Section 255(4) — The opinion expressed by the Third Member (TM) is binding on the member in minority — Questions framed by the member in minority while giving effect to the opinion of majority are outside the purview of section 255(4) of the Act and have no relevance.

Section 255(4) — The opinion expressed by the Third Member (TM) is binding on the member in minority — Questions framed by the member in minority while giving effect to the opinion of majority are outside the purview of section 255(4) of the Act and have no relevance.

In an appeal filed by the assessee, the Tribunal was considering taxability of certain amounts as cash credits u/s.68 of the Act and also allowability of certain expenditure as a deduction. In the course of hearing before the Tribunal, the assessee filed certain additional evidence. After considering the evidence filed by the assessee before the lower authorities and also the additional evidence filed before the Tribunal, the Judicial Member (JM) decided both the issues in favour of the assessee, while the Accountant Member (AM) decided both the issues in favour of the Department. The members formulated questions to be referred by the President to the Third Member. The TM agreed with the JM and decided both the issues in favour of the assessee. At the stage of giving effect to the opinion of the TM, the JM passed an order in conformity with the order of the TM, whereas the AM observed that it is not possible to give effect to the order of the TM on the ground that the order of TM was contrary to the opinion expressed by the TM himself in his own order and that the TM had not considered various points of differences arising from the dissenting orders. He raised certain new questions on merits of the dispute and directed that the matter be referred back to the President. The JM did not agree and raised an issue whether the Members of the Bench could comment on the order of the TM instead of merely passing a confirmatory order in terms of section 255(4). The President on a reference made by the Division Bench referred the following question to the SB for its consideration:

“Whether on a proper interpretation of s.s (4) of section 255 of the Income-tax Act, the order proposed by the learned AM while giving effect to the opinion of the majority consequent to the opinion expressed by the learned Third Member, can be said to be a valid or lawful order passed in accordance with the said provision.”

Held:

(1) There is no doubt that the Accountant Member while agreeing with the questions formulated at the time of the original reference to the President of the ITAT has again framed three new questions at the time of giving effect to the opinion of the majority de hors the provisions of section 255(4) of the Act as he had become functus officio after he passed his initial draft order;

(2) The opinion expressed by the Third Member was very much binding on the Accountant Member. The Accountant Member who is in minority was bound to follow the opinion of the Third Member in its true letter and spirit. It was necessary for judicial propriety and discipline that the member who is in minority must accept as binding the opinion of the Third Member;

(3) On a difference of opinion among the two Members of the Tribunal, the third Member was called upon to answer two questions on which there was difference of opinion among the two members who framed the questions and the third Member in a wellconsidered order, answered the reference by giving sound and valid reasons agreeing with the views of the Judicial Member. Thus, the majority view was in favour of the assessee;

(4) The proposed order dated 18-2-2010 of the Accountant Member who is in the minority and had become functus officio wherein he has expressed his inability to give effect to the opinion of the majority and proceeded to frame three new questions to be referred to the President, ITAT again for resolving the controversy cannot be said to be a valid or lawful order passed in accordance with the provisions of section 255(4) of the Act. The SB held that the said order dated 18-2-2010 proposed by the Accountant Member to be not sustainable in law. It answered the question referred to it in favour of the assessee.