the Tribunal came up for a review in one form or another by several Committees and Commissions in the course of these 60 years. The Income-tax Investigation Commission appointed in 1947 examined the working of the Tribunal with special emphasis on its terms of reference which were to examine the extent to which the existing law relating to and procedure for the assessment and collection of taxes were adequate to prevent evasiofl thereof. The important among the recommendations which it made in connection with the Income-tax Appellate Tribunal and which were accepted by the Government were the proposat to refer a point of law arising from the order of the Tribunal directly to the Supreme Court for opinion in cases where a conflict existed between the decisions of two High Courts, and the recommendation to give both Department and the assessee the right to submit cross objections when they have not filed appeals and are only respondents in appeals filed by the other party. The Taxation Inquiry Commission appointed in 1953-54 also had an occasion to examine the working of the Tribunal indirectly, but by reason of its terms of reference it could not go into the details of the major aspects of the functioning of the Tribunal

34. It is not as if the Appellate Tribunal has had a smooth existence. There were some doubts and misgivings about its continuance and even its existence was threatened at times. In its Twelfth Report regarding the Income-tax Act, 1922 (dated September 26, 1958). the Law Commission of India considered the existing system of appeals to the Appellate Tribunal and thereafter a reference to the High Court on questions of law as very cumbersome and causing unnecessary delay in disposing of the appeals. It accordingly recommended that where the amount in dispute was Rs.7,500/- or more, the appeal would be on fact as well as on law and that in other cases the appeal would be only on questions of law. This view was not, however, shared by the Direct Taxes Administration Enquiry Committee, which in its Report dated November 30, 1959 observes that the Appellate Tribunal, consisting of equal number of Judicial Members and Accountant Members, is best suited to deal with the problems arising from the administration of the taxing statutes and that it is convinced that the Appellate Tribunal cannot be dispensed with and should continue.

35. The recommendation made by the Law Commission as aforesaid dealt with the situation as it existed prior to 1956-57 and since then the conditions have materially altered by the lapse of time. In any event the Government of India and the Parliament did not accept the said recommendation and provided for the continuance of the Appellate Tribunal in the Income-tax Act, 1961 on the same lines on which it functioned under the Indian Income-tax Act, 1922.

36. The 11 5th report of the Law Commission while examining the necessity and expediency of setting up a National Tax Court’ vis-a-vis a Tribunal under Art.323B in 229 thereof complimented the working of the Tribunal in the following words :

"There is near unanimity of opinion that Income Tax Appellate Tribunal has immensely justified its existence and largely vindicated the trust reposed in it. It has, therefore, to be retained with its regional jurisdiction. It would be the fact finding authority"

37. The hour when the Tribunal was born was apparently an auspicious one for its growth was rapid. From the very beginning it appears, the public was very much satisfied with the work done by the Members of the Tribunal, their independence, judicial approach and fairness to both parties, the assessees and the department alike. The number of appeals instituted before the Tribunal rose from 1607 in 1941-42 to 22,380 in 1963-64 and 53,980 in 1979-80, 83,765 in 1990-91 and 36,995 in 1999-2000 after the reference jurisdiction taken away from 1-10-1998. There were many reasons for this progress, some of which may be attempted to be enumerated here.

i) The first of these was the territorial expansion of what was previously British India into the Indian Union of today. To start with, the Tribunal had jurisdiction over the provinces of British India. When partition came some of the provinces and parts of provinces were transferred to Pakistan and so excluded from its jurisdiction. Thereafter, as a result of the integration of the former princely or native stales and the merger of the former French and Portugese possessions in the Indian Union, the jurisdiction of the Tribunal now extends to the whole of the territory of India.

ii) The second reason was the happy notion of combining two categories of technical expertise in the selection of members instead of recruiting only judicial officers to the posts. The Judicial Members were recruited from among senior District Judges or lawyers with lucrative tax practice who distinguished themselves later by being elevated as judges of High Courts. Reference has earlier been made to Mr. Mohd. Munir, who retired as the Chief Justice of the Pakistan Supreme Court, Mr. S Ranganathan and Ms Fatima Bibi who rose to be the Judges of the Supreme Court of India.. There have 30 members elevated to the High Courts so far. [A list of such members is given in Appendix —1- The Accountant Members were drawn from persons with experience in the profession or in the department. A combination of these talents was able to grapple with and evolve satisfactory solutions to the various types of problems arising under the taxing enactments.

(iii) The third important reason for the Tribunal’s popularity was Is informality and easy accessibility. To quote an eminent tax lawyer Shri NA. Palkhivala, who had intimate knowledge of the Tribunal and its functioning An informal atmosphere prevails in the Tribunal and cases are allowed to be argued, not only by lav~,jers but by accountants, Income-tax practitioners, relatives, off icers of companies and other representatives. Secondly, the Tribunal, unlike a Civil Court, is not bound by the rules of evidence. It is permitted, in fact expected, to do substantial justice, bearing in mind [if one may adapt the historic dictum of Justice Holmes] that there is a limit to the nicety of inquiry which is possible in a tax appeal. Relevant and even material facts, which the Tribunal reaadily takes into account, would be exiled from the records in the Civil Court on the ground that they do not pass the tests of the Evidence Act. The Tribunal’s work often involves investigation of facts embedded in accounts kept in a variety of languages and in documents which are not formally proved. In a sizeable number of cases the Tribunal is constrained to make merely rough guesses at truth. The decisions rendered by the Tribunal have, body and large been distinguished by study independence and a desire to do justice."

(iv) Next, is the gigantic economic development of the Country, particularly after the Second World War, which gave scope for enormous private profits. This prosperity brought in its wake various new enactments and an appellate forum was naturally needed to dispose of the appeals arising out of assessments made under these various Acts as well. The imposition of Excess Profits Tax and the Business Profits Tax during the War gave rise to a very large number of appeals. In 1957-58, the Legislature enacted a triple tax legislation, bringing to charge the net wealth of, as well as the gifts made and the penditure incurred by, an assessee. The Wealth-tax, Gift Tax and the Expenditure Tax Acts took advantage of the appellate machinery already functioning under the Income-tax Act. Earlier, the Estate Duty Act had come on the Statute Book in 1953. It is worth noting that, in the initial stages of the administration of the Estate Duty Act, appeals were provided for to the Central Board of Revenue and it was the Central Board of Revenue which proceededd to state a case and refer questions of law to the High Court. But, in 1960, this position changed. Appeals became so numerous that it was found more convenient and satisfactory to entrust the appellate work under this Act also to the I.T.A.T. In 1963 and 1964 the Super Profits Tax and the Companies (Profits) Sur-tax Act adopted the machinery available under the other Direct Tax Acts. The Income-tax Act, 1974, the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, the Hotel Receipts Tax Act, 1981 and Interest Tax Act, 199? have also been framed on the same lines and orders passed on first appeal by the appropriate authorities under these various enactments have been made appealable to the Tribunal. Thus, the I.T.A.T. is today, not merely confined to appeals under the Income-tax Act, It is really a Direct Taxes Appellate Tribunal dealing with appeals under all the enactments above referred to.

SUGGESTIONS MOOTED FOR MOST IDEAD SET UP FOR SECOND APPEAL

38. It may not be inappropriate at this juncture to refer to certain suggestions that have been mooted as to the most deal appellate set up in the context of the tax laws:

a) UPGRADATION OF TRIBUNAL UNDER ART. 323B: One approach is reflected by the 42 amendment to the Constitution of India which contemplates the creation, in special fields, of Administrative Tribunals which will be the ultimate appellate authojilies, amenable only to the special leave jurisdiction of the Supreme Court under Article 136. Reference may be made to Part XIV A and, in particular, Article 323-B introduced by the 42’d amendment. It appears that, in introducing this amendment, the Government was, at least in part, influenced by the precedent set up by the Income-tax Appellate Tribunal. In his speech in support of the amendment bill delivered in the Lok Sabha on 1.111976 the then Law Minister, Shri H.R.Gokhale said :

“With regard to the composition of the Tribunal, I have already stated that while it is difficult to lay down in the Constitution the formulation, the composition will certainly be laid down in the statute when it will be brought before the House for consideration. It will depend on the nature of the Tribunal, the puipose for which the Tribunal is going to be set up as to how the constitution of that Tribunal should be . A?! that I can say is to repeat what I have said earlier that it will be the Governments endeavour to see that the Tribunal is composed of the people who will inspire confidence. It will not necessarily be composed only of judicial persons although I personally think that it is necessary that at any rate some representatives of those who have judicial experience ought to be there on these Tribunals.

It is not absolutely necessary t hat every one of the Tribunal should have that experience. I have got the example of the Income-tax sAppellate Tribunal is functioning extremely well and even those people who have gone before the Income-tax Appellate Tribunal have told me and have spoken on the public platform that the Income-tax Appellate Tribunal as it is constituted today, is the best example to show how the Tribunals if properly constituted, can create confidence. I can say that the Income-tax Appellate Tribunal’s decisions are rarely interfered with by the High Courts and the Supreme Court because the quality of their work has been found to be sufficiently good as to inspire confidence.”

It may be pointed out that in case the Government should decide to implement the above Article in the field of the direct tax laws, it can be done in one or two years. An administrative Tribunal with an appropriate composition may be setup which will take the place presently held by High Courts in these matters and hear appeals or references from orders of the Income-tax Appellate Tribunal on all or substantial questions of law Alternatively, it may even be possible and perhaps easier, to convert the Income-tax Appellate Tribunal itself as the administrative Tribunal for the purpose, all that is necessary for doing so being some modifications in its composition, if need be, and some amendments to the Income-tax Act rendering its decisions final.

b) CENTRAL TAX COURT A second suggestion which has often been mooted is the constitution of Central Tax Court and the provision of appeals from the orders ol the Tribunal directly to the Central Tax Court instead of references to various High Courts. The main idea behind this suggestion is to ensure the continuous sitting ol a Bench, of the status of the High Court, to hear tax matters only and also to obviated the difficulties that now arise on account of differences on opinion among High Courts. This proposal was initially mooted by one of the former Law Minister [Shri G.S.Pathak] and has been endorsed by the Direct Tax Laws Committee [under the chairmanship of Shri Chokshij which submitted its report in September, 1978. The Committee strongly recommended the establishment of a Central Tax Court to deal with all matters arising under the Income-tax Act and other Central Laws. In making this suggestion, the Committee was influenced by a consideration of the huge pendency of tax references as well as writ petitions in tax matters before the severa’ High Courts for a number of years. The Committee pointed out that such delays had a snow-balling effect all along the line of the appellate hierarchy as proceedings in a large number of cases were usually initiated and kept pending at various levels to await the final pronouncement of the Supreme Court in some case. The Committee recommended that the Government should lake steps for the early establishment of a Central Tax Court with all India jurisdiction to deal exclusively with litigation under the Direct Tax Laws in the first instance with provision for extending its jurisdiction to cover all other Central Tax Laws if considered necessary in the future. Pending the creation of such courts, it recommended the constitution of special tax benches in the High Courts to deal with the large number of lax cases by continuous sitting throughout the year. It was suggested that the judges to be appointed to these special benches may be selected from among those who have special knowledge and experience in dealing with matters relating to Direct Tax Laws so that when the Central Tax Court is established at a later dale, theses judges could be transferred to that court. It was further recommended that the powers of the Central Tax Court should extend to consider even the validity of the provisions of the lax laws other than those under which they are appointed or constituted or under which their powers and functions are derived. It further recommended that the lurisdiction of Central Tax Court should be appellate and not advisory.

c) Tribunals final as far as the facts and there is every reason to provide an appeal to a Tax Bench of the Supreme Court. Instead of different High Courts taking divergent views and ulUmnately the Supreme Court decidEng the references, a direct appeal to the Supreme Court may be preferable. But the only snag appears to be thaI the Supreme Court which is already overburdened would be flooded with cases from all over the country. A direct appeal to the Supreme Court may prove a hurdle lo speedy disposal of these matters. However, Income-tax being a subject in the Union List, for ensuring certainty and uniformity, there should be a single authority to lay down the law for the entire country. The matter requires a critical examination

39. These are some of the suggestions that have been made to ensure speedier disposal of litigation in tax matters. Some of the authors have given their views on as to how the Tribunal should further improve its working and one of them has focused on his Ideal Member’. These are printed here in this souvenir for ready reference. It is not the purpose of this survey to discuss their competitive merits of feasibility. They have been referred to here because.they have a nexus with the Tribunal’s functioning and have been under serious consideration of the authorities at various points of time. It is ultimately for the Government, in the light of these and other suggestions, to decide whether the existing set up needs any modification at all and if so, what final shape should be given to the final appellate body in tax matters.

Conclusion

40. Whatever the future may hold, there is unanimity of opinion that the Tribunal has been the one administrative Tribunal which has established for itself the goodwill and confidence of the public. The Frank Committee set up In England in 1957 to examine the working of administrative Tribunals in that country produced a historical report in which it enunciated the following as the criteria of a good administrative Tribunal (I) Cheapness: (ii) Easy Accessibility: (iii) Freedom from technicalities; (iv) Expedition and (v) An expert knowledge of the particular subject. the useful existence for a period of 60 years is ample evidence of its commendable performance and fulfillment of its objectives. It may be of interest to know that the number of appeals and applications instituted in the Tribunal is in the region of 22000 per year. About 90 percent of the appeals disposed of by the Tribunal do not go on a reference to the High Court. The Tribunar’s judgments on points of Jaw are upheld in over two-thirds of the references by the Supreme Court.

41. The Tribunal over its past existence has earned for itself accolades and encomium from all quarters as are depicted in Accolades and Encomium. It would be interesting to take note of the fact that during 1984-85 to 1997-98 a total number of 5,97,238 case were disposed of by the Tribunal outof which 435885 decision were acepted by the parties at the stage itself This gives a percentage of 72.98%. Out of the balance 27.02% only 56.83 thereof i.e., 15.36% reference were rejecled either because these involved question of facts or were the questions not referable for opinion of the High Courts and only 11.66% (27.02- 15.36) of appeals disposed of have gone in reference to High Courts. Statistics show that High Courts have upheld 67% of the cases referred to them. In other words 7.76% (66.65% of 11.66%) of the appeals disposed by the Tribunal got approval and acceptance from the High Courts. This aggregate to 96.10% (7298% plus 15.36% plus 7.81% plus 7.81%) and only 3.85% of the Tribunal orders were reversed or set aside in further proceedings.

42. Later development provides practical proof that the Tribunal has continued to live up to these words. Encouraged by the record of the Income-tax Appellate Tribunal, the Government has constituted a similar appellate Tribunal for indirect taxes , Customs, Excise and Gold (Control) Appellate Tribunal, Central Administrative Tribunal, Railway Claims Tribunal, Foreign Exchange Regulation Appellate Board and the Appellate Tribunal for forfeited Properly. Possibly, it may do so in future in other fields as well. The Income-tax Appellate Tribunal, celebrating its sixieth anniversary, can, therefore, justly rejoice over its exemplary past and be assured of good wishes from one and all for an equally bright and glorious future.

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