Central Wines vs Income Tax Officer and Another

M.N. Rao, J.—This is one of the rare cases concerning breach of procedural fairness on the part of the Tribunal, Hyderabad, the second respondent herein. The petitioner is a registered firm dealing in liquors. The question was whether certain Income Tax deductions were admissible or not. Before the Division Bench of the Tribunal, consisting of two Members, namely, Sri K. S. Viswanatham and Sri K. Chathurvedi, the dispute was confined to two items, viz., (i) Rs. 13,58,390 and (ii) Rs. 3,50,644. The Division Bench, by an order of reference under s. 255(3) of the IT Act, referred the following question for decision by a Special Bench :

"Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of Rs. 3,50,644, when the assessee does not acknowledge any such liability to the ST Department and no statutory demand has been raised against the assessee by the Department ?"

From a perusal of the order of reference, it is clear that what was referred for decision by the Special Bench was only the item concerning Rs. 3,50,644, but not the other one relating to Rs. 13,58,390. While so, the order of the Special Bench in ITA No. 89/Hyd/1987, dt. 3rd May, 1990, covers both the items. On the question concerning Rs. 3,50,644 the order of the Special Bench went in favour of the assessee, and, as regards the item concerning Rs. 13,58,390, the decision went in favour of the Department.

After perusing the reference order of the Division Bench and the order of the Special Bench, we are convinced that the order of the Special Bench is clearly unsustainable in law. When the matter referred to the Special Bench concerned only with the deduction of Rs. 3,50,644, it was not open for the Special Bench to go into the question of the alleged claim for deduction of Rs. 13,58,390, which did not find a place in the reference order. We, therefore, allow this writ petition, set aside the order of the Tribunal, Hyderabad, the second respondent herein, made in ITA 89/Hyd/1987, dt. 3rd May, 1990, and remand the matter to the Division Bench of the Tribunal, with a direction to re-entertain the appeal and dispose of the matter in accordance with law, after due notice to both sides.