TMI Blog2008 (2) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... PRE A. M., WAGHMARE S. R. MRS. JJ. JUDGMENT A. M. Sapre J.- 1. This is an income-tax reference made by the Tribunal at the instance of the assessee under section 256(1) of the Income-tax Act, 1961, which arises out of an order dated December 27, 1996, passed by the Tribunal in I. T. A. No. 778/Ind/1992 to answer the following questions of law : "(i) Whether the Tribunal was justified and/or had the jurisdiction to ignore the decision of the High Court rendered in MCC No. 65 of 1993 decided on August 20, 1996 (CIT v. Premier Industries P. Ltd. [1997] 227 ITR 282 (MP)) on the ground that it does not lay down the correct principles of law on the issue involved therein ? (ii) Assuming the Tribunal was right in their observations, even then what was the procedure which the Tribunal should have followed in such eventuality ?" 2. The facts necessary to answer the questions need mention in brief. As a matter of fact, for answering the questions referred, the facts relating to the merits of the case out of which this reference arises need not be taken note of in detail because no specific question of law on the merits of the controversy is referred to this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(1A) contended that imposition of the additional tax by the Assessing Officer was justified and that of the order of the Commissioner of Income- tax (Appeals) directing deletion of the additional tax was bad. He, thus, urged for setting aside of the order of the Commissioner of Income-tax (Appeals) and that of restoration of the order of the Assessing Officer. The counsel for the assessee, in reply, while supporting the order of the Commissioner of Income-tax (Appeals), contended that the view taken by the Commissioner of Income-tax (Appeals) is in conformity with the law laid down by the jurisdictional High Court, i.e., the Madhya Pradesh High Court in the case of CIT v. Premier Industries Pvt. Ltd., MCC No. 65 of 1993, decided on August 20, 1996, ([1997] 227 ITR 282 (MP)) wherein the High Court on interpretation of section 143(1A) has taken the similar view and, hence, the appeal filed by the Revenue be dismissed by upholding the order of the Commissioner of Income-tax (Appeals) which does not call for any interference. It was also urged that since the Commissioner of Income-tax (Appeals) did not decide the appeal on the merits on other prima facie adjustment made by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceded to the request of the assessee and, accordingly, made reference to this court under section 256(1) of the Act on the aforementioned two questions of law for answer by this court. 8. Heard Shri G. M. Chaphekar, senior advocate with Shri D. S. Kale, advocate for the assessee and Mr. R. L. Jain, senior advocate with Kum. Veena Mandlik, advocate for the Revenue. 9. Learned counsel for the assessee contended that the Tribunal, while allowing the appeal filed by the Revenue, erred in not placing reliance on the decision of the jurisdictional High Court (i.e., Madhya Pradesh High Court) rendered in the case of CIT v. Premier Industries Pvt. Ltd.-MCC No. 65 of 1993 decided on August 20, 1996 ([1997] 227 ITR 282 (MP)). According to the learned counsel, the decision of the jurisdictional High Court (MP) was binding on the Tribunal (M.P. Bench) so long as it is holding the field. Learned counsel urged that it was not proper on the part of the Tribunal to ignore and/or decline to follow the decision of the Madhya Pradesh High Court on the ground that the High Court, while deciding the case, did not take note of certain amendments made in the Income-tax Act (i.e., in section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart, no prayer was made either by the assessee or the Revenue for calling additional statement or questions from the Tribunal by taking recourse to the provisions of section 256(1) and/or (2) of the Act. Indeed, looking to the controversy that was debated before the Tribunal in an appeal filed by the Revenue out of which this reference arises and in the light of the finding recorded by the Tribunal, the reference could have been made by the Tribunal on all questions relating to the merits in addition to the questions referred. It was also possible because once the finding on the merits is recorded one way or the other then in such event, the Tribunal gets jurisdiction to refer the question to this court under section 256(1) of the Act for its answer on the merits. Likewise, when the Tribunal declines to make the reference under section 256(1) of the Act to this court as prayed by one party then an application can be made to this court under section 256(2) of the Act praying for direction to the Tribunal to refer the questions which, according to an aggrieved party arise out of the order of the Tribunal. These remedies though available, were not resorted to at any stage with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a higher court to settle." 16. In one leading decision of the Supreme Court in Tirupati Balaji Developers P. Ltd. v. State of Bihar, AIR 2004 SC 2351, their Lordships, speaking through R. C. Lahoti J. (as his Lordship then was and later C. J. I.), explained in subtle way as to what should be the role of court as against their superior court under whom they function. It was a case where their Lordships were dealing with the role of the High Court qua the Supreme Court. A perusal of this decision would go to show that their Lordships, after examining the issue in the context of constitutional provisions and various judicial precedents, explained the role of courts qua their appellate court while deciding the cases. It is useful to refer to some of the apt observations of the Supreme Court contained in paras. 8 and 9 of the decision, which, in our view, must always be kept in mind by judges while deciding any ease and in particular when such situation arises before them (page 235 of 2004 AIR) : "8. Under the constitutional scheme as framed for the judiciary, the Supreme Court and the High Courts both are courts of record. The High Court is not a court 'subordinate' to the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to reverse, confirm, annul or modify the decree or order of the forum appealed against and in the event of a remand the lower forum shall have to rehear the matter and comply with such directions as may accompany the order of remand. The appellate jurisdiction inherently carries with it a power to issue corrective direction binding on the forum below and failure on the part of latter to carry out such directions or show disrespect to or to question the propriety of such directions would-it is obvi-ousbe destructive of the hierarchical system in administration of justice.The seekers of justice and the society would lose faith in both." 17. In the case reported in East India Commercial Co. Ltd. v. Collector of Customs, AIR 1962 SC 1893, the question arose before the Supreme Court as to whether an administrative tribunal can ignore the law declared by the highest court in the State, i.e., High Court and initiate proceedings in direct violation of the law so declared ? Answering the question in the negative, their Lordships ruled that the Tribunal cannot ignore the law laid down by the High Court on a particular issue. Their Lordships, speaking through Subba Rao (as his Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the Code of Criminal Procedure, while deciding the case, hence, it is not possible for the High Court (Single Bench) to place any reliance on such decision of the Supreme Court. The single judge of the Kerala High Court thereupon proceeded to decide the case, before him without placing reliance on the decision of the Supreme Court. In other words, the single judge of the Kerala High Court ignored the decision of the Supreme Court by finding fault with it which had otherwise full application to the case. When the matter went to the Supreme Court, their Lordships, speaking through Thomas J., came down heavily on the single judge of the Kerala High Court and held that it is impermissible for the High Court to overrule the decision of the Supreme Court on the ground that the Supreme Court laid down the legal position without considering a particular section of Code of Criminal Procedure, which was not brought to their notice. It was held that it is not only a matter of discipline for the High Court in India, it is the mandate of the Constitution as provided in article 141 of the Constitution of India that the law declared by the Supreme Court shall be binding on all courts within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether an order passed in ignorance of law laid down by the High Court can be rectified in section 154 proceedings ? Their Lordships of the Gujarat High Court, after placing reliance on the law laid down by the Supreme Court in the case of East India Commercial Co. Ltd., AIR 1962 SC 1893, held that it is implicit in the power of supervision con- ferred on a superior court that all the tribunals subject to its supervision should confirm to the law laid down by it. It was held that the law laid down by the High Court has to be followed by the income-tax authorities situated in the area over which the High Court has jurisdiction. This is what their Lordships ruled in the concluding para after placing reliance on the decision of East India Commercial Co. Ltd., AIR 1962 SC 1893 (page 191 of 165 ITR) : "In view of this decision of the Supreme Court, the Income-tax Officer and the Appellate Assistant Commissioner were bound to follow the decision of this court in Hasanali Khanbhai and Sons' case [1987] 165 ITR 195 (Guj). If they failed to do so, it would undermine the respect for the law laid down by the High Court and the constitutional authority of the High Court and their conduct wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the High Court is equally binding on courts/tribunals they being subordinate to the High Court by virtue of the powers conferred by articles 215, 226 and 227 of the Constitution of India and by the judicial precedents. 23. In our view, the Tribunal has full authority/jurisdiction to distinguish the decision when cited by any party be that of the Supreme Court and/or the High Court by pointing out its distinguishing features both on facts and law involved in the said decision. In other words, if the Tribunal feels that a decision cited by any party has no application to the facts of the case under consideration then the Tribunal has full jurisdiction to distinguish the said decision thereby not considering appropriate in the facts of that case to place any reliance on such decision. However, the reasons as to why the decision relied on by any party has no application and which are those distinguishing features due to which the said decision can have no application have to be specifically stated in the order. Such distinction is permissible in law because counsel may in his wisdom place reliance on several decisions in support of his submissions. It is for the court/tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 282 (MP)) on the ground that it does not lay down the correct principle of law on the issue involved therein. 26. This takes us to answer question No. 2, which reads as under : "(ii) Assuming the Tribunal was right in their observations, even then what was the procedure which the Tribunal should have followed in such eventuality ?" 27. A perusal of the aforesaid question No. 2 would show that it is consequential in nature to question No. 1. We have answered question. No. 1 by holding that the Tribunal was not justified in ignoring the decision of the High Court on the ground that it does not lay down the correct principle of law on the issue involved. However, the question that now arises for consideration is ; what procedure should then have been followed by the Tribunal having ignored the decision of the High Court ? 28. In our view, in the first instance, as held supra, the Tribunal should not have ignored the decision of the jurisdictional High Court once it came to a conclusion that it is otherwise applicable to the issue involved in appeal. Instead, it should have placed reliance on such decision having found that it cannot be distinguished on facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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