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M/s Tulip Hotels Pvt. Ltd. Chandramukhi(Basement) Behind The Oberoi,Mumbai-400 021. VS. Deputy Commissioner of Income Tax,Central Circle 36,Mumbai.
February, 15th 2013
         IN THE INCOME TAX APPELLATE TRIBUNAL
           MUMBAI SPECIAL BENCH "E", MUMBAI

    Before SHRI G.E.Veerabhadrappa, President ,
    Shri D.K.Agarwal, J.M. and Shri P.M.Jagtap, A.M.


                ITA Nos.6490 and 6491/Mum/2008
                (Asst.Years 2004-05 and 2005-06)

M/s Tulip Hotels Pvt. Ltd.                 Deputy Commissioner of
Chandramukhi(Basement)                     Income Tax,
Behind The Oberoi,                   Vs.   Central Circle 36,
Mumbai-400 021.                            Mumbai.
(PAN: AAACT9446Q)

            Appellant                              Respondent


Date of Hearing                  : 1.2.2012

Date of Pronouncement            :     30.3.2012


             Appellant by       : Shri Arvind Sonde
             Respondent by      : Shri B.Jaikumar



                              ORDER

Per Bench :


The Hon'ble President of the Income Tax Appellate

Tribunal, on a reference made by a Division Bench,

has constituted this Special Bench vide order dated

14.5.2010       and     the   following     question     has    been

referred for our consideration and decision:-


     "Whether on a proper interpretation of sub-
     section (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
                                                                   Special Bench-
                                  2             ITA Nos.6490 and 6491/Mum/2008
                                                         :AY 2004-05 and 2005-06





      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"


2.     The factual matrix of the case leading to the

recommendation for the constitution of this                        Special

Bench by the Division Bench is as follows:


3.     The assessee company is engaged in the business

of operation and management of hotels owned by third

parties. The assessee has taken over the management

of the hotel property, viz. Tulip Star Mumbai, situated

at Juhu Tara Road, Juhu, Mumbai. The assessee was

redeveloping the said property into a multi product

hospitability   destination       and    was     also        developing

international      standard       Service       Apartments.               The

assessee offered the space in the same property to

Shri Somendra Khosla of UAE on a 99 years lease

basis. After negotiation, Shri Khosla agreed to acquire

the space admeasuring 12700 sq. ft. at the rate of

Rs.7,500/- per sq. ft. In pursuance to such booking of

the    property,   Shri       Khosla    advanced        the       sum        of

Rs.4,78,12,403/- during the accounting year relevant

to    assessment       year    2004-    05   and        the       sum        of

Rs.1,02,91,176/- in the accounting year relevant to

assessment      year    2005-06.       During     the      assessment
                                                                    Special Bench-
                                   3             ITA Nos.6490 and 6491/Mum/2008
                                                          :AY 2004-05 and 2005-06


proceedings,     the    assessee        produced      the      copies         of

correspondence         between         the    assessee         and        Shri

Khosla; confirmation of Shri Khosla with regard to

advance given by him; complete details with regard to

remittance in USD; the correspondence showing why

the property could not be developed as stipulated and

the termination of the agreement with the liability on

the assessee to refund the money. The assessee also

produced     the     certificate       from    Citibank,          Mumbai,

certifying the receipt of inward foreign remittance by

the assessee, which was sent by Shri Khosla. The

Assessing    Officer,     not      being      satisfied        with         the

evidences furnished before him held that the assessee

has not established the identity, creditworthiness                         and

genuineness of the transaction and accordingly added

an amount of Rs.4,78,12,403/- u/s 68 of the Income

Tax Act, 1961 (the Act) to the total income of the

assessee.    In the assessment year 2005-06 also, the

assessee     had received a sum of Rs.1,02,91,176/-

from Shri Khosla and for the same                 reasons given in

the assessment order for the assessment 2004-05, the

AO added     the sum of       Rs.1,02,91,176/- as income of

the assessee u/s 68 of the Act.               On appeal before the

CIT(A),    the     assessee     furnished       various        additional
                                                                             Special Bench-
                                        4                 ITA Nos.6490 and 6491/Mum/2008
                                                                   :AY 2004-05 and 2005-06


evidence in the form of             certificate from a Chartered

Accountant, giving the details of the properties owned

by    Shri    Khosla;      copy    of       his        Passport;       the      Trade

License issued to the company of Shri Khosla, viz.

Dome     Services         (FZC);   copy           of    his    telephone           bill,

electricity       bill;    newspaper          cuttings           showing             the

voluminous         business    being         done         by     the      company

named        as   New     World    Real       Estate          (NWRE),          whose

President is Shri Somendra Khosla; the Heath Card

and other Cards issued by the Government of UAE.

The ld. CIT(A) while observing                     that these documents

were not produced            before the Special Auditor                        during

the special audit conducted u/s 142(2A) of the                                 Act or

the    AO at the time of             assessment , held that the

same     cannot be admitted             being fresh evidence at the

appellate stage as the appellant has failed to explain

the reasons for not producing these documents before

the   AO or Special         Auditor. He further held that since

no evidence of            creditworthiness of                  Shri Somendra

Khosla            was     produced          during         the       assessment

proceedings, the           AO was justified in making addition

u/s 68 of the Act Rs.4,78,12,403/- for the assessment

year 2004-05 and Rs.1,02,91,176/- for the assessment

year 2005-06.
                                                                            Special Bench-
                                          5              ITA Nos.6490 and 6491/Mum/2008
                                                                  :AY 2004-05 and 2005-06


4.      With regard to the second issue of disallowance

of payments, the brief facts are that the assessee has

entered into an agreement with M/s Tulip Hospitality

Services Ltd.(THSL) for operating their Hotel Tulip

Star, Mumbai for which the assessee is entitled to

operating       fee    @     3%     and       reimbursement             of    actual

expenditure incurred by it on operating the hotel. The

assessee entered into another contract with M/s Tulip

Star Hotels Pvt. Ltd. (TSHL) for operating the Hotel

Tulip Star, Mumbai, by which TSHL is to get 3% of the

gross     hotel       receipt.      Thus,         whatever        the        amount

assessee is entitled to receive from THSL is to be

passed on to TSHL. The assessee also entered into an

agreement        with      M/s      Cox       &   King   (India)        Pvt.      Ltd.

(CKIL)     for        using      their        network       of      office         and

infrastructure for brand awareness and marketing of

Tulip    Star     hotel       for     which        CKIL      is     entitled          to

reimbursement of expenses actually incurred by them.

CKIL raised monthly debit note upon the assessee for

expenditure incurred by them. In turn, the assessee

raised    debit       note    of    identical       amount         upon        THSL.

During    the     whole       year,       CKIL     raised      debit       note       of

Rs.7,56,16,910/- and in turn, similar debit note is

raised by the assessee. The amount received from
                                                                         Special Bench-
                                       6              ITA Nos.6490 and 6491/Mum/2008
                                                               :AY 2004-05 and 2005-06


THSL is paid to CKIL. In its profit and loss account,

the assessee has not claimed any deduction in respect

of debit note raised by CKIL, because the same was

already reimbursed by THSL.

      With      regard          to      the      operating             fee         of

Rs.61,93,015/-        is    concerned           it   entered           into       an

agreement with THSL for operating their hotel namely

Tulip Star. Simultaneously, the assessee entered into

another agreement with THSL for operating the said

hotel.   The    entire     operating          fee    receivable          by      the

assessee for operating the hotel was passed on to

TSHL.     Therefore,       in    effect,      the    assessee          has       not

claimed       expenditure         of       Rs.61,93,015/-.             The        AO

however, did not accept the claim. It was observed by

him that the auditors had clearly stated that                                    the

assessee      had    claimed          the    expenditure          in     P    &     L

account. It was observed by him that the assessee had

understanding with              TSHL & CKIL to provide various

services and therefore question of reimbursement did

not   arise    and   even        if    the    services      were        actually

provided by CKIL and TSHL the assessee was required

to deduct tax at sources in respect of payments made

to them as the same were in the nature of contractual

payments.      The AO accordingly disallowed the claim of
                                                                              Special Bench-
                                         7                 ITA Nos.6490 and 6491/Mum/2008
                                                                    :AY 2004-05 and 2005-06


deductions of Rs.7,56,16,910/- and Rs.61,93,015/- for

assessment year 2004-05.                     Similar deduction had also

been claimed in assessment year 2005-06 i.e. sum of

Rs.7,95,73,902/-            on     account           of    brand        awareness

activities paid to          CKIL and Rs.37,03,683/- on account

of operating fees paid to THSL. For the reasons give n

in   the    assessment           order       for   the      assessment              year

2004-05         the    AO    disallowed              the        said    claims          in

assessment        year      2005-06          also.         In    appeal        CIT(A)

confirmed the above disallowances made by the AO.


5.     On appeal before the Tribunal, on the issue of

sustenance of addition u/s 68 of the Act, both learned

Members         have     considered            the        evidence         produced

before the AO as well as the additional evidence. The

learned     Judicial     Member,             after    considering             all     the

evidence,       i.e.   the       evidence          produced            before         the

Assessing Officer as well as the additional evidence ,

came       to   the    conclusion             that        the     assessee           has

discharged the onus of proving the cash credit lay

upon it and accordingly he ordered for deletion of

addition; while the learned Accountant Member was of

the opinion that even after considering the additional

evidence the assessee has not been able to discharge

the onus of proving the cash credit and hence upheld
                                                              Special Bench-
                              8            ITA Nos.6490 and 6491/Mum/2008
                                                    :AY 2004-05 and 2005-06





the order of ld.CIT(A) sustaining the addition made by

the AO.


6.    On the second issue of disallowance of payments,

the ld. Judicial Member while observing             that there is

only incoming and outgoing entries         in the books              and

for this reason neither the assessee has shown in its

profit and loss account any incoming entry/ income

nor   outgoing     entry/     expenditure,         deleted            the

disallowance of Rs.7,56,16,910/-      and       Rs.61,93,015/-

for the assessment year 2004-05 and for the same

reasons    he    also    deleted    the     disallowance                of

Rs.7,95,73,902/-        and   Rs.37,03,683/-              for         the

assessment      year    2005-06.     However,                the       ld.

Accountant Member while        observing      that there is no

evidence for services rendered by             CKIL and mere

agreement or payment by cheque is not enough,                         the

claim has to be disallowed in view of the provisions of

section 40(1)(ia) of the      Act   on the ground of non

deduction of tax, confirmed the above disallowances

made by the AO.


7.    Since there was a difference        of opinion between

the members      constituting the Bench, a Reference was

made to the Hon'ble President under section 255(4) of
                                                            Special Bench-
                              9          ITA Nos.6490 and 6491/Mum/2008
                                                  :AY 2004-05 and 2005-06


the Income Tax Act, 1961, for referring the points of

difference to the ld. Third Member       for adjudication of

the following points of difference: -


     " Whether on the facts and circumstances of the
     case:

     i)   the   additions  of  Rs.4,78,12,403/-   and
     Rs.1,02,91,176/- made and confirmed by the lower
     authorities u/s 68 for AYs 2004-05 and 2005-06
     respectively are liable to be deleted or to be
     confirmed?

     ii) the addition made and confirmed by the CIT(A)
     on account of reimbursement of expenses to M/s
     Cox & King (India) Pvt. Ltd. and to M/s Tulip Star
     Hotels Pvt. Ltd. for AYs 2004-05 and 2005-06 are
     liable to be deleted or confirmed?"


8.    The   ld.   Third   Member   on   the   first      point        of

difference vide paragraphs 22 and 23 of his order

dated 27.11.2009 held as under :


     "22. Considering the totality of the above facts
     namely that Shri Somendra Khosla is a NRI, he is
     in the business of development of real estate and
     he is a man of substantial means, in my opinion, if
     he has decided to invest in the real estate in
     India, the genuineness cannot be doubted unless
     there is any evidence to the contrary. The Revenue
     has doubted the genuineness merely on the basis
     of   presumption    and   suspicion  ignoring   the
     documentary evidences produced by the assessee,
     which establish the genuineness of transaction.

     23. In view of the above, in my opinion, the
     assessee has duly established the identity of the
     creditor, creditworthiness of the creditor and also
     genuineness of the transaction. Thus, the onus of
     proving the cash credit which lays upon the
     assessee is duly discharged. Accordingly, I answer
                                                              Special Bench-
                                 10        ITA Nos.6490 and 6491/Mum/2008
                                                    :AY 2004-05 and 2005-06


     question no.1 in favour of the assessee and hold
     that   the    addition  of  Rs.4,78,12,403/-   and
     Rs.1,02,91,176/- made and confirmed by the lower
     authorities under section 68 of the Income Tax Act
     are liable to be deleted."


On   the   second   point   of    difference,    the      ld.     Third

Member vide paragraphs 27, 28 and 29 of his order

has held as under :

     "27......The assessee has furnished the profit and
     loss account in its paper book and from the
     perusal of which it is evident that the total
     expenditure debited in the profit and loss account
     was     only   Rs.86,97,337/-.  When    the    total
     expenditure incurred by the assessee during the
     year under consideration was Rs.86,97,337/-, by
     no stretch of imagination, it can include the
     expenditure incurred by CKIL for which debit note
     amounting to Rs.7,56,16,910/- was raised by the
     assessee. When the assessee has not claimed the
     deduction in respect of the expenditure of
     Rs.7,56,16,910/-, the question of disallowing the
     same in the case of the assessee cannot arise.

     28.   With   regard   to   the  operating     fee  of
     Rs.61,93,015/- is concerned, I find that the
     assessee received the identical amount from THSL
     and paid the same to TSHL. Here again, in real
     terms, the assessee has neither received any
     income nor incurred any expenditure. It entered
     into an agreement with THSL for operating their
     hotel namely Tulip Star. Simultaneously, the
     assessee entered into another agreement with
     THSL for operating the said hotel . The entire
     operating fee receivable by the assessee for
     operating the hotel was passed on to TSHL.
     Therefore, in effect, the assessee has not claimed
     expenditure    of   Rs.61,93,015/-.   As    I    have
     mentioned earlier that in the profit and loss
     account, the assessee debited total expenditure of
     only Rs.86,97,337/- the details of which is given in
     the Schedule `G' to the profit and loss account
     which is as under :
                                                                      Special Bench-
                                     11            ITA Nos.6490 and 6491/Mum/2008
                                                            :AY 2004-05 and 2005-06




             "SCHEDULE ANNEXED TO AND FORMING PART OF
          THE ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH 2004

                                                             Previous
                                                               Year

            SCHEDULE "G"                  Rs.         Rs.               Rs.

  OPERATING AND ADMINISTRATIVE
  EXPENSES
  Salaries                                             1,339,850         1,398,033
  Gratuity                                               153,159           175,500
  Staff Welfare                                          796,444           755,280
  Travelling & Conveyance                              1,101,082         1,775,118
  Printing & Stationery                                  337,992           586,543
   Bad Debts Written off                               1,545,625         3,758,655
  Communication Expenses                                 838,142         1,328,648
  Repairs & Maintenance                                  170,462           160,122
  Vehicle Expenses                                       558,545           931,927
  Legal & Professional Fees                              583,426         1,738,975
  Entertainment Expenses                                  60,876           142,431
  Audit Fees                                              33,000            37,650
  Business Promotion Expenses                             12,755            46,069
  Rent, Rates & Taxes                                    310,048           394,516
  Membership & Subscription                                3,750             4,000
  Electricity Expenses                                   110,582           140,776
  Interest Charges                                       110,010                 --
  Office Expenses                                         97,237            95,782
  Sundry Expenses                                        532,452           537,326
  Preliminary Expenses Written Off                           900               900
  Total                                         8,697,337               14,008,251




29. From the above details of the expenditure, it is
evident that the assessee has not claimed any
deduction in respect of operating fees paid by it to
TSHL. When no deduction is claimed, the question
of disallowing the same does not arise. Before I
part with the matter, I may clarify that the
expenditure was actually incurred by TSHL and
whether such expenditure is allowable or not is to
be examined in the case of THSL. So far as the
assessee's case is concerned, in my opinion, when
no deduction was claimed, the question of any
disallowance does not arise. Similar is the fact in
assessment year 2005-06 except variation in the
amount. Therefore, my finding for the assessment
year 2004-05 would be squarely applicable to
assessment year 2005-06. Accordingly, I answer
the question no.2 also in favour of the assessee
and hold that the addition made and confirmed by
the CIT(A) on account of reimbursement of
expenses to M/s. Cox & King (India) Pvt. Ltd. and
to   M/s.Tulip  Star   Hotels   Pvt.Ltd.   for   the
assessment years 2004-05 and 2005-06 are liable
to be deleted."
                                                                      Special Bench-
                                    12             ITA Nos.6490 and 6491/Mum/2008
                                                            :AY 2004-05 and 2005-06




Accordingly the ld. Third Member while agreeing with

the opinion of ld.Judicial Member, has decided both

the issues in favour of the assessee.


9.     While giving effect to the opinion of the ld. Third

Member,       the     ld.     Judicial     Member           passed             the

conformity order in February 2010. However, the ld.

Accountant Member observed that it is not possible to

give effect to the order of the ld. Third Member as the

order of the        ld. Third Member is contrary to his own

expressed opinion and has also not considered various

points of differences arising            from the proposed orders

of the members of the bench.               There is also           difficulty

in forming the majority of opinion. The difficulty, it

appears has arisen partly because of the question

framed being too general without specifying                        the point

of differences in deciding the issue and partly because

some    of   the    vital   facts   have     been       omitted           to    be

considered in the order of the ld. Third Member.                               The

ld.    Accountant       Member,          after     considering                 the

arguments of both the sides observed that it would be

appropriate for the Division             Bench to refer the matter

back    to   the    Hon'ble    President,        ITAT    than        to    pass

perverse order so that the                 controversy             could be
                                                                Special Bench-
                                13           ITA Nos.6490 and 6491/Mum/2008
                                                      :AY 2004-05 and 2005-06


resolved properly and accordingly, he framed following

new questions:

      "1.    Whether    on   the   facts  and    in   the
      circumstances of the case, the additional evidence
      which had not been filed before AO, can be
      admitted by the tribunal in deciding the issue of
      cash credit and if so whether the tribunal can
      decide the issue based on fresh evidence or the
      issue is required to be restored to the file of the
      AO for fresh adjudication after examining the
      detailed evidence    and after necessary inquiries
      and opportunities to the assessee.

       2.   Whether on the facts and circumstances of
      the case, as highlighted in the proposed order of
      the AM and particularly the fact that the assessee
      produced no evidence to show        that the foreign
      remittances credited in the accounts of the
      assessee had been made out of funds belonging to
      the creditor, the cash credit can be taken as
      explained satisfactorily only on the ground that the
      assessee was doing business and owned several
      properties.

      3.    Whether considering the finding of the AO
      and the auditor's note and all other relevant
      material it can be said that the assessee had not
      claimed any expenditure in relation to the payment
      made to Cox & Kings and Tulip Star Hotels Ltd.
      and whether the claim of expenditure can be
      allowed considering the facts and circumstances of
      the case."


10.    The   ld.   Judicial   Member     has      expressed             his

disagreement       with the     course adopted by the ld.

Accountant Member and in a note dated 23.2.2010 has

proposed the following        question to be referred to the

Special      Bench    or   Larger    Bench      to     resolve          the

controversy:
                                                                  Special Bench-
                                 14            ITA Nos.6490 and 6491/Mum/2008
                                                        :AY 2004-05 and 2005-06


      "Whether on the facts and circumstances of the
      case, the Members of the Bench, could comment
      on the order of the    Third Member, instead of
      passing a confirmatory order in terms of section
      255(4) of the Act?"


11.    However, the Hon'ble President on careful perusal

and consideration of the issue observed that a Special

Bench consisting of three or more Members may have

to be constituted          to resolve the issue. It involves

interpretation        of sub-section (4) of section 255 which

provides that the point on which difference arose shall

be    decided    in    accordance     with   the   opinion         of     the

majority. The question to be considered is whether at

that stage (i.e., the stage of giving effect to the

opinion     of     the    ld.Third    Member)        it     is     legally

permissible, having regard to the statutory provision,

for a Member who is in the minority to decline to give

effect to the      opinion of the majority whatever be his

reasons. In addition to the question of interpretation,

it also involves the issue of judicial decorum.                          The

questions        proposed by the ld. Accountant Member

touche upon the merits of the decision of the                    ld.Third

Member.      The      question   proposed by the ld. Judicial

Member touches upon the duty/power of the                           Bench

sitting to give effect to the majority                    opinion u/s

255(4)    and accordingly he constituted this                     Special
                                                                          Special Bench-
                                          15           ITA Nos.6490 and 6491/Mum/2008
                                                                :AY 2004-05 and 2005-06


Bench     to    resolve   the       controversy         on       the    question

referred in page 1 of this order.


12.     At the time of hearing, the ld. Counsel for the

assessee        after referring to the relevant provisions of

section 255(4) of the           Act submits that in view of the

findings       recorded        by        the   ld.   Judicial      Member           in

paragraphs          14.1, 30, 31, 35, 41 and 42 of the draft

order     dated      February 2009 and                paragraphs 23 and

29 of the       opinion of the ld. Third Member,                    there        is a

majority       of    opinion        in     favour     of     the       assessee,

therefore, the order passed by the ld. Judicial Member

be upheld.           He further submits that the ld. Third

Member after considering the questions which have

been agreed and signed                     by both the Members has

answered the questions in favour of the assessee,

therefore, there is clear majority of opinion in favour

of    assessee.         He     further          submits       that       the       ld.

Accountant Member in the order giving effect to the

order of the ld. Third Member has observed                              that the

questions framed being too general without specifying

point     of    difference          in     deciding        the     issue         and

particularly because some of the vital facts have been

omitted to be considered in the order of the ld.Third

Member, therefore, he has framed three new questions
                                                                            Special Bench-
                                      16                 ITA Nos.6490 and 6491/Mum/2008
                                                                  :AY 2004-05 and 2005-06


which were not there at the time of reference to the

ld. Third Member.         In other words, he has taken a U-

turn which is not permissible under the provisions of

section 255(4) of the Act.                 He further submits that it

has been observed by the ld. Third Member, at page 3

of his order, that the additional evidence has been

considered by both the ld. Members. The                              ld. Judicial

Member on       the evidence produced before the                              AO as

well as the additional evidence came to the conclusion

that the assessee has           discharged the onus of proving

the cash credit laid upon it. Whereas according to the

ld.   Accountant       Member      even          after     considering              the

additional evidence the assessee has not been able to

discharge the onus of proving                     the cash credit.                   He

further submits that once it has been held by the

majority   of    opinion       that        the   assessee               has       duly

established        the         identity           of        the           creditor,

creditworthiness       of the creditor and also genuineness

of the transaction, the onus of proving the cash credit

which   lay     upon     the    assessee          is     fully      discharged,

therefore, the order passed by the ld. Judicial Member

attained the majority and hence the questions which

have been framed by the ld. Account Member in his

order dated 18.2.2010             are against the provisions of
                                                                      Special Bench-
                                     17            ITA Nos.6490 and 6491/Mum/2008
                                                            :AY 2004-05 and 2005-06


section      255(4) of the          Act. He further submits that

while giving the effect to the opinion of the ld.Third

Member         under the provisions of section 255(4), we

have    to     ascertain     the    majority     view     and       not         to

consider       the correctness of the view, therefore,                        the

ld. Accountant Member               is not justified        in     doubting

the correctness of the opinion of the majority.


13.    The ld. Counsel         for the assessee while referring

to the decision in A.N.Seth               V/s    CIT (1969)            74 ITR

852 (Del) submits that the duty of the                             ld. Third

Member is to decide the point of difference which the

Members        of    the    Bench    originally     heard         the      case

differed.       He cannot himself formulate a new point on

which he could base his decision.                 In the case before

us, the ld. Third Member              has decided the issues on

the    basis    of   reference      jointly     signed     by     both        the

Members, therefore,            the opinion expressed                   by the

ld. Third Member is a valid opinion in the eyes of the

law.


14.    The ld. Counsel for the assessee while referring

to the decision        in    Niraj Petrochemicals Ltd. V/s ITO

(2001) 248 ITR (AT) 1(Hyd) submits                   that the ld.Third

Member cannot alter the referred questions to him or
                                                                    Special Bench-
                                 18              ITA Nos.6490 and 6491/Mum/2008
                                                          :AY 2004-05 and 2005-06


cannot    modify    the    questions      and/or          reframe           the

questions and then decide              the reframed questions

instead of the original questions.          He further submits

that the ld. Third Member while deciding the issue can

take a different route         but cannot alter the questions

framed and he has to agree either with the opinion of

the ld. Judicial Member or with the ld. Accountant

Member.


15.   The ld. Counsel for the assessee while referring

to the decision      in Jain Irrigation System Ltd. V/s

DCIT(2004) 266 ITR (AT) 31 (Pune) submits that the

duty of the ld.Third Member is to resolve the dispute

and point involved shall be decided according to the

opinion of majority. The ld.Third Member is competent

to decide only the point on which the members of the

bench originally hearing the case differed.                    He cannot

himself formulate a new point on which he could base

his decision.


16.   The ld. Counsel for the assessee               further submits

that in view of the decision          in ITO V/s Vice-President,

Income     Tax Appellate Tribunal (1985) 155 ITR 310

(Mad)    the    powers    of   the    ld.Third     Member            of     the

Tribunal to whom         any case is referred u/s 255(4) of
                                                                   Special Bench-
                                19              ITA Nos.6490 and 6491/Mum/2008
                                                         :AY 2004-05 and 2005-06


the   Act is confined to the giving of a decision                    on the

points on which          the members of the Tribunal had

differed and which has been formulated                     by them as

the question for the decision of the ld. Third Member.

He further submits that according to this decision the

ld. Third Member cannot remit the matter back to the

two Members        who originally heard the appeal to re-

hear the matter which is beyond his jurisdiction.


17.   The ld. Counsel for the assessee further refers to

the decision of the       Tribunal in Rameshwar                  Soni V/s

ACIT (Invst.) (2005) 279 ITR (AT) 60 (Jodhpur)                               to

contend     that   the   jurisdiction     of   the       Tribunal          u/s

255(4) is confined       to deciding the points of difference

according    to    the   majority    of   the    Members            of     the

Tribunal and not beyond that.


18.   The ld. Counsel for the assessee further refers to

the decision of the        Tribunal in H.P. Agro Industries

Corporation Ltd. V/s DCIT (1999) 240                     ITR (AT) 62

(Chd) to submit that the              ld.Third Member is fully

empowered in law to arrive at the same end result as

done by any of the Members constituting the Division

Bench although he may do             it by a different route and

all that is necessary      is that he must agree with                     one
                                                                      Special Bench-
                                     20            ITA Nos.6490 and 6491/Mum/2008
                                                            :AY 2004-05 and 2005-06


of the members constitution the                  Division Bench and

who have disagreed on the point at issue.


19.     The ld. Counsel for the assessee while referring

to the decision of the Hon'ble Delhi               High Court in CIT

V/s   Sudhir         Choudhrie   (2005)         278    ITR      490(Delhi)

submits that         the duty of the Tribunal is to pronounce

its   judgments        and   orders        in   open     hearing           upon

enlisting them for a given date. Since in this case,

there     is    no   final   order        and   only    opinions           were

expressed by the Members constituting                         the       Bench

and the        ld.Third Member, therefore, the order passed

by the respective Members/ Third Member is merely an

opinion which cannot be              said that the          Tribunal has

passed any order so far.             Therefore, the contention of

the      Revenue that there is a mistake in the order

passed by the           ld.Third Member            is devoid of any

merit.


20.     He, therefore, submits that since in this case

opinion of        the majority has been arrived at on the

questions referred to by both the Members                                   who

originally heard the appeal, therefore, the effect may

be given in view of the provisions of section 255(4) of

the   Act as per opinion of          majority which is in               favour
                                                                      Special Bench-
                                    21             ITA Nos.6490 and 6491/Mum/2008
                                                            :AY 2004-05 and 2005-06


of the assessee and the opinion expressed                        by the ld.

Accountant Member, while giving the effect to the

order of the ld. Third Member is not in accordance with

the provisions of section 255(4) of the Act as he is in

the minority.


21.   On the other hand, the ld. DR, at the outset,

submits    that    there   is   a    technical       mistake           in     the

question referred to Special Bench wherein it has been

mentioned " the order proposed by the ld. Accountant

Members",        whereas there is no such               order and only

an opinion, therefore, the question referred should

suitably be amended.            The ld. DR while referring to

the opinion expressed by the ld.Third Member dated

27.11.2009 submits that even according to the ld.

Third Member on the issue of admission of additional

evidence    it    has   been    observed      by      him          that       "In

principle I agree with the learned DR that when the

Income     Tax     Appellate     Tribunal      admits            additional

evidence, it should allow a reasonable opportunity to

the   Assessing     Officer     to       examine     such        additional

evidence and to produce any evidence or document in

rebuttal of such additional evidence. For                  this purpose,

either the ITAT can call for the Remand Report from

the Assessing Officer or may set aside the matter to
                                                                              Special Bench-
                                        22                 ITA Nos.6490 and 6491/Mum/2008
                                                                    :AY 2004-05 and 2005-06


the Assessing Officer for examination of additional

evidence and thereafter re-adjudication. Admittedly, it

has    not    been        done     by    the           ITAT    in     this      case".

Therefore,         the order passed by the ld. Third Member

admitting the additional evidence is not a valid order

in the eyes of law.          He further submits that it is borne

out from the        assessment order that the assessee                               has

never filed any such evidence before the AO in support

of    the   said    credits.      Therefore,            the      AO       was       fully

justified in making the addition u/s 68 of the Act.


22.    He further submits that it has been held in Abhay

Kumar Shroff            V/s ITO (1997) 63 ITD (Pat) 144 that

where additional evidence enables the Tribunal to pass

orders or for any other substantial cause it could

require the parties to do so. There is no gain saying

that    while      this    power    could          be     exercised           by      the

Appellate Tribunal suo motu the jurisdiction vested in

the Tribunal could be got invoked at the instance of

one of the parties before it.                          Relying       on the said

decision     he     submits       that       it    was     the      duty       of     the

Tribunal to exercise his power to provide a reasonable

opportunity        of     being   heard           to    the   department              for

examining the evidence submitted by the assessee

which has not been done in this case, therefore,                                        in
                                                                     Special Bench-
                                    23            ITA Nos.6490 and 6491/Mum/2008
                                                           :AY 2004-05 and 2005-06


the interests of justice the matter may be set aside to

the file of the AO.


23.    The ld. DR further submits that in               ITO V/s Baker

Technical       Services           (P)     Ltd.         (2009)              126

TTJ(Mumbai)(TM) 455 it has been held that when a

majority      opinion    has     not     been        formed           it    was

suggested by the         ld. Third Member that a reference

may be made to the Hon'ble President for making a

further     reference    to    a     Member       or     Members             for

resolving    the difference of opinion in accordance with

law.    Relying     on the same view the ld.DR                      submits

that both the Members              while giving         effect to            the

opinion     of the ld. Third Member have passed                             two

separate       orders,     therefore,      the       opinion         of      the

majority     has   not   been       formed      in     this     case        and

therefore, the issue may be decided fresh.


24.    The ld. DR    further submits that in               M/s       Deepak

Agro Foods V/s State of Rajasthan & Ors. (SC) (Civil

Appeal Nos.4327-28 of 2008 (arising out of Special

Leave Petition (C) No.17346-47 of                      2005 and Ors.

dated 11.7.2008, it has been observed that "where an

authority    making      order     lacks   inherent         jurisdiction,

such order would be without jurisdiction, null, non est
                                                                     Special Bench-
                                   24             ITA Nos.6490 and 6491/Mum/2008
                                                           :AY 2004-05 and 2005-06


and   void   ab    initio   as    defect     of   jurisdiction         of     an

authority goes to the root of the matter and strikes at

its very authority to pass any order and such a defect

cannot be cured even by consent of the parties,".

Relying on the same he submits that since in this case

the   additional       evidence    produced        by    the      assessee

before the Tribunal          has not been admitted by the

Tribunal by any          specific order, therefore, the order

passed by the ld. Third Member                after considering the

additional evidence is without jurisdiction, non est

and void ab initio.


25.   The ld. DR further            submits         that in Khopade

Kisanrao Manikrao V/s ACIT (2001) 250 ITR 18(Pune);

(2000) 74 ITD 25(Pune), it has been observed that

power of the ld. Third Member is not limited to the

language of       the questions framed              in the reference

but it   extents to         entire sum and substance of the

opinion on the specified point(s); the Third Member

has   power       to    consider    the      entire     material,            the

reasoning and the conclusion recorded by the Members

as well as    the contentions advanced on behalf of the

parties. Relying        on the same he submits               that       in the

absence of any specific order                of admission              of the

additional    evidence       either     by    the     ld.     Accountant
                                                                            Special Bench-
                                        25               ITA Nos.6490 and 6491/Mum/2008
                                                                  :AY 2004-05 and 2005-06


Member or by the ld. Judicial Member or by the ld.

Third    Member,        the    opinion        given by          the     ld.     Third

Member is bad in law.


26.     The    ld.    DR     further     submits         that    in     Collector,

Central Excise, Bombay V/s M/S. S.D. Fine Chemicals

Pvt. Ltd.(1995)(3)SCR 84, it has been observed and

held    that, if the third Member of the Tribunal has not

dealt with the case in a full and proper manner and

has     disposed       of    the   issue       in    a    cryptic         manner ,

therefore, it become necessary to remit the matter for

the fresh opinion of the third Member of the Tribunal.

Relying on the above decision, the ld. DR submits that

since    in the case of the assessee, there is no mention

about        the     admission     of        the    additional          evidence,

therefore, the order passed by the ld.Third Member

has to be set aside.


27.     The        ld. DR    further submits that in B.T.Patil &

Sons     Belgaum Construction (P.) Ltd V/s                         ACIT (2010)

35 SOT 171(Mum)(LB)                     it has been held that the

parties are entitled to file additional evidence before

the ld. Third Member. Relying on the same he submits

that    in    the     case    of   the       assessee,        the      additional

evidence was already on record, therefore, it was the
                                                                     Special Bench-
                                  26              ITA Nos.6490 and 6491/Mum/2008
                                                           :AY 2004-05 and 2005-06


duty of the       Third Member to pass a specific order for

admission of       the     same   which     has     not      been       done,

therefore, the order passed by the Third Member is

void ab initio.


28.    The ld.DR while relying on the decision in CIT V/s

Shri Ramdas Motor Transport (1999)                        238 ITR 177

(AP)   submits      that    the   order    passed        by     the      Third

Member should be well considered order, answered the

reference by giving sound and valid reasons.                           In the

case of the assessee           the order passed by the Third

Member is        not a well considered order, therefore, the

same may be set aside.


29.    In the light of the above, the ld. DR submits that

the order passed by the ld.Third Member is not a valid

order, and in the absence of any opinion of                                  the

majority,     the order passed          by the ld.Third Member

may be set aside             and the issue may be decided

afresh.

30.    We have carefully considered the submissions of

the rival parties and perused the material available on

record.     To    appreciate      the     controversy          in     proper

perspective it is seemly to reproduce section 255(4) of

the Act which reads as under :
                                                              Special Bench-
                             27            ITA Nos.6490 and 6491/Mum/2008
                                                    :AY 2004-05 and 2005-06


      "255. (1) ......
      (2) ...
      (3)....
      (4) If the members of a Bench differ in opinion on
      any point, the point shall be decided according to
      the opinion of the majority, if there is a majority,
      but if the members are equally divided, they shall
      state the point or points on which they differ, and
      the case shall be referred by the President of the
      Appellate Tribunal for hearing on such point or
      points by one or more of the other members of the
      Appellate Tribunal, and such point or points shall
      be decided according to the opinion of the majority
      of the members of the Appellate Tribunal who have
      heard the case, including those who first heard it."

31.    A   harmonious reading     of the aforesaid provision

shows that the majority decision       of the Bench of the

Tribunal has to prevail and in case of difference of

opinion    among   equal   number     of   members             of     the

Tribunal, the matter is further required to be decided

by one or more     of   the other members of the Tribunal

and    such point or points shall     be decided according

to the opinion of the majority        of       the         members

of the Appellate Tribunal who         have          heard             the

case, including those who first heard it. Thus, it is the

final conclusion of majority of the members of the

Tribunal which is to prevail.


32.    In this regard, we may      refer with profit to the

following decisions relating to the relevant             provisions

of section 255(4) of the Act.
                                                                Special Bench-
                               28            ITA Nos.6490 and 6491/Mum/2008
                                                      :AY 2004-05 and 2005-06




33.    In   A.N.Seth     (supra),    Their      Lordship             have

observed as under (page 860 of 74 ITR) :

       "Under this provision, if the Members of a Bench
      of the Appellate Tribunal are equally divided on
      any point or points, the said point or points have
      to be referred to one or more of the other
      Members of the Tribunal for his or their opinion. A
      reading   of   the   sub-section   shows         that   it
      contemplates a difference amongst the Members
      on the conclusion on a point, and not a difference
      in the reasoning or reasons for arriving at the
      conclusion.   Therefore, if the Members agree on
      the conclusion on a point, but differ in              the
      reasoning or reasons for arriving at the conclusion,
      the provision in the sub-section does not apply,
      and the question of any reference to one or more
      of the other Members does not arise............"


34.    In ITO V/s Vice-President, ITAT (supra), it has

been observed and held          that the power of the third

member to whom the case is referred under section

255(4) is confined to the giving of a decision on the

point(s) on which the two members had differed and

which has been formulated by them as a question or

questions for the decision of the third member. The

third member acting under section 255(4) does not

have any power to direct the two members of the

Tribunal who had differed on the point(s) referred to

him to decide on a particular point or points or act in a

particular manner. The third member cannot act as if

he was an appellate authority over the two members
                                                            Special Bench-
                              29         ITA Nos.6490 and 6491/Mum/2008
                                                  :AY 2004-05 and 2005-06


of the Tribunal and direct them to rehear and dispose

of the matter afresh.


35.    In H.P. Agro Industries Corporation Ltd.(supra) it

has been observed and held (page 77):

      "A question may be raised at this stage as to how
      the Third Member has        expressed an opinion
      different from the one given by the two Members
      constituting the Division Bench. In my opinion, the
      Third Member is fully empowered in law to arrive
      at the same end result as done by any of the
      Members constituting the Division Bench although
      he may do it by a different route and all that is
      necessary is that he must agree with one of the
      Members constituting the Division Bench and who
      have disagreed on the point at issue. By means of
      the present order I have held that the deduction
      of Rs.10,090 is allowable and the           learned
      Accountant Member has also expressed a similar
      opinion by allowing the miscellaneous petition filed
      by the assessee. In other words, the majority
      opinion of the Tribunal is available as a result of
      the present Third Member order and the matter
      shall now be posted before the Division Bench for
      passing an order in conformity with the majority
      opinion."


36.    In Khopade Kisanrao Manikrao (supra), it has

been held (headnote, page 22):

       "A plain reading of section 255 of the Income-tax
      Act, 1961, makes it clear that the jurisdiction of
      the Third Member is in regard to the point of
      difference and the framing of the question for a
      reference under section 255(4) need not be
      equated with a reference to the High Court under
      section 256. Under section 256, the High Court,
      till, recently, had advisory jurisdiction in regard to
      any question of law arising out of the order of the
      Tribunal and referred to the High Court for its
      opinion. In the case of the reference under section
      255(4) to the Third Member, the object is to
                                                                  Special Bench-
                                 30            ITA Nos.6490 and 6491/Mum/2008
                                                        :AY 2004-05 and 2005-06


      resolve the difference in opinion on any point
      which arises in the course of deciding of an
      appeal. Therefore, the jurisdiction of the Third
      Member is not limited to the language of the
      question(s) framed in the reference but it extends
      to the entire sum and substance of opinion on the
      specified points. The questions are framed in
      accordance with rules for identifying the dispute
      but it is a well settled principle of law that the
      rules cannot restrict the scope of the powers
      conferred under the statute. Therefore, the rules
      do not have the effect of curbing the scope of
      powers of the Third Member conferred upon him
      under section 255(4)."


37.    Applying the ratio of the aforesaid decisions to

the facts of the present case, we find that there is no

dispute     that    there   was       a   difference       of     opinion

between the two Members who originally heard                              the

appeal and the reference was made to the Hon'ble

President of the Tribunal, u/s 255(4) of the Act for

referring    the   points   of   difference      to     the      ld.Third

Member. The Hon'ble President               accordingly referred

the said     matter    for a decision to a Third Member.

The ld. Third member after giving the opportunity to

the parties observed that "the Judicial Member after

considering all the evidences i.e. evidence produced

before the AO as well as the additional evidence, came

to the conclusion that the assessee has discharged the

onus of proving the cash credit lay upon it; while the

ld. Accountant Member was of the opinion that even
                                                                                Special Bench-
                                           31                ITA Nos.6490 and 6491/Mum/2008
                                                                      :AY 2004-05 and 2005-06


after considering the additional evidence the assessee

has not been able to discharge the onus of proving the

cash credit" and                held that the assessee has duly

established              the        identity        of          the           creditor,

creditworthiness               of    the        creditor        and        also         the

genuineness of the transaction.                          Thus,         the onus of

proving the cash credit which lays upon the assessee

is    duly    discharged            and     accordingly           the       ld.     Third

Member        while       agreeing         with    the       views       of     the      ld.

Judicial Member              answered the first question in favour

of the assessee.                Similarly, on the other issue of

addition on account of reimbursement of expenses he

observed that when no deduction was claimed, the

question          of   any     disallowance         does         not       arise       and

accordingly while agreeing with the views of the ld.

Judicial Member answered the other question                                    also       in

favour       of    the    assessee,        and     deleted           the      additions

made by the AO. Thus, in this case, opinion of the

majority has arrived at in favour of the assessee.


38.    However, we find that while giving effect to the

opinion of the Third Member,                       ld. Accountant Member

has again formulated three questions which we have

already       referred         in    paragraph           9      of     this       order.

According to the ld. Accountant Member since the
                                                                         Special Bench-
                                   32                 ITA Nos.6490 and 6491/Mum/2008
                                                               :AY 2004-05 and 2005-06


additional evidence has not been                filed before the AO,

the ld.Third Member             cannot decide            the issue based

on fresh evidence filed before the               Tribunal, rather the

ld. Third Member is required to restore the same to

the    file   of    the    AO    for    fresh        adjudication             after

examining the             said evidence         and after providing

reasonable opportunity of being heard to the assessee.


39.    From the reading of the above, there is no doubt

that the ld. Accountant Member while agreeing                                  with

the questions formulated at the time of the original

reference to the Hon'ble 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. This view also finds             support from the decision

in Delhi Press Samachar Patra Ltd.                      V/s CIT           (2004)

267    ITR    458    (Del),     wherein         it    has       been           held

(headnote):

      "Held, that the Accountant Member had become
      functus officio after he passed his initial order.
      Secondly, the procedure prescribed by the statute
      had not been followed. In such a situation, the
      procedure indicated in sub-section (4) of section
      255 of the Income-tax Act, 1961, is required to be
      followed. It was incumbent upon the members to
      state the points on which they differed and the
                                                               Special Bench-
                               33           ITA Nos.6490 and 6491/Mum/2008
                                                     :AY 2004-05 and 2005-06


      case was required to be referred to the President
      of the Tribunal for appropriate orders."

40.    At this juncture, we cannot resist observing that
the opinion     expressed by        the ld.Third Member               was
very much binding on the             ld. Accountant Member.
The    ld. Accountant Member          who is in minority was
bound to follow the opinion of the ld. 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 opinion of the ld.
Third Member.          The reliance    is also placed           on the
decision   of    the    Hon'ble     Apex   Court     in     Assistant
Collector of Central Excise v. Dunlop India Ltd.(1985)
154 ITR 172 (SC), wherein it has been observed                        and
held (page 180) :


      "We desire to add and as was said in Cassell and
      Co. Ltd. v. Broome [1972] AC 1027 (HL), we hope
      it will never he necessary for us to say so again
      that " in the hierarchical system of courts " which
      exists in our country, " it is necessary for each
      lower tier ", including the High Court, " to accept
      loyally the decisions of the higher tiers ". " It is
      inevitable in a hierarchical system of courts that
      there are decisions of the supreme appellate
      tribunal which do not attract the unanimous
      approval of all members of the judiciary ...... But
      the judicial system only works if someone is
      allowed to have the last word and that last word,
      once     spoken,       is loyally accepted"    (See
      observations of Lord Hailsham and Lord Diplock in
      Broome v. Cassell). The better wisdom of the court
      below must yield to the higher wisdom of the court
      above. That is the strength of the hierarchical
      judicial system......"


41.    In this view of the matter, the questions framed

by the ld. Accountant Member while giving                   effect to
                                                                Special Bench-
                                 34          ITA Nos.6490 and 6491/Mum/2008
                                                      :AY 2004-05 and 2005-06


the opinion     of majority      are outside       the purview            of

section    255(4)     of   the   Act   and     hence        have         no

relevance.


42.    Now we shall discuss the decisions relied upon by

the ld. DR.


43.    In Deepak Agro Foods (supra), it has been held

       "15. All irregular or erroneous or even illegal
      orders cannot be held to be null and void as there
      is a fine distinction between the orders which are
      null and void and orders which are irregular,
      wrong or illegal. Where an authority making order
      lacks inherent jurisdiction, such order would be
      without jurisdiction, null, nonest and void abinitio
      as defect of jurisdiction of an authority goes to the
      root of the matter and strikes at its very authority
      to pass any order and such a defect cannot be
      cured even by consent of the parties. (See: Kiran
      Singh & Ors. Vs. Chaman Paswan & Ors.1).
      However, exercise of jurisdiction in a wrongful
      manner cannot result in a nullity - it is an
      illegality. 1 AIR 1954 SC 340 capable of being
      cured in a duly constituted legal proceedings."


Whereas in the case before us, the           ld.    Third Member

has passed the order after hearing the parties and

after considering the material including the additional

evidence      filed   by   the   assessee,     which       was        also

considered by the Members who originally heard the

appeal, therefore, there is no irregularity            in the order

of the    ld. Third Member and therefore, the decision
                                                                       Special Bench-
                                    35              ITA Nos.6490 and 6491/Mum/2008
                                                             :AY 2004-05 and 2005-06


relied    on by the ld. DR is distinguishable and not

applicable to the facts of the present case.


44.     In Baker Technical Services               (P) Ltd.(supra), the

Third     Member     had      partly       agreed        with         the      Ld.

Accountant       Member       and        partly    agreed          with        the

ld.Judicial Member, therefore,             he while observing that

if the    Division   Bench finds it difficult to form the

majority opinion as per the orders in this case, it is

suggested that a reference may be made                                  to the

Hon'ble     President    of    ITAT        for    making          a     further

reference to a Member or                 Members for resolving a

difference of opinion in accordance with law.


45.     Whereas in the case before us,                  there is no such

situation. The ld.Third Member while agreeing with the

views of the ld. Judicial Member has passed the order

in favour of the assessee, therefore, the majority of

opinion    has    been     arrived        at     and,    therefore,            the

decision relied on by the ld. DR is distinguishable and

not applicable to the facts of the present case.


46.     In B.T.Patil & Sons          Belgaum Construction (P.)

Ltd.(supra), the questions for considerations before

the Larger Bench were :
                                                                 Special Bench-
                                36            ITA Nos.6490 and 6491/Mum/2008
                                                       :AY 2004-05 and 2005-06


      "(1) Whether on facts and circumstances of the
      case, the appellant assessee is entitled for
      claiming of deduction under the provisions of
      section 80-IA(4) in respect of the projects
      undertaken?

      (2)   Whether the Tribunal has to decide an issue
      on the basis of the law as it stands on the day of
      the passing of the order?"

On the question No.1 it has been held

       "....... that the conditions set out in sub-section (4)
      clause(i) are not satisfied and, hence,              the
      assessee cannot claim deduction under this
      section. The insertion and substitution of the
      Explanation is only to clarify that the deduction
      cannot be allowed in relation to a business in the
      nature of works contract under any circumstances.
      In other words, the view emerging from the careful
      circumspection of sub-section (4) has been
      endorsed by the Explanation and that too with
      retrospective       effect   from   1.4.2000    thereby
      covering both the years under consideration. We,
      therefore, answer question No.1 in negative by
      holding that the assessee is not entitled to
      deduction under the provisions of section 80-IA(4)
      in respect of the projects undertaken. (para 59)

On the question No.2, it has been held

      "......that the Tribunal is not empowered but duty
      bound to apply such retrospective amendment
      made to the relevant section after allowing chance
      to the aggrieved party to address on such
      retrospective amendment concerning the dispute in
      question. We, therefore, answer this question in
      affirmative by holding that the Tribunal has to
      decide an issue on the basis of the law as it stands
      on the day of the passing of the order." (para 26)

47.    Whereas    in    the   case   before   us      the      issue       is
entirely different i.e. whether the order proposed by
the    ld. Accountant Member while giving              effect to the
opinion of     the     majority consequent to           the opinion
expressed by the ld. Third Member, can be said to be a
                                                                 Special Bench-
                                37            ITA Nos.6490 and 6491/Mum/2008
                                                       :AY 2004-05 and 2005-06


valid order.     Therefore, the decision relied on by the
ld. DR is of no help to the Revenue and hence not
applicable.


48.    In M/S. S.D. Fine Chemicals Pvt. Ltd. (supra), it
has been held that if the Third Member of the Tribunal
has not dealt with the case in full and proper manner
and has disposed of the issue in cryptic manner, the
matter has to be remitted back to the                Third Member
for a fresh opinion after hearing the parties.


49.    Whereas    in   the   case    before    us,     the      ld.Third

Member has passed a detailed and reasoned order and

it is not the case of the Revenue that the ld. Third

Member has not dealt with the any of the                     issues or

plea taken by the Revenue or the order passed by him

is a cryptic order, therefore, the decision relied on by

the ld. DR is distinguishable and not applicable                   to the

facts of the present case.


50.    In Abhay Kumar Shroff (supra) it has been held

that if the additional evidence enables the Tribunal to

pass order or for any other substantial cause it could

require the parties to do so. There is no gain saying

that   while   this    power   could   be     exercised          by      the

Appellate Tribunal suo motu the jurisdiction vested in

the Tribunal could be got invoked at the instance of

one of the parties before it.
                                                                    Special Bench-
                                    38           ITA Nos.6490 and 6491/Mum/2008
                                                          :AY 2004-05 and 2005-06




51.    Whereas in the case before us the additional

evidence, after providing opportunity,               was considered

by both        the      members who originally                heard the

appeal and the same was also considered by the ld.

Third Member, therefore, the decision relied on by the

ld. DR rather supports the assessee's case.


52.    There     is     no    quarrel     with       the        principles

enunciated      in the aforesaid decision of the                  Tribunal

in Khopade Kisanrao Manikrao (supra) inasmuch as                              in

the   case     before    us   the   additional     evidence              after

providing opportunity was considered by the ld. Third

Member, therefore, the decision relied                  on by the ld.

DR rather supports the assessee's case.


53.    In Shri Ramdas Motor Transport (supra) it has

been held (page 4) :


      "4.    Question No. 11.-Except raising bare ground
      in the I. T. C. that the   Third Member has not
      answered the reference as contemplated under
      section 255(4) of the Act, no argument is
      advanced before us as to how the order of the
      Third Member is unsustainable in law. We have,
      however, perused the order passed by the Third
      Member. He was called upon to        answer three
      questions on which there was a difference of
      opinion among      the two Members. The Third
      Member in a well considered order, answered the
      reference by giving sound and valid reasons
      agreeing with the Accountant Member. Thus, the
      majority view was in favour of the assessee and a
                                                                   Special Bench-
                                  39            ITA Nos.6490 and 6491/Mum/2008
                                                         :AY 2004-05 and 2005-06


      consolidated order was accordingly passed by the
      Tribunal in     accordance with the provisions of
      section 255(4) of the Act. Therefore, we are not
      ready to accept the contention that the order of
      the Appellate Tribunal does not represent the
      majority view. There is absolutely no question of
      law involved in this point. We, therefore, decline
      to refer this question also."


54.    Whereas in the case before us, the ld. Third

Member      in a well considered            order, answered the

reference by giving sound and valid reasons agreeing

with    the views     of     ld. Judicial Member, therefore,

the    decision     relied    upon        by   the        ld.      DR        is

distinguishable and not applicable             to the facts of the

present case.


55.    For the reasons as discussed above                we hold that

on a difference of opinion among the two Members of

the    Tribunal, the ld.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     ld.Third      Member          in      a     well

considered order, answered the reference by giving

sound and valid reasons agreeing with the                        views of

the ld. Judicial Member.          Thus, the majority view was

in favour of the assessee.             We further hold that                the

proposed order dated 18.2.2010 of the ld. Accountant

Member      who      is      in    the     minority           and         had
                                                                      Special Bench-
                                   40              ITA Nos.6490 and 6491/Mum/2008
                                                            :AY 2004-05 and 2005-06


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    Hon'ble    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 and, hence,

the said order dated 18.2.2010 proposed                         by the ld.

Accountant       Member       is    not       sustainable           in      law.

Accordingly, we answer the question referred to us in

negative i.e.in favour of the assessee.


56.   At the time of hearing, with the consent of the

parties and in the interests of justice, it has been

decided by the Hon'ble President to finally dispose of

the appeals on         the basis of majority view. Therefore,

based on the opinion of the majority, the ground wise

decision   of    the    appeals    for       the   assessment             years

2004-05 and 2005-06 is as under :

                        ORDER GIVING EFFECT

Assessment Year : 2004-05

57.   Ground Nos.1 and 2 are against the confirmation

of action of the        AO in appointing Special Auditor                      u/s

142(2A) of the Act.
                                                                     Special Bench-
                                 41               ITA Nos.6490 and 6491/Mum/2008
                                                           :AY 2004-05 and 2005-06


58.   It   has   been    decided       by    the       members             who

originally heard the appeal against the assessee and in

favour of the Revenue. The grounds taken by the

assessee are, therefore, rejected.


59.   Ground     No.3     is    against      the      sustenance               of

disallowance     of   Rs.2,76,885/- paid to Mr. Sudhanshu

Purohit and treating           the amount of             Rs.1,17,627/-

receivable as income from Mr. Sudhanshu Purohit.


60.   It has been       restored back by the members who

originally heard the appeal            to the file of the               AO to

examine the issue afresh.             The ground taken                by the

assessee     is, therefore, partly allowed for statistical

purposes.


61.   Ground     No.4    is    against      the    sustenance                  of

addition    of    Rs.4,78,12,403/-           received           from         Mr.

Somendra Khosla.


62.   As per majority view, the issue is decided in

favour of the assessee and against the Revenue by

deleting the same.       The ground taken by the assessee

is, therefore, allowed.


63.   Ground Nos.5 to 8 are not pressed, hence, they

are dismissed being not pressed.
                                                                            Special Bench-
                                          42             ITA Nos.6490 and 6491/Mum/2008
                                                                  :AY 2004-05 and 2005-06




64.   Ground No.9 is against the sustenance of addition

of    the     value       of        150        Room      nights          vouchers

Rs.21,00,000/- on adhoc basis or in alternative, as an

additional ground for               assessment year 2005-06, the

same may be allowed in assessment year 2005-06 as

loss/bad debts.


65.   It has been restored back by the members who

originally heard the appeal to the file                        of the          AO to

decide      the    same    as       per        directions      given        by      the

Tribunal. The ground including the additional ground

taken by the assessee are therefore, partly allowed for

statistical purposes.


66.   Ground        No.10      is    against       the     sustenance                 of

disallowance of bad debts written off Rs.5,44,000/-.


67.    The Members who originally heard the appeal

confirmed         the   disallowance             of   Rs.4,45,000/-                and

deleted the balance amount of                         Rs.99,000/-.                 The

ground taken by the assessee is, therefore, partly

allowed.


68.   Ground No.11 is against sustenance of addition of

Rs.4,11,217/- u/s 68 of the Act.
                                                                   Special Bench-
                               43               ITA Nos.6490 and 6491/Mum/2008
                                                         :AY 2004-05 and 2005-06


69.    It   has   been    decided   by    the        members             who

originally heard the appeal in favour of the assessee

and against the         Revenue by deleting the amount of

Rs.4,11,271/-.      The ground taken by the assessee is,

therefore, allowed.


70.    Ground     Nos.12     and    13    are       against                the

sustenance         of     disallowance     of        the        expenses

Rs.7,56,16,910/- and Rs.61,93,015/-.


71.    As per majority view, the issue is decided in

favour of the assessee and against the Revenue by

deleting the same. The grounds taken by the assessee

are, therefore, allowed.


Assessment year 2005-06.


72.    Ground No.1 is against the sustenance of addition

of    Rs.1,02,91,176/-     received      from      Shri       Somendr a

Khosla.


73.    As per majority view, the issue is decided in

favour of the assessee and against the Revenue by

deleting the same.       The ground taken by the assessee

is, therefore, allowed.
                                                               Special Bench-
                              44            ITA Nos.6490 and 6491/Mum/2008
                                                     :AY 2004-05 and 2005-06


74.   Ground No.2 is against the deletion of addition of

Rs.10,42,027/- towards interest paid to Shri Somendra

Khosla.


75.   It   has   been   decided     by    the    members             who

originally heard the appeal        in favour of the assessee

and against the Revenue by deleting the same. The

ground taken by the assessee is, therefore, allowed.


76.   Ground     No.3   is   against      the   sustenance               of

disallowance of bad debts Rs.15,58,655/-.


77.   It   has   been   decided     by    the    members             who

originally heard the appeal        in favour of the assessee

and against the Revenue by deleting the same. The

ground taken by the assessee is, therefore, allowed.


78.   Ground No.4 and 5 are against the sustenance of

disallowance of expenses of              Rs.7,95,73,902/- and

Rs.37,03,683/-.


79.   As per majority view, the issue is decided in

favour of the assessee and against the Revenue. The

ground taken by the assessee is, therefore, allowed.
                                                               Special Bench-
                                45          ITA Nos.6490 and 6491/Mum/2008
                                                     :AY 2004-05 and 2005-06


80.    In the light of discussions, besides answering
the reference, the captioned appeals be treated as
partly allowed in the manner indicated.

Order pronounced in the open Court on 30th Mar., 2012.


       sd                  sd                sd
  (P.M.JAGTAP)    (G.E.VEERABHADRAPPA ) (D.K.AGARWAL)
Accountant Member       President       Judicial Member

Mumbai : 30th    March, 2012.

SRL:

Copy   to :
1.     The Appellant.
2.     The Respondent.
3.     The CIT concerned
4.     The CIT(A) concerned.
5.     The DR/ITAT, Mumbai.
6.     Guard File.
                                     By Order
true copy
                       Assistant Registrar, ITAT, Mumbai.
 
 
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