High Court Of Madhya Pradesh : Indore Bench
Agrawal Warehousing & Leasing Ltd. vs. CIT
Sections 254, 255(3)
Asst. Year 1989-90
Deepak Verma & N.K. Jain, JJ.
IT Ref. No. 43 of 1997
11th July, 2002
Counsel Appeared
P.M. Choudhary, for the Applicant : R.L. Jain, for the Respondent
JUDGMENT
N.K. JAIN, J. :
This reference under s. 256(1) of the IT Act, 1961, made at the instance of the applicant-assessee, arises out of the order of Income-tax Appellate Tribunal (for short the Tribunal), Indore Bench, Indore, dt. 26th Sept., 1995, in ITA No. 952/Ind/1994 seeking answer of the following questions stated to be the questions of law :
“(i) Whether, on the facts and in the circumstances of the case, the Tribunal once having held that its decisions are binding on the lower authorities, was right in not setting aside the order of the CIT (A) in which the CIT(A) had refused to follow the order of the Tribunal ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in not allowing the appeal on the preliminary issue regarding binding nature of orders of the Tribunal on lower authorities and instead dismissing the appeal on the basis of the grounds which were raised “without prejudice” to the grounds regarding preliminary issue ?
(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in reviewing its own decision in the case of Arihant Builders, Developers and Investors (P) Ltd. particularly when a reference arising out of the said order was already pending before the Hon’ble Court? And whether the Tribunal is right in relying upon the decision in the case of Distributors (Baroda) (P) Ltd. vs. Union of India (1985) 47 CTR (SC) 349 : (1988) 155 ITR 120 (SC) : TC 24R.516?
(iv) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the notice under s. 143(2) could be issued even after grant of refund under s. 143(1)(a)(ii) and the words ‘without prejudice to provisions to sub-s. (2)’ appearing in cl. (i) of the said section can be read into cl. (ii) ?
(v) Whether on the facts and in the circumstances of the case the Tribunal has misinterpreted and misapplied the judgment of MP High Court in the case of Kamal Textile vs. ITO & Ors. (1991) 95 CTR (MP) 274 : (1991) 189 ITR 339 (MP): TC 10R.299 for interpreting provisions of sub-cl. (ii) of s. 143(1)(a) of the IT Act?”
The matter pertains to the asst. yr. 1989-90. The assessing authority having first granted refund to the applicant- assessee under s. 143(1)(a)(ii) of the IT Act, subsequently issued notice under s. 143(2) of the Act. On completion of the assessment, certain additions were made. The applicantassessee challenged the assessment order in appeal before the CIT(A). One of the grounds for challenge was that the AO having granted refund under s. 143(1)(a)(ii) could not have in law issued notice under s. 143(2) and as such the order of assessment making addition was without jurisdiction. During hearing of the appeal before the CIT(A), the assessee cited a decision of the Tribunal rendered in the case of Arihant Builders, Developers & Investors (P) Ltd. vs. Asstt. CIT (ITA No. 1014/Ind/93 on 19th July, 1994), wherein the Tribunal had held that where refund has been granted under s. 143(1)(a)(ii), no notice under s. 143(2) can legally be issued. CIT(A), however, declined to follow the above cited decision and was of the view that the decision in Arihant (supra) did not lay down the correct proposition of law. The appeal filed by the assessee was dismissed and the addition was upheld.
Aggrieved by the decision of the CIT(A), the assessee carried the matter in further appeal before the Tribunal and it was contended inter alia, that the CIT(A) was bound by the decision of the Tribunal in the case of Arihant (supra). The Tribunal, however, dismissed the appeal and upheld the view taken by the CIT(A). As regards the binding force of its own earlier judgment in the case of Arihant (supra), the Tribunal observed: “21. In view of the reasons discussed above, we feel that the view adopted by the CIT(A) is correct and hence we need not follow the view adopted by this very Bench in the case of Arihant Builders. It would not be out of place to mention here that once the Hon’ble Supreme Court was also placed in a similar situation. While dealing with the case of Distributors (Baroda) (P) Ltd. vs. Union of India (1985) 47 CTR (SC) 349 : (1988) 155 ITR 120 (SC) : TC 24R.516 the Hon’ble Court had come to the conclusion that the view adopted by it in the case of Cloth Traders (P) Ltd. vs. CIT (1979) 10 CTR (SC) 393 : (1979) 118 ITR 243 (SC) : TC 24R.531 does not lay down the correct law. In such a situation, at p. 124 of the report, the Hon’ble Court observed “To perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience”. The Hon’ble Court also referred to the inspiring words of Justice Bronson in Pierce vs. Delameter (A.M.Y. at p. 18) : ‘a Judge ought to be wise enough to know that he is fallible and, therefore, ever ready to learn : great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead : and courageous enough to acknowledge his errors’. Further, at p. 140 of the report, the Hon’ble Court referred to the dissenting opinion of Justice Jackson in Massachusetts vs. United States (333 US 611) : ‘I see no reason why I should be consciously wrong today because I was unconsciously wrong yesterday’. Reference was also made to the observations of the Lord Denning in Ostime vs. Australian Mutual Provident Society (1960) AC 459, 480 : ‘The doctrine of precedent does not compel your Lordships to follow the wrong path until you fall over the edge of the cliff’.”
4. The applicant-assessee feeling aggrieved by the decision of the Tribunal made application under s. 256(1) of the IT Act, whereupon the Tribunal made reference to this Court for resolution of the questions already extracted above. We have heard Shri P.M. Choudhary, legal counsel for applicant and Shri R.L. Jain, legal counsel for respondent Department. Question Nos. 1 to 3 are inter-related and if they are answered in favour of the applicant- assessee, then it would not be necessary for us to consider the remaining question Nos. 4 and 5. In fact, this reference involves much larger question of judicial propriety and discipline.
The Tribunal is created under s. 252 of the IT Act consisting of as many as JM and AMs as may be appointed by the Central Government. One such JM of the Tribunal is normally appointed as the President thereof. Any assessee aggrieved by the orders passed by the authorities as enumerated under cls. (a) to (c) of sub-s. (1) of s. 253 may appeal to the Tribunal. The Tribunal has power to pass such orders on such an appeal as it thinks fit. Sub-s. (4) of s. 254 attaches finality to the orders of the Tribunal subject to the provisions of s. 256 (or s. 260A). Needless to say that the orders passed by the Tribunal are binding on all the Revenue authorities functioning under the jurisdiction of the Tribunal. Dealing with this very aspect of the matter, the Supreme Court in the case of Kamlakshi 1991 (55) ELT 433 (SC) emphasised : “It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them Revenue Officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Asstt. Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Asstt. Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal.” “The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not ‘acceptable’ to the Department—in itself an objectionable phrase and is the subject- matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.” Obviously, the CIT(A) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Tribunal. Even where he may have some reservations about the correctness of the decision of the Tribunal, he had to follow the order. He could and should have left it to the Department to take the matter in further appeal to the Tribunal and get the mistake, if any, rectified.
The learned members of the Tribunal who decided the appeal upholding the view taken by the CIT(A) also did not observe the due procedure as laid down by various judicial pronouncements. It is significant to note that the decision in the case of Arihant (supra) was rendered by the same Bench of the Tribunal comprising of the same members who decided the appeal giving rise to this reference. The learned members took upon themselves to overrule their own judgment in the case of Arihant. This again in our opinion was not proper. In para 21 of their order, the learned members have referred to certain decisions of the Supreme Court where in the apex Court has undertaken review of its own earlier decisions. However, the learned members seems to have missed the point that the review was undertaken by larger Bench. The legal position on the point is made luculent by the Supreme Court in the case of Pradip Chandra Parija & Ors. vs. Pramod Chandra Patnaik & Ors. (2002) 174 CTR (SC) 580 : (2002) 254 ITR 99 (SC) in following terms : “Judicial discipline and propriety demands that a Bench of two Judges of the Supreme Court should follow a decision of a Bench of three Judges. If the Bench of two Judges concludes that an earlier judgment of a Bench of three Judges is so very incorrect that in no circumstances can it be followed, the proper course for the Bench of two Judges to adopt is to refer the matter before it to a Bench of three Judges setting out the reasons why it could not agree with the earlier judgment. If, then, the Bench of three Judges also comes to the conclusion that the earlier judgment of a Bench of three Judges is incorrect, reference to a Bench of five Judges is justified.”
10. The Gujarat High Court in Sayaji Iron & Engg. Co. vs. CIT (2002) 172 CTR (Guj) 339 : (2002) 253 ITR 749 (Guj), dealing with almost similar situation laid down guidelines for resolution of such controversy as follows: “(ii) That the Tribunal of fact had no right to come to a conclusion contrary to the one reached by another Bench of the same Tribunal on the same facts. If the Tribunal wanted to take an opinion different from the one taken by an earlier Bench, it ought to place the matter before the President of the Tribunal so that he could have the case referred to a Bench consisting of three or more members for which there was provision in the IT Act itself.”
11. The requisite provision is contained in sub-s. (3) of s. 255 where the President of the Tribunal is authorized to constitute a Special Bench of three or more members. In the instant case also the learned members of the Indore Bench of the Tribunal instead of reviewing their own earlier judgment, ought to have referred the matter to the larger Bench.
12. For what we have said above, we answer the Question Nos. 1 to 3 in favour of the applicantassessee and against the Revenue leaving the remaining questions unanswered. The matter shall now go back to the Tribunal for doing the needful in the light of the observations made hereinabove.
[Citation : 257 ITR 235]
