S. 255(4): Even if Third Member's verdict is shown to be “unsustainable in law and in complete disregard to binding judicial precedents”, Division Bench has no choice but to give effect to it

On a question relating to the levy of penalty, there was a difference of opinion between the Judicial Member and the Accountant Member. The Third Member, to whom the difference was referred, agreed with the Accountant Member and confirmed the levy of penalty. At the stage of giving effect to the order of the Third Member, the assessee claimed that the said order could not be given effect to as it was “unsustainable in law and in complete disregard to binding judicial precedents”. The assessee claimed that the matter of whether effect could be given to such an order was required to be referred to a Special Bench. HELD by the Tribunal:

(i) A larger bench decision binds the bench of a lesser strength because of the plurality in the decision making process and because of the collective application of mind. What three minds do together, even when the result is not unanimous, is treated as intellectually superior to what two minds do together, and, by the same logic, what two minds do together is considered to be intellectually superior to what a single mind does alone. Let us not forget that the dissenting judicial views on the division benches as also the views of the third member are from the same level in the judicial hierarchy and, therefore, the views of the third member cannot have any edge over views of the other members. Of course, when division benches itself also have conflicting views on the issues on which members of the division benches differ or when majority view is not possible as a result of a single member bench, such as in a situation in which one of the dissenting members has not stated his views on an aspect which is crucial and on which the other member has expressed his views, it is possible to constitute third member benches of more than one members. That precisely could be the reason as to why even while nominating the Third Member under section 255(4), Hon’ble President of this Tribunal has the power of referring the case “for hearing on such point or points (of difference) by one or more of the other members of the Appellate Tribunal”. Viewed from this perspective the Third Member is bound by the decisions rendered by the benches of greater strength. That is the legal position so far as at least the jurisdiction of Hon’ble Gujarat High Court is concerned post CIT Vs Vallabhdas Vithaldas [(2015) 56 taxmann.com 300 (Guj), but, even as we hold so, we are alive to the fact that Hon’ble Delhi High Court had, in the case of P C Puri Vs CIT [(1985) 151 ITR 584 (Del)], expressed a contrary view on this issue which held the field till we had the benefit of guidance from Hon’ble jurisdictional High Court. The approach adopted by the learned Third Member was quite in consonance with the legal position so prevailing at that point of time.

(ii) At the time of giving effect to the majority view under section 255(4), it cannot normally be open to the Tribunal to go beyond the exercise of giving effect to the majority views, howsoever mechanical it may seem. In the case of dissenting situations on the division bench, the process of judicial adjudication is complete when the third member, nominated by Hon’ble President, resolves the impasse by expressing his views and thus enabling a majority view on the point or points of difference. What then remains for the division bench is simply identifying the majority view and dispose of the appeal on the basis of the majority views. In the course of this exercise, it is not open to the division bench to revisit the adjudication process and start examining the legal issues (B T Patil & Sons Belgaum Constructions Pvt Ltd Vs ACIT (ITA Nos, 1408 and 1409/PN/2003; order dated 28th February 2013 distinguished).