Judicial precedents play a very
important role in law-giving process. They occupy a big area of the law being
administered in this country. Their importance lies in the fact that they are
the product of the expertise and erudition acquired by the Judges during the
course of their dealing with various problems of law, many times highly
complicated ones. If law exists by way of a legislative exercise, a Judge is
concerned with its interpretation and, in that process, he may evolve new
rule(s) to fill up gaps left therein, as the legislative authority cannot
visualise each and every situation which may arise during the course of the
administration of the law. He may even depend on customary law. While solving a
problem, if a Judge finds no enactment or customary law on the subject, he will
determine his own propositions to be applied to the given facts and
circumstances. Salmondon Jurisprudence, (12th Edition) has stated the role of
the English Judges as law-giving authority as under :
“They
have worked together in harmony, imposing their own views of law and justice
upon the whole realm, and establishing thereby a single homogeneous system of
common law, with little interference either from local custom or from
legislation.”
Though the object of
achieving harmony is kept in mind a Judge cannot afford to treat this as an end
itself and, therefore, wherever situation demands, he can give differing
opinions. The role of the Judge in finding out and interpreting the law may not
be an easy one. The process is involved and evolving.
Meaning
of precedent
The term “precedent” is
not defined anywhere. In general English it means, a previous instance or case
which is, or may be taken as an example of rule for subsequent cases, or by
which some similar act or circumstances may be supported or justified.
According to Salmond : In loose
sense it includes merely reported case law which may be cited and followed by
courts. In strict sense, that case law which not only has great binding
authority but must also be followed. In all precedents are authority of past
decisions for future cases. It must be reported, cited and followed by Courts.
Precedent means a legal
decision or form of proceedings serving as an authoritative rule in future for
similar or analogues cases. It is absolutely necessary for maintaining judicial
discipline and rule of law that the precedents are taken as binding on the
lower authorities.
In other words,
‘Judicial Precedent’ means a judgment of a Court of law cited as an authority
for deciding a similar set of facts, a case which serves as authority for the
legal principle embodied in its decision. A judicial precedent is a decision of
the Court used as a source for future decision making.
A precedent is a
statement of law found in decision of a Supreme Court. Though law making is the
work of the legislature, Judges make law through the precedent. Inferior Courts
must follow such laws. Decisions based on a question of law are precedents.
Decisions based on
question of facts are not precedents. Judges must follow the binding decisions
of superior of the same Court. Following previous binding decisions bring
uniformity in decision making, not following would result in confusion. It is
well settled that Article 141 of the Constitution empowers the Supreme Court to
declare the law and not to enact the law, which essentially is the function of
the legislature. To declare the law means to interpret the law. This
interpretation of law is binding on all the Courts in India. This is called as
precedent.
Origin
of Precedent
Precedent
originates from the doctrine of stare decisis. Stare decisis means
to abide by the decisions. The doctrine of stare decisis brings
certainty and conformity to the decisions of the Court and to law.
Object of doctrine of
precedent
The
main object of doctrine of precedent is that the law of the land should be clear,
certain & consistent so that the Courts shall follow it without any hesitation.
In Union of India v. Raghubir Singh AIR 1989 (SC) 1933, it has been held
that: “The doctrine of binding precedent has the merit of promoting a certainty
and consistency in judicial decisions, and enables an organic development of
the law, besides providing assurance to the individual as to the consequence of
transactions forming part of daily affairs. And, therefore, the need for a
clear and consistent enunciation of legal principle in the decisions of a
Court”.
Doctrine of Stare decisis - This
doctrine simply means to abide by the former precedents
“Stare decisis”
is a latin phrase which means “to stand by decided cases” or “to uphold
precedents”. Doctrine of Stare decisis is a general maxim which states
that when a point of law has been decided, it takes the form of a precedent which
is to be followed subsequently and should not normally be departed from.
The objective of “Stare Decisis”
i.e., binding nature of judicial precedents is, undoubtedly, unprecedented
value in bringing stability to judicial functioning and as an aid to
dispensation of justice. Of course, in its application a distinction has to be
drawn between the “ratio decidendi” and “obiter dicta” (which cannot be
suo-moto made applicable) and also for exceptional circumstances to account for
compelling changes in circumstances and legal/statutory provisions.
Similar to judicial precedent, the
principle of stare decisis is sometimes invoked to follow earlier judgment
which has stood the test of time for a long time and accepted by every one. The
same will be followed even if subsequently the court may think that it is not
correct. Acceptance for long settled law would be the ground on which different
view is not taken though it could be taken by that bench.
The Hon’ble Madras High
Court in Peirce Leslie & Co. v. CIT (1995) 216 ITR 176 observed that
the doctrine of stare decisis is one of the policy grounded on the
theory that security and certainty require that accepted and established legal
principle, under which rights may accrue, be recognized and followed, though
later found to be not legally sound, but whether a previous holding of the
court shall be adhered to, or modified, or overruled is within the Court’s discretion
under the circumstances of case before it. The above observation of the Madras
High Court underscores two important aspects of the doctrine of stare decisis.
One, it imparts security and certainty in the legal system of the country in
the sense that it becomes more stable and predictable. Non-observance of this doctrine
would, in fact, lead to chaos. Everybody would be then seen interpreting the
law according to his whims and fancies. Lawyers would be a confused lot not
knowing how to advise their clients. Courts would be in quandary while delivering
judgements and the general public would be in a dilemma as to what is the correct
position of law whether to obey or not to obey it and ultimately the whole
judiciary would lose its credibility. The other aspect that is highlighted is the
limitation of this doctrine. Hon’ble High Court states that a judicial
precedent may in certain circumstances, more particularly when it is not based
on legally sound principles, be departed
from at the discretion of the court.
Obiter dicta
An observation or opinion by a
judge on an issue immaterial to the ratio decidendi which is unnecessary for
the decision of the particular case is called an obiter dicta. An obiter dicta
of any court other than of the Supreme Court has no binding effect on lower
courts.
The Andhra Pradesh High Court in CIT
v. B.R. Constructions (1993) 202 ITR 222 states that a precedent ceases to
have a binding force in the following situations—
(i) If it is reversed or overruled
by a higher court;
(ii) When it is offered or reversed
on a different ground;
(iii) When it is inconsistent with
the earlier decision of the same rank;
(iv) When it is sub silentio (non-speaking
judgment); and
(v) When it is rendered per
incuriam (decision decided without referring to a statutory provision or a
precedent).
Ratio
decidendi (literally means ‘reason for deciding’)
Ratio decidendi (Latin plural rationes decidendi) is a Latin phrase meaning "the reason" or "the rationale for the decision". The ratio decidendi is "the point in a case that determines the judgement" or "the principle that the case establishes". In other words, ratio decidendi is a legal rule derived from, and consistent with, those parts of legal reasoning within a judgment on which the outcome of the case depends.
It
is not the judgement as such but its ratio that constitutes a binding
precedent. It is trite to say that a decision is binding not because of its
conclusion but in regard to its ratio and the principles laid down therein.
It
is a legal phrase which refers to the legal, moral, political and social
principles used by a court to compose the rationale of a particular judgment.
Unlike obiter dicta, the ratio decidendi is, as a general rule, binding on
courts of lower and later jurisdiction—through the doctrine of stare decisis. Certain
courts are able to overrule decisions of a court of coordinate jurisdiction.
However, out of interests of judicial comity, they generally try to follow
coordinate rationes.
Binding nature of
precedents
Precedents work like
lighthouse to guide all Courts. Precedents bring certainty in law. They always
help the lower court judges, specially the junior judges to deal with applying
the law correctly. Sometimes the judges may support their views with help of
the precedents. These are the guidelines which must be followed by the lower
courts to ensure the real justice, consistency, uniformity in the judicial
decisions and also provide predictability to the individual rights.
Judicial precedents are
binding not only on the Courts or quasi-judicial authorities but also even
administrative, tax and revenue authorities. It ensures consistency, equality,
non-prejudice and non-bias.
Binding nature of
precedents, certain general principles
The effect of a binding
precedent in India is that the decisions of the Supreme Court are binding on
all the Courts and Tribunals in India. Article 141 of the Constitution embodies
the rule of precedents. All the subordinate courts are bound by the judgments
of the concerned State High Court. A single judge is bound by the judgments of
Benches consisting of more judges than one. So also, a Division Bench is bound by
the judgment of another Division Bench or a Full Bench or a larger Bench.
While reviewing the
binding nature of precedents, certain general principles may be considered.
§ The first and foremost
principle is that a precedent is an authority for what it actually decides and
not what may remotely or even logically follow from it.
§ Secondly, a decision on
a question which has not been argued cannot be treated as a precedent.
§ Thirdly, as observed by
the Supreme Court in CWT v. Dr. Karan Singh (1993) 200 ITR 614 (SC).
§ If the language in the judgment
is plain and unambiguous and can be reasonably interpreted in only one way, it
has to be understood in that sense, and any involved principle of artificial
construction has to be avoided.
§ Further, if there be any
doubt about the decision, the entire judgment has to be considered, and a stray
sentence or a casual remark cannot be treated as a decision. Fourthly, a case
is a precedent for what it explicitly decides and nothing more.
Exception to the doctrine of
precedents i.e. when Precedent ceases to be binding
Though exceptions do not prove the
rule, they do help us to understand the scope and nature of the rule. The
courts and the jurists while trying to avoid uncertainty of law, recognizes the
need to make law grow hand in hand with the society which is in constant state
of flux. Hence, exception to the rule of doctrine of precedents.
(a) Abrogated Decisions :
A decision ceases to be a precedent
if a statute or statutory rule is enacted subsequently which is inconsistent
with the decision. It may however be noted that an enactment with retrospective
effect cannot make ineffective, a judicial pronouncement delivered which is
binding upon the parties to a dispute, even if the later provision, in
substance, overrules that provision of the statute on which the judgement was
based.
(b) If it is reversed or over ruled by a higher
court.
This is where a court higher in the
hierarchy departs from a decision made in a lower court. Then the previous
decision is no longer binding.
(c) Affirmation or reversal on another ground :
When the judgement of the lower
court is affirmed or reversed on another ground, the ground on which the
decision of lower court is based, is deprived of its binding nature.
(d) Judgement is per incurium :
A judgment can be said to be per
incuriam, if a decision has been given in ignorance of relevant statutory
provision or some authority binding on the court that has resulted in reasons
which are apparently and demonstrably unsustainable, the court may be left with
no option but to treat such decision per incurium and not a binding decision.
But if the provision of
the Act was noticed and considered before the conclusion was arrived at, merely
on the ground that it has erroneously reached the conclusion, the judgment
cannot be ignored as being per incuriam. The rule of per incuriam is
of limited application.
PER INCURIAM DECISIONS
Per incuriam decisions do not have
binding effect. Per incurium decisions mean where the court has acted in
ignorance of a previous decision of its own or of a court of co-ordinate
jurisdiction or when the decision is given in ignorance of the terms of a
statute or a rule having statutory force.
The Apex Court in State of Bihar v.
Kalika Ker alias Kalika Singh & others (2003) 5 SCC 448 held that:
“A decision is given per
incuriam when the Court has acted in ignorance of a previous decision of its
own or of a court co-ordinate jurisdiction which covered the case before it, in
which case it must decide which case to follow; or when it has acted in
ignorance of House of Lords decision, in which case it must follow that decision;
or when the decision is given in ignorance of the terms of a statute or rule
having statutory force.”
(e) Precedent is sub-silentio :
A court may decide in favour of one
party because of issue ‘A’ which it considers and decides. It may be shown, however,
that the court should not have decided in favour of that party unless it also
decides issue ‘B’ in his favour. But the issue ‘B’ was not argued or considered
by the court. In such circumstance, although issue ‘B’ was logically involved
on facts, and although the case had specific outcome the decision is not an
authority on issue ‘B’. Issue ‘B’ is said to pass sub-silentio.
(f) When it is an erroneous decision i.e. a
decision conflicting with the fundamental principles of law.
Legislative amendment
The effect of subsequent
legislative amendment on an earlier precedent can also be considered. It has
been held that function of judiciary and the legislature are distinct and
separate and, therefore, it is not possible for the legislature to supercede a
judgment of the court. However, it has been laid down that the same result can
be achieved by the legislature by altering the basis on which the court has
based its decision. In such a case, precedent is no longer binding or it loses
its binding effect. It has been laid down that a legislature has no legislative
power to render ineffective earlier judicial decision by making a law which
simply declared the earlier decision as invalid and not binding because such power
would not be a legislative power but a judicial power (G.C. Kanengo v. State of
Orissa AIR 1995 SC 1655 at 1665).
However, it has been held that it
would be permissive for the executive or the legislature to remove the defect
which is the cause of the decision of the court. Such defect can be removed
retrospectively and action can be validated but a mere validation with
prospective effect without the defect being removed would be invalid in
achieving validation.
Rule of consistency - It
is not open to revenue to accept a judgment in the case of one assessee, and
appeal, against the identical judgment in the case of another. It was held that
such a differential treatment on the same set of facts was not permissible in
law
In UOI v. Kaumudini
Narayan Dalal (2001) 249 ITR 219 (SC) held that it is not open to revenue
to accept the judgment in the case of the assessee in that case and challenge
its correctness in the case of another assessee, without just cause. Accordingly
following the co-ordinate bench decision and having regard to the fact that the
Revenue has not pointed out any reasons whatsoever as to why the co-ordinate
bench decision will not apply on this assessment year as well, the conclusions
arrived at by the Commissioner (Appeals) is to be approved. (Related Assessment
year : 2003-04) – [DCIT v. Core Healthcare Ltd. (2019) 177 ITD 26 (ITAT
Ahmedabad)]
[1] Decisions of the Supreme Court
The law laid down by the
Supreme Court is law of the land. But the Supreme Court itself is not bound by
its own decision and is free to depart from a previous decision if the court is
satisfied of its incorrectness and its bad effects on the general interest of
the public.
A contrary decision of Larger
Bench prevails over the decision of a smaller Bench. Where a question has been
decided by a Larger Bench, subsequent decision by similar Benches must be
construed so as not to contradict the decision by similar Benches must be
construed so as not to contradict the decision of the Larger Bench.
Position regarding
contrary decision by Supreme Court itself
In case of divergence
between the decisions of Supreme Court, decision of the Larger Bench should be
followed and in case of conflict between decisions of bench of equal strength,
the later decision should be followed provided the earlier decision is
considered.
Dismissal of SLP
The doctrine of
precedents does not apply to another rejection of SLP. SLP can be rejected on
any ground and rejection of SLP does not mean that the Supreme Court agrees
with the view of the High Court or approves or affirms such view. A mere
dismissal of SLP does not mean that the judgment of the High Court stands
affirmed by the Supreme Court.
By virtue of Article 141
of the Constitution of India, the judgements pronounced by the Hon’ble Supreme
Court have the force of law and are binding on all courts in India. However,
the Supreme Court itself is free to review its earlier decision and depart from
it if the situation so warrants.
Article 141 of the
Constitution of India provides that the law declared by the Supreme Court shall
be binding on all courts within the territory of India. The law pronounced by
the Hon’ble Supreme Court becomes the law of the land and all the lower courts
and the authorities implementing the law are bound to follow the same without
any exception; not following the law pronounced by the Hon’ble Supreme Court
may in some cases amount to the contempt of court. The doctrine of stare
decisis provides for the binding nature of the decisions of the court in
order to avoid confusion and uncertainty and to sub-serve the ends of justice;
a decision should not be ignored but be adhered to.
Hon’ble Chief Justice,
Shri Sabhyasachi Mukherjee in the case of Delhi Transport Corporations v.
Mazdoor Congress AIR 1991 SC 101, observed that under Article 141, the
Courts are empowered to declare the law and announce the opinion and its powers
were not fettered by the childish fiction holding that law is made by the
legislature and not by the judiciary; the expression ‘declare’ is wider in the
scope and authorizes the court to pronounce the law. With this, the court has
risen above the literal interpretation and have since then, assumed the line
that permits a purposive and progressive approach to meet the ends of justice.
The Hon’ble Supreme Court is no more an interpreter of the law but is the final
arbiter on the interpretation of the Constitution and as a wing of the State is
a source of law. The law is what the court says it is.
It is the duty of the
subordinate courts, the tribunals and the authorities to respect and implement
the principles laid down by the Supreme Court in administration of justice. Not
doing so amounts to judicial impropriety, that renders an order passed to be a
nullity. No order contrary to the order of the Hon’ble Supreme Court, would be
valid or binding on a person in respect of whom such order is passed. Needless
to say, that it is the principle laid down by the court that is binding and not
every word and the sentence in a judgement.
“The principle of
judicial discipline requires that the order 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”. – [UOI v. Kamalakshi Finance Corporation Ltd., AIR 1992 SC 711].
Supreme Court holds
majority view of larger bench prevails over smaller bench, irrespective of
number of Judges constituting majority
Supreme Court holds that
in view of Article 145(5) of the Constitution of India, concurrence of a
majority of the judges at the hearing will be considered as a judgment or
opinion of the Court as it is a settled position that the majority
decision of a Bench of larger strength would prevail over the decision of a
Bench of lesser strength, irrespective of the number of Judges constituting the
majority; Justice Indira Banerjee authored the judgment on behalf of Justice
Surya Kant, Justice M. M. Sundresh and Justice Sudhanshu Dhulia; Justice Hemant
Gupta in a separate but concurring judgment observes, that “The conclusion (1) is that a decision delivered by a Bench of largest
strength is binding on any subsequent Bench of lesser or coequal strength. It
is the strength of the Bench and not number of Judges who have taken a
particular view which is said to be relevant. However, conclusion (2) makes it
absolutely clear that a Bench of lesser quorum cannot disagree or dissent from
the view of law taken by a Bench of larger quorum. Quorum means the bench
strength which was hearing the matter. Thus, it has been rightly concluded that
the numerical strength of the Judges taking a particular view is not relevant,
but the Bench strength is determinative of the binding nature of the Judgment.” – [Trimurthi Fragrances (P) Ltd. v.
Government of N.C.T. of Delhi – Date of Judgement : 19.09.2022 (SC)]
Precedent – Dismissal of
Special Leave Petition in limine – Not an affirmation of High Court
The fact that the
Special Leave Petition against the decision of the High Court was dismissed by
the Supreme Court would not amount to a confirmation of the view of the High
Court.—[Palam Gas Service v. CIT ( 2017) 394 ITR 300 : 295 CTR 1 : 247
Taxman 379 : 151 DTR 1 (SC)]
Precedent – Supreme
Court’s decision
It is axiomatic that a
decision of the Supreme Court does not make the law but it only declares the
law as always existing since its inception. - [E. Mark (India) Ltd. v. CIT
(2017) 393 ITR 91 (Bom.)]
It was the Hon’ble
Supreme Court came to the rescue of the taxpayers when there was move to take
away the powers of the High Courts and constitute the Landmark Judgements of
the Hon’ble Supreme Court of India. Notational Tax Tribunal to decide the
substantial question of law as the provisions of the said Act were not in
accordance with the basic structure of the Constitution. The substantial
provisions of the Act were struck down as unconstitutional. – [Madras Bar
Association v. UOI (2014) 368 ITR 42 : 271 CTR 257 : 227 Taxman 151 : 109 DTR
273 (SC)]
Conflicting decisions of
the same court
Where there are
conflicting decisions of courts of co-ordinate jurisdiction (read same rank),
the later decision is to be preferred if reached after full consideration of
the earlier decisions. - [CIT v. Thana Electricity Supply Ltd. (1994) 206
ITR 727 (Bom.)]
A decision of a Bench of Supreme
Court is binding on another Bench of the Supreme Court. - [Kalyan Municipal
Council v. Usha Paper Products (P) Ltd (1990) 184 ITR 80 (SC)]
Though the principle of res
judicata does not apply in tax proceedings, the rule of precedent applies
and a Supreme Court decision will be binding in the absence of any difference
in facts or subsequent legislation. - [CIT v. Shri Agastyar Trust (1984) 149
ITR 609 (Mad.); Raman Bhattathiripad v. CIT (1992) 196 ITR 671 (Ker.)]
Supreme Court also will
deviate from its earlier decisions only in exceptional cases
The Supreme Court also will deviate
from its earlier decisions only in exceptional cases. Such exceptions were laid
down by the Supreme Court in Union of India v. Raghubir Singh in the
following words:
1.7 The pronouncement of law by a
Division Bench of the Supreme Court is binding on a Division Bench of the same
or a smaller number of judges and in order that such decision be binding, it is
not necessary that it should be a decision rendered by the full Court or a
Constitution Bench of the Supreme Court.
1.8 The Supreme Court is not bound
by its own previous decision. Like all principles evolved by man for the
regulation of the social order the doctrine of binding precedent is
circumscribed in its governance by perceptible limitations — limitations
arising by reference to the need for, readjustment in a changing society, a
readjustment of legal norms demanded in a changed social context. The court
would, however, do well to ensure that although the new norm chosen in response
to the changed social climate represents a departure from the previously ruling
norm it must, nevertheless, carry within it the same principle of certainty,
clarity and stability.
1.9 The Supreme Court of India
should not differ from its decision merely because a contrary view appeared
preferable. But if the previous decision is plainly erroneous, there is a duty
of the court to say so and not perpetuate the mistake. A revision of its
earlier decision would be justified if there were compelling and substantial
reasons to do so. The earlier decision may be reviewed, for instance, (i) where
an earlier relevant statutory provision had not been brought to the notice of
the court, or (ii) if a vital point was not considered.
1.10 Whether the court should
review depends on several relevant considerations, such as :
(a) What
was the nature of the infirmity or error on the earlier occasion
(i) did some patent aspects of the question
involved remain unnoticed, or
(ii) was the attention
of the court not drawn to any relevant and material statutory provision or
(iii) was any previous
decision of the court bearing on the point not noticed?
(b) Is the
court hearing the plea for review unanimous that there is such an error in the
earlier view?
(c) Has
the earlier decision been followed on subsequent occasions either by the
Supreme Court or by the High Courts?
(d) What
would be the impact of the error on the general administration of law or on the
public good?
(e) Would the reversal of the earlier decision
lead to public inconvenience, hardship or mischief ?
1.11 So far as the binding nature
of judgments of Supreme Court inter se, it is clear that judgment of one bench
is binding on another bench, of lesser or equal strength. However, if the
Single Judge finds that judgment of Division Bench of two Judges is not
correct, he can make reference to the Chief Justice to place the matter before
another Division Bench of more Judges. Otherwise he is bound by the judgment of
Division Bench of two judges. If the Division Bench of two judges differs from
decision of another Division Bench of two Judges, it has to make reference to
the Chief Justice to refer the matter to the bench of more than two Judges.
1.12 Sometimes, even looking at the
importance of the issue, issue can be referred by the Chief Justice to the
Bench of 5, 7, 9, 11, 13 judges.
1.13 Similar would be the position
at the level of the High Court and similar procedure is to be invoked for
making reference to Bench of more Judges.
1.14 Though it may amount to a
little deviation reference may be made the decision in the case of Tribhuvandas
v. Ratilal 70 Bom L. R. 73 in which the Supreme Court dealt with a very unusual
situation created by Raju J. when he refused to be bound by the judgment of a
single judge or of a Division Bench of the High Court of which he was a judge
on the ground that to be so bound would amount to violating the judges oath and
also Section 165 of the Evidence Act. He further held that a judgment delivered
by a full bench on a reference made by a single judge or a division bench could
be ignored, since such judgment would “not be a judgment at all” and “has no
existence in law” because such a reference was tantamount to usurping the
jurisdiction of the Chief Justice. The Supreme Court said:
“The observations made
by the learned judge subvert the accepted notions about the force of precedents
in our system of judicial administration. Precedents which enunciate rules of
law form the foundation of administration of justice under our system. It has
been held time and again that a single judge of a High Court is ordinarily
bound to accept as correct judgments of Courts of Co-ordinate jurisdiction and
of Division Benches and of the full Benches of his Court. The reason of the
rule which makes a precedent binding lies in the desire to secure uniformity
and certainty in the law”. – [Union of India v. Raghubir Singh (1989) 178 ITR
548 (SC)]
Supreme Court not bound
by its own decisions
While interpreting the word “all
courts” in the case of Bengal Immunity Co. v. State of Bihar, Hon'ble Supreme
Court has held that in the context of article 141, that the phrase “all Courts”
must refer to Courts other than the Supreme Court. Hon’ble Supreme Court is not
bound by its earlier judgments and possessed the freedom to overrule its
judgments when it thought fit to do so to keep pace with the needs of changing
times. – [Bengal Immunity Co. v. State of Bihar (1955) AIR 1955 (SC) 661 : 2
SCR 603 (SC)]
[2]
Decision of High Court
The Indian Income-tax
Act extends to whole of India therefore the judgments rendered by High Court
should normally be followed by the other High Courts in also the income-tax
authorities particularly in identical or comparable circumstances unless there
are compelling reasons for departing from the view taken by the another High
Court in order to preserve uniformity in law, not taking the “territory” as the
base.
State High Court has
jurisdiction within the State. Law laid down by a High Court is binding on all
the courts, Tribunals, tax authorities and other administrative authorities
within the jurisdiction of the State High Court. Article 227 provides
supervisory power and Article 226 confers power to issue a writ, direction or
an order and all the subjects are bound to follow else would commit Contempt. A
Judgment or order of a State High Court is not of binding nature on the Hon’ble
Judges of the other High Courts. However, delivered by a High Court deserves to
be respected by the other High Courts, particulars, in tax field as it is a
union legislative.
General rule
General rule is that High Court will not interfere
with the concurrent findings of the courts below. But it is not an absolute
rule. Some of the well-recognised exceptions are where
(i)
the courts below have
ignored material evidence or acted on no evidence;
(ii)
the courts have drawn
wrong inferences from proved facts by applying the law erroneously; or
(iii)
the courts have wrongly
cast the burden of proof. When we refer to “decision based on no evidence”, it
not only refers to cases where there is a total dearth of evidence, but also
refers to any case, where the evidence, taken as a whole, is not reasonably
capable of supporting the finding.
Binding force of High
Court’s decisions
Like Article 141 there
is no such provision available in Constitution of India which deals about the
binding force of the decisions pronounced by the High Courts. But on the basis
of several case laws it is settled law of the land that the High Courts have
binding force in the State in which it operates and not in the territory
outside of the State. It means decisions of the High Court are binding on the
subordinate courts, tribunals and other authorities of the jurisdiction in
which the High Court runs. High Courts of other States may take same view or
consider decision of another High Court but are not duty bound to follow it.
Admission of SLP against jurisdictional High
Court’s ruling does not curtail its binding nature - ITAT cannot refuse to follow Hon’ble jurisdictional High Court’s
decision merely because Supreme Court has admitted SLP against the decision
There
is no dispute that the issue in the appeal is squarely covered by the
judgements of the Hon’ble jurisdictional High Court, in favour of the assessee,
and, to that extent, the legal position is that in the absence of any
incriminating material, no addition can be made in the assessment proceedings
under section 153A read with section 143(3). Whatever may be learned
Departmental Representative’s vehement submission against the merits of this
legal position and the support that her arguments canvass from the scheme of
the Income Tax Act, 1961, she has been gracious enough to accept that while
there are conflicting decisions of Hon’ble non-jurisdictional High Courts on
the above legal proposition, but with “the Jurisdictional Bombay High Court
deciding the issue in favour of the assessee in its oft quoted judgement
rendered in the case of Continental Warehousing”. The question then arises as
to what is the binding nature of judicial precedent from the non-jurisdictional
High Court, and whether the fact of an SLP being admitted, against a binding
judicial precedent, can dilute, curtail or otherwise narrow down the binding
nature of such judicial precedent. As for the first question, i.e. binding
nature of decisions from the Hon’ble jurisdictional High Court and decisions
from the Hon’ble non-jurisdictional High Court, the legal position is clear and
unambiguous. As observed by the Hon’ble Supreme Court in the case of Mumbai
Kamgar Sabha v. Abdulbahi Faizullbhai AIR 1976 SC 1455, “It is trite, going
by anglophonic principles that a ruling of a superior Court is binding law”.
While dealing with judicial precedents from nonjurisdictional High Courts, we
may usefully take of observations of Hon’ble jurisdictional High Court in the
case of CIT v. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom.),
to the effect “The decision of one High Court is neither binding precedent for
another High Court nor for the Courts or the Tribunals outside its own
territorial jurisdiction. It is well-settled that the decision of a High Court
will have the force of binding precedent only in the State or territories on
which the Court has jurisdiction. In other States or outside the territorial
jurisdiction of that High Court it may, at best, have only persuasive effect”.
Unlike the decisions of the Hon'ble jurisdictional High Court, which bind us in
letter and in spirit on account of the binding force of law, the decisions of
the Hon'ble non jurisdictional High Court are followed by the lower
authorities, only in the absence of benefit of guidance by the Hon’ble
jurisdictional High Court on that issue, on account of the persuasive effect of
these decisions and on account of the concept of judicial propriety-factors
which are inherently subjective in nature. Quite clearly, therefore, the
applicability of the non-jurisdictional High Court is never absolute, without
exceptions and as a matter of course, and that too is limited only on the
issues on which there is no guidance of the Hon’ble jurisdictional High Court.
In the present case, we have the benefit of guidance on the subject by the
Hon’ble jurisdictional High Court. There is thus no occasion for us to consider
the judgments of the Hon’ble non-jurisdictional High Courts. In view of these
discussions, the decisions of the Hon’ble non jurisdictional High Court have no
relevance in the present context. It is also elementary in law that the mere
pendency of the appeal, against a binding judicial precedent, in a higher
judicial forum does not dilute, curtail or otherwise narrow down its binding
nature. As long as the binding judicial precedent holds good in law, as it does
unless it is upturned or reversed by a higher judicial forum, it binds the
lower judicial forums.
In
view of these discussions, as also bearing in mind the entirety of the case, we
uphold the plea of the assessee, and respectfully following the coordinate
bench in the case of Luxoria Realtors, as also Hon’ble jurisdictional High
Court’s judgments in the cases of CIT v. Continental Warehousing Corporation
(Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom.) and All Cargo Global
logistics (2015) 374 ITR 645 (Bom.), hold that the impugned additions, in
respect of share capital subscriptions from the two Mauritius based entities,
namely Access Investment India and Aanya Properties (2) Limited, amounting to
Rs 110,02,46,593, must be deleted for this short reason alone. We, therefore,
delete the impugned additions. The assessee gets the relief accordingly.
(Related Assessment year : 2009-10) – [Luxora Infrastructure (P) Ltd. v.
DCIT(C) [2022] 144 taxmann.com 93 (ITAT Mumbai)]
Assessing Officer is
bound to follow High Court ruling given in assessee’s favour even if Department
has filed SLP against the decision to Supreme Court
Judicial discipline demands Assessing Officer and
CIT(A) should follow High Court decision in assessee’s favour in assessee’s own
case even if Department has filed SLP in Supreme Court and SLP is pending.
(Related Assessment year : 2013-14) – [Sheraton International, LLC v. JCIT
(International Taxation) (2022) 142 taxmann.com 520 (ITAT Delhi)]
An order of High Court does not
become inoperative merely because Department filed an appeal or SLP against it
Judicial discipline and
propriety are the two significant facets of administration of justice. 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 or that 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.
Just as the judgments and
orders of the Supreme Court have to be faithfully obeyed and carried out throughout
the territory of India under Article 141 of the Constitution, so should be the
judgments and orders of the High Court by all inferior courts and tribunals
subject to supervisory jurisdiction within the State under Article 226 and 227
of the Constitution.
If an officer under the
Income Tax Act, 1961 refuses to carry out the clear and unambiguous direction
in a judgment passed by the Hon’ble Supreme Court or High Court or the Income
Tax Appellate Tribunal then in effect, it is denial of justice and is destructive
of one of the basic principles in the administration of justice based on
hierarchy of the Court.
Unless there is a stay
obtained by the authorities under the Income Tax Act, 1961 from higher forum,
the mere fact of filing appeal or SLP will not entitle the authority not to
comply with the order of the High Court. Even though the authority may have
filed an appeal or SLP but either could not obtain a stay or the stay is
refused, the order of the High Court must be complied with. Mere filing of an
appeal or SLP against the judgment or order of High Court does not result in
the assailed judgment or order becoming inoperative and unworthy of being
complied with. – [Mohan Lal Santwani v. Union of India (2022) 138
taxmann.com 292 (All.)]
Precedent
- Law laid down by High Court is binding on all in the States
The
law laid down by the High Court is binding on all authorities in the State. - [CIT
v. Raghuvir Synthetics Ltd. (2017) 394 ITR 1 : 295 CTR 143 : 247 Taxman 393 : 151
DTR 153 (SC)]
Revenue authorities, while making assessments as
well as deciding appeals, must follow law laid down by High Court; a wilful
disregard of law laid down by High Court would amount to civil contempt as
defined in section 2(b) of Contempt of Courts Act, 1971
Being highly aggrieved by the action of the
respondent - Assessing Officer of ignoring a decision of the jurisdictional
High Court directly covering the controversy in issue as well as the assessment
orders passed in the previous years and making a high pitched assessment, the
petitioner has directly approached this court challenging the assessment order
dated 31.03.2015 passed by the respondent Assessing Officer in relation to
assessment year 2012-13, to the extent he has made an addition of
Rs.116,43,00,000/- by way of disallowance of the final installment of the price
paid for milk.
Since a preliminary objection has been raised to
the maintainability of the petition on the ground of there being an alternative
statutory remedy, it may be necessary to address the same at the outset.
The Supreme Court in Union of India v. T. R. Varma
AIR 1957 SC 882, held that it is well settled that when an alternative and
equally efficacious remedy is open to a litigant, he should be required to
pursue that remedy and not invoke the special jurisdiction of the High Court to
issue a prerogative writ. It is true that the existence of another remedy does
not affect the jurisdiction of the court to issue a writ; but, the existence of
an adequate legal remedy is a thing to be taken into consideration in the
matter of granting writs.
In State of U. P. v. Mohd. Nooh AIR 1958 SC 86, the
Supreme Court held thus :
“If an inferior court or tribunal of first instance
acts wholly without jurisdiction or patently in excess of jurisdiction or
manifestly conducts the proceedings before it in a manner which is contrary to
the rules of natural justice and all accepted rules of procedure and which
offends the superior court's sense of fair play the superior court may, we
think, quite properly exercise its power to issue the prerogative writ of
certiorari to correct the error of the court or tribunal of first instance,
even if an appeal to another inferior court or tribunal was available and
recourse was not had to it or if recourse was had to it confirmed what ex facie
was a nullity for reasons aforementioned. This would be so all the more if the
tribunals holding the original trial and the tribunals hearing the appeal or
revision were merely departmental tribunals composed of persons belonging to
the departmental hierarchy without adequate legal training and background and
whose glaring lapses occasionally come to our notice. The superior court will
ordinarily decline to interfere by issuing certiorari and all we say is that in
a proper case of the kind mentioned above it has the power to do so and may and
should exercise it. We say no more than that.”
In State of H. P. v. Gujarat Ambuja Cement Ltd.
(2005) 6 SCC 499, the Supreme Court held thus:
“Where under a statute there is an allegation of
infringement of fundamental rights or when on the undisputed facts the taxing
authorities are shown to have assumed jurisdiction which they do not possess
can be the grounds on which the writ petitions can be entertained. But
normally, the High Court should not entertain writ petitions unless it is shown
that there is something more in a case, something going to the root of the
jurisdiction of the officer, something which would show that it would be a case
of palpable injustice to the writ petitioner to force him to adopt the remedies
provided by the statute.”
Having regard to the principles propounded in the
above decisions, this court is of the opinion that the petitioner has made out
a strong case to contend that the present writ petition is maintainable despite
the fact that the petitioner has availed of an alternative remedy against the
impugned order, inasmuch as, the lapse on the part of the Assessing Officer is
quite glaring and the high pitched assessment made as a result of ignoring the
decision of the jurisdictional High Court results in palpable injustice to the
petitioner. Nonetheless, without expressing any opinion on the maintainability
of the present petition, considering the fact that the petitioner has already
availed of the remedy of appeal before the Commissioner (Appeals) against the
impugned order in relation to several points, including the point involved in
the present case, this court is not inclined to exercise its extraordinary
jurisdiction, inasmuch as, interference by this court would result in examination
of the same order, may be, on different points by the Commissioner (Appeals) as
well as this court, leading to an anomalous situation.
Be that as it may, this court also cannot be
oblivious of the conduct of the Assessing Officer while framing the assessment.
As can be seen from the impugned order, the assessee had brought the decision
of this court in Mehsana District Co- operative Milk Producers Union Ltd.
(supra) which appears to conclude the point in question in favour of the
petitioner, to the notice of the Assessing Officer as well as the fact that in
the preceding years, the point had been decided in its favour and no addition
had been made. However, the Assessing Officer, without assigning any reason as
to why the decision of the jurisdictional High Court was not applicable to the
facts of the case, nor as to why he was required to depart from the consistent
view adopted in the previous years, has held that the expenses on this count
cannot be considered as expenditure but application of income and has made an
addition of Rs.116,43,00,000/-. The conduct of the Assessing Officer is,
therefore, required to be strongly deprecated.
Law laid down by the High Court must be followed by
all authorities and subordinate Tribunals when it has been declared by the
highest Court in the State. They cannot ignore it either in initiating
proceedings as deciding the rights involved in such a proceedings. If in spite
of the earlier exposition of law by the High Court having been pointed out and
attention being pointedly drawn to that legal position, proceedings are
initiated, it must be held to be a wilful disregard of the law laid down by the
High Court and would amount to civil contempt as defined in section 2(b) of the
Contempt of Courts Act, 1971.
The revenue authorities, while making assessments
as well as deciding appeals, may well bear in mind the above principles, lest
they may have to face proceedings for willful disregard of the law laid down by
the High Court or the Supreme Court.
Subject to the above observations, the petition is disposed of as not
entertained. However, having regard to the peculiar facts of the case, the
Commissioner (Appeals) is directed to hear and decide the appeal as
expeditiously as possible, and preferably within a period of two months from
the date of receipt of a copy of this order. Considering the fact that in
earlier years the issue had been decided in favour of the petitioner, there
shall be no coercive recovery pursuant to the demand notice to the extent of
Rs.48,92,85,432/-, which is the component pertaining to the addition in
question. Notice is discharged with no order as to costs. – [Kaira District Co-operative Milk
Producers Union Ltd. v. DCIT (2016) 386 ITR 633 : (2017) 80 taxmann.com 157
(Guj.)]
Tribunal being subordinate to High Court has to
follow decision of jurisdictional High Court without making any comment upon
said decision or/and without ignoring it on any grounds except those which are
well recognized; it has no jurisdiction to ignore decision of High Court on ground
that it did not take into consideration a particular provision of law or that
it did not lay down correct principles of law on issue involved therein - Held,
yes
It is neither permissible nor legal for any Court
and Tribunal to comment upon the decision of the Supreme Court/High Court.
Similarly, it is also not permissible for the Tribunal to comment upon the
manner in which a particular decision was rendered by the Supreme Court/High
Court. It is also not permissible for the Tribunal to sidetrack or/and ignore
the decision of the High Court on the ground that it did not take into
consideration a particular provision of law. If such an approach is resorted to
by subordinate Courts/Tribunals, then it is held to be not in conformity with
the law laid down by the Supreme Court. It was deprecated by the Supreme Court
as being improper.
When the High Court has no jurisdiction to comment
upon any decision of the Supreme Court nor the High Court has a power to ignore
such decision by virtue of mandate contained in article 141 of the
Constitution, then on the same reasoning, the Tribunal, being subordinate to
the High Court, has to follow the decision of the jurisdictional High Court
without making any comment upon the said decision or/and without ignoring it on
any grounds except those which are well-recognized as indicated herein below.
In other words, when law laid down by the Supreme Court is binding on all the
Courts/Tribunals in the country by virtue of article 141, then law laid down by
the High Court is equally binding on the Courts/Tribunals, they being
subordinate to the High Court by virtue of powers conferred by articles 215,
226 and 227 of the Constitution and by judicial precedents.
The Tribunal has full authority/jurisdiction to
distinguish the decision when cited by any party, be that of the Supreme Court
or/and 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 it 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 to decide as to why
a particular decision has no application to the facts of a case under
consideration. Indeed, here lies the application of mind of the author of
decision to analytically discuss the cases on facts involved in the case cited
by a party and then compare the same with the facts of the case before the
Tribunal and then record the note of dissent. In doing this exercise, which is
an integral part of judgment writing for recording a finding one way or other
the Court/Tribunal does not comment upon the ratio decidendi of the said
decision nor holds that it does not lay down correct principle of law. On the
other hand, the Tribunal accepts the decision as laying down the correct
principle of law but respectfully records its dissent due to dissimilarity in
facts of both the cases.
Therefore, the Tribunal had no jurisdiction to
comment upon the decision of the jurisdictional High Court and in particular,
the manner in which it was rendered nor had jurisdiction to ignore the decision
rendered in CIT v. Premier Industries (P) Ltd. (1997) 227 ITR 282 : 93
Taxman 214.’s case. It was for the reason that firstly, it was a decision
rendered by the jurisdictional High Court. Secondly, the Tribunal was
functioning in the same State (Madhya Pradesh) as subordinate to the High Court
of Madhya Pradesh. Thirdly, the Tribunal had no jurisdiction to hold that the
decision of the High Court is 'per incuriam'. Though the Tribunal did not say
so in so many words, yet in effect it tantamounted to such a declaration.
Fourthly, the Tribunal had also no jurisdiction to find fault with the decision
of the High Court so as to avoid its binding effect.
In view of foregoing discussion, the Tribunal was
not justified in commenting upon the decision of the Madhya Pradesh High Court
nor was it justified in ignoring the decision rendered in Premier industries
(P) Ltd.’s case (supra), on the ground that it did not lay down correct
principle of law on the issue involved.
The Tribunal should not have ignored the decision
of the jurisdictional High Court once it came to a conclusion that it was
otherwise applicable to the issue involved in appeal. Instead, it should have
placed reliance on such decision having found that it could not be
distinguished on facts and then proceeded to decide the appeal accordingly. At
best, in such an eventuality, the Tribunal should have mentioned the submission
of the revenue about the decision cited and left the issue at that stage. It
was then for the parties to pray to the Tribunal to either make reference on
the question proposed under section 256(1) or to file an appeal to the High
Court under section 260A ibid so that when the matter would reach the High
Court, then a prayer could be made to the High Court to reconsider such
decision by constituting a Larger Bench. It is for the High Court to decide as
to whether it has laid down correct principle of law and if not, whether it needs
to be overruled and if so, to what extent and on what grounds. The matter can
then be referred to a Larger Bench of the High Court as per the procedure
prescribed in the High Court Rules and Orders for deciding the correctness of
such a decision. It is for the reason that a jurisdiction to declare any
decision of the High Court as laying down correct principles of law or as per
incuriam vests only in the Supreme Court, it being an appellate Court for the
High Court under article 136 of the Constitution as also being the highest
Court in the Indian judicial system and in the concerned High Court. As a
matter of fact, a decision rendered by the ‘A’ High Court cannot be overruled
by the ‘B’ High Court. In such circumstance, ‘B’ High Court can only record its
dissent with the view taken by ‘A’ High Court by assigning its own reasoning.
In other words, a power to overrule any decision of the High Court vests only
with the Supreme Court and the Larger Bench of the same High Court. So long as
a decision is not overruled, it continues to hold the field and is, therefore,
binding on the Courts/Tribunals subordinate to such High Court. (Related Assessment year : 1989-90) – [National Textile Corporation Ltd. v. CIT (2011) 338 ITR
371 : (2008) 216 CTR 153 : 171 Taxman
339 (MP)]
Binding Precedent for
Non-Jurisdictional High Court Judgement
It is a well-settled
position that a judgement of non-jurisdictional High Court is not binding on
the Tribunal, especially when there are contrary decisions of other High Courts
and Tribunal. Reference, in this regard, can be made to the decision of the
Bombay High Court in the case of CIT v. Thane Electricity Supply Ltd.
(1994) 206 ITR 727 (Bom.)] and the observations of the Mumbai
Tribunal, in this regard, in the case of ACIT v. Pahilajrai Jaikishin
(2016) 157 ITD 1187 (ITAT Mumbai)] to the following effect:
“………We
are also fully aware that law declared by Hon’ble Supreme Court is binding on
all courts within the territory of India under Article 141 of Constitution of
India which is binding on us and we are bound to follow the same. In the case
of CIT v. Smt. Godavari Saraf (1978) 113 ITR 589 (Bom.), the Bombay High Court
held that the Judgment of non-Jurisdictional High Court was binding on the
Tribunal if there were no contrary judgments. The above Judgment runs contrary
to Article 141 of the Constitution as per which only the Supreme Court’s
Judgments are binding on all Courts within India. The Bombay High Court in the
case of CIT v. Thane Electricity Supply Ltd. (1994) 206 ITR 727 overruled the
Judgment in the above case of Godavari Saraf (supra) holding that the decision
of one High Court was not a binding precedent for another High Court or Lower
Courts outside the jurisdiction.”
It was held that the
ratio of a decision of the same High Court which is applicable to the facts of
the case is binding on the parties and the High Court has to follow the same
without any reservation.—[Warner Lambert Co. v. CIT (1994) 205 ITR 395
(Bom)]
Even a notification
issued by the State Government does not affect the binding force of a High
Court’s decision unless there is a change in the substantive provision. If such
notification gives a direction to ignore a High Court’s judgment, the
notification would be considered ultra vires, void and inoperative. - [Goodyear
India Ltd v. State of Haryana (1991) 188 ITR 402 (SC)]
High Court’s decisions –
Whether binding in nature and binding on whom
Though there is no
express provision in the Constitution like Article 141, in respect of the High
Courts, the Tribunals within the jurisdiction of a High Court are bound to
follow its judgements as the High Court has the power of superintendence over
them under Article 227 of the Constitution. The Hon’ble Supreme Court in East
India Commercial Co. Ltd. v. Collector of Customs AIR 1962 (SC) 1893 observes:-
“We therefore, hold that
the law declared by the highest court in the State is binding on authorities or
Tribunals under its superintendence and they cannot ignore it.”
The Apex Court
reiterated the afore stated position once again in Baradakanta Mishra v.
Bhimsen Dixit AIR 1972 (SC) 2466 where it stated that it would be anomalous
to suggest that a Tribunal over which a High Court has superintendence can
ignore the law declared by it and if a Tribunal can do so, all the subordinate
courts can equally do so, for there is no specific provision as in respect of
Supreme Court, making the law declared by the High Court binding on subordinate
courts. The court further observed that it is implicit in the power of
supervision conferred on a superior Tribunal that all the Tribunals subject to its
supervision should confirm to the law laid down by it. If the Tribunals defy their
jurisdictional High Court, there would be confusion in the administration of
law and respect for law would irretrievably suffer.
Emphasising the need of following
the judgements of the High Courts by the Assessing Officers, the Allahabad High
Court in K.N. Agarwal v. CIT (1991)189 ITR 769 observed:
“Indeed, the orders of
the Tribunal and the High Court are binding upon the Assessing Officer and
since he acts in a quasi judicial capacity, the discipline of such functioning
demands that he should follow the decision of the Tribunal or the High Court,
as the case may be. He cannot ignore merely on the ground that the Tribunal’s order
is the subject-matter of revision in the High Court or the High Court’s
decision is under appeal before the Supreme Court. Permitting him to take such
a view would introduce judicial indiscipline, which is not called for even in
such cases. It would lead to a chaotic situation.”
It was held that where
it pronounced that it is not permissible for the authorities and the Tribunals
to ignore the decisions of the High Court or to refuse to follow the decisions
of the High Court on the pretext that an appeal is pending in the Supreme Court
or that steps are being taken to file an appeal. The court then made the
following important and bold observations:
“If any authority or the
Tribunal refuses to follow any decision of the High Court on the above grounds,
it would be clearly guilty of committing
contempt of the High Court and is liable to be proceeded against.” - [State of
A.P. v. CTO (1988) 169 ITR 564 (AP)]
Position in regard to
different benches of the same High Court
The position in regard to different
benches of the same High Court is as follows:—
SINGLE JUDGE MUST FOLLOW THE
DECISION OF THE LARGER BENCH OF THE SAME HIGH COURT
Single judge must follow the
decision of the Larger Bench of the same High Court even if for reasons to be
stated, a different view is warranted.— [Super Spg. Mills Ltd v. CIT (1993)
199 ITR 832 (Mad.)]
– A Single Judge or a Division
Bench order of a High Court is binding on the Single Judge of the same High
Court.
– It is obligatory on the part of a
Division Bench to follow the decision of another Division Bench of equal
strength or a Full Bench of the same High Court.
– Where a Single Judge
does not subscribe to the views expressed in a Single Judge’s order or Division
Bench’s order of the same High Court, he should place the papers before the
Chief Justice to enable him to constitute a Larger Bench to examine the
question.
A Division Bench of a
High Court is normally bound by the decision of the Full Bench of the court and
if the words are clear and the answer is clear there is no question of any
interpretation of the decision.—[CIT v. Krishna Warrier (P) (1994) 208 ITR
823 (Ker.)]
Similarly where a Division Bench
differs from another Division Bench of the same High Court, it should refer the
case to a Larger Bench.
Judicial propriety
requires Single Judge to follow and apply earlier Division Bench judgement of
same court which is very much binding on him sitting as a Single Judge of the
same High Court. -[Super Spinning Mills Ltd. v. CIT (1993) 199 ITR 832
(Mad.)]
Judicial decorum and
legal propriety demand that where a learned Single Judge or a Division Bench
does not agree with the decision of the Bench of co-ordinate jurisdiction, the
matter shall be referred to a Larger Bench. It is subversion of judicial
process not to follow this procedure. - [Sundarjas Kanyalal Bhatija v.
Collector (1990) 183 ITR 130 (SC)]
So long as the Full
Bench judgement stands, the dicta laid down therein are binding on all courts
including Single Judges and Division Benches of that High Court. - [Koduru
Venkata Reddy v. LAO (1988) 170 ITR 15 (AP)]
Law of precedents is
that a decision of the Division Bench given in an earlier case is binding on a
subsequent Bench. - [CIT v. Hari Nath & Co. (1987) 168 ITR 440 (All.)]
In Mohandas Issardas
v. Santhanam (A.N.), it was held that it would be incorrect to say that
every opinion of the Supreme Court would be binding on the High Courts. Only
the opinion expressed on a question that arose for the determination of a case
is binding. - [Mohandas Issardas v. Santhanam (A.N.) AIR 1955 Bom. 113]
Conflicting judgments of
the jurisdictional High Court
When there are conflicting
judgments of the jurisdictional High Court, normally the latter judgment would
prevail provided it has referred to the earlier decision and distinguished the
same. However, if the earlier judgment is not referred to at all, and there are
two conflicting judgments, it is open to the Tribunal to follow that judgment,
the reasoning of which appeals to Tribunal.
It was held that the
Tribunal must follow the decision of the High Court holding the provision to be
valid. If there are two decisions of High Courts contrary to each other and one
of which is approved by the Supreme Court, the other High Court’s decision must
be considered as not approved. It is, therefore, not open to such other High
Court to re-examine the issue. - [CIT v. Indian Rare Earth Ltd (1990) 181
ITR 22 (Bom)(FB)]
Decision of another High
Court
Judicial decorum,
propriety and discipline requires that the High Court should, especially in the
event of its contra view or dissent, discuss the judgements of the different
High Courts and record its own reasons for its contra view. Judgements given by
a High Court are not binding on the other High Court(s), but all the same, they
have persuasive value. Another High Court would be within its right to differ
with the view taken by other High Courts but, in all fairness, the High Court
should record its dissent with reasons therefore. - [Pradip J. Mehta v. CIT
(2008) 216 CTR 1 (SC)]
A decision of one High
Court is not binding as a precedent on another High Court unlike a decision of
the Apex Court
In fact this Court in CIT
v. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom.) has observed
that a decision of one High Court is not binding as a precedent on another High
Court unlike a decision of the Apex Court. In support, reliance was placed in
the above order upon the decision of the Apex court in Valliamma Champaka
Pillai v. Sivathanu Pillai AIR 1979 (SC) 1937 to hold that it is well
settled that decision of one High Court is not a binding precedent upon another
High Court and at best can only have persuasive value. However, at the cost of
repetition we must emphasize that the decision of another High Court rendered
in the context of an all India Act would have persuasive value and normally to
maintain uniformity and certainty we would adopt the view of the other High
Court. However, with the greatest respect, we find that the decision of
Karnataka High Court in K. Ramchandra Rao has been rendered subsilentio.
Therefore, we cannot place any reliance upon it to conclude the issue on the
basis of that decision.
A decision of one High
Court is not binding as precedent on another High Court unlike a decision of
the apex court
The Bombay High Court in
the case of Thana Electricity Supply Ltd. has commented on the position in the
paragraph 31 of the order which is verbatim reproduced below.
31. This
court, in the above case, discussed the real issue before it at great length in
the light of the facts of the case and ultimately decided to answer the
question in line with the decisions of the Kerala and Punjab and Haryana High
Courts. The aforesaid observations leave no scope for doubt that the court
merely observed what according to it is desirable and did not lay down any
principle of law making the decisions of other High Courts binding precedents
for this court. Any other construction of the observations in the above cases
will lead to an anomalous situation as it will have the effect of giving the
decisions of other High Courts the status of law binding on all courts or
Tribunals throughout the country - a status which the Constitution, by virtue
of article 141, has conferred only on the judgment of the Supreme Court. If for
the sake of uniformity, the decisions of any High Courts and Tribunals in the
country, the very distinction between the precedent value of the Supreme Court
decisions and the High Court decisions will be obliterated. Such a situation is
neither contemplated by the Constitution nor is it in consonance with the
principle laid down by the Supreme Court and the doctrine of stare decisis. - [CIT
v. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom.)]
The Income-tax Act is an
all-India statute and it is desirable in the interest of uniformity that one
High Court should follow the decision of another High Court. - [CIT v.
Sarabhai Sons (P) Ltd (1993) 204 ITR 728 : 113 CTR 322 : (1994) 72 Taxman 217 (Guj.)]
If there are two
decisions of non-jurisdictional High Courts, one High Court holding a
particular provision to be valid and the other High Court holding such provision
to be invalid, neither of the two decisions is binding on the Tribunal as such.
- [CED v. Ashok Kumar M Parikh (Shri) (1990) 186 ITR 212 (Bom.)]
Barring certain
exceptions court cannot differ from an interpretation given by another High
Court
In income-tax matters,
which are governed by an all India statute, when there is a decision of another
High Court on the interpretation of statutory provision, it would be a wise
judicial policy and practice not to take a different view (whatever one’s own
view may be) barring of course, certain exceptions, like where the decision is sub
silentio, per incuriam, obiter dicta or based on a concession or takes a
view which it is impossible to arrive at or there is another view in the field
or there is a subsequent amendment of the statute or reversal or implied
overruling of the decision by a High Court or some such or similar infirmity is
manifestly perceivable in the decision.—Arvind Boards & Paper Products
Ltd. v. CIT (1982) 137 ITR 635 (Guj.) and CIT v. Sarabhai Sons
Ltd. (1983) 143 ITR 473 (Guj.) followed.—[CIT v. Deepak
Family Trust No. 1 (1995) 211 ITR 575 : (1994) 119 CTR 150 : 72 Taxman 406
(Guj.)]
Considered opinion of
any other High Court should be followed unless there are overriding reasons for
taking a divergent view
The Bombay High Court in
CIT v. T. Maneklal Mfg. Co. Ltd., has observed that the Income-tax Act
being an all India statute, uniformity in the construction of its statutory
provisions is eminently desirable and the considered opinion of any other High
Court should be followed unless there are overriding reasons for taking a
divergent view. - [CIT v. T. Maneklal Mfg. Co. Ltd. (1978) 115 ITR 725 (Bom.)]
[3] Decision of the Tribunal
Findings
of fact generally recorded by the ITAT are treated as conclusive. The High
Court can interfere with the findings of fact while deciding a substantial
question of law when the findings are not supported by the material on record,
so as to be treated as perverse. For this, however, the High Court must frame a
separate substantial question of law and only then interfere with the findings
of fact by the ITAT, while applying the strict parameters
As per the findings of fact
recorded by the Income Tax Appellate Tribunal, the hirer has acknowledged that
the appellants - assessees are the owners of the vehicle. As per the
hire-purchase agreements, the hirer must pay rent to the owner during the
hiring as per the sums mentioned in the agreement on the dates mentioned
therein. Further, the hirer has to take proper care of the vehicle and keep it
in good condition. He has to also pay all rents, rates, taxes and outgoings
payable. The hirer must keep the vehicle in his sole custody and possession at
the address mentioned in the agreement, or such other place as the owner has
previously consented to in writing. The owner or any person authorised by him
in writing is entitled to inspect the vehicle at all reasonable times during
the period of hire. The hirer may, at any time, determine the hire-purchase
agreement by delivering the vehicle at his own cost to the owners. If the hirer
fails to pay the hire instalments within the stipulated time, becomes
insolvent, pledges or sells, or attempts to pledge or sell or otherwise
alienate or transfer the vehicle, or does or suffer any act or thing whereby,
or in consequence of which, the vehicle may be distrained, seized or taken into
execution under legal process, or breaks or fails to perform or observe any
condition as mentioned in the hire-purchase agreement, the owner is entitled to
forthwith determine the agreement and, thereupon, entitled to enter the place
where the vehicle is kept and seize, remove and retake possession thereof. The
owner is also entitled to sue for all the instalments due, damages for breach
of the agreement, and the cost in retaking possession of the vehicle. The
owners, if agreeable, may permit the hirer to have the registration of the
vehicle in his own name, provided that the hirer shall transfer the
registration in the name of the owner whenever required to do so by the owner,
especially when the hirer commits breach of any of the conditions of the
agreement, due to which the owners are obliged to seize the vehicle.
On the above facts, the
ITAT accepted the plea of the appellants - assessees that they are not liable
to pay interest tax on the interest component imbedded in the hire-purchase
instalment. The ITAT referred to Circular No. 760 dated 13.01.1998 issued by
the Central Board of Direct Taxes and observed that the hire-purchase agreement
is a composite transaction, and has elements of bailment and sale. Relying on
the terms and conditions of the hire-purchase agreement noted above, the ITAT
held that hire-purchase agreements are distinguishable from loans and advances.
The hire instalments are something different and more, and not the interest on
loans and advances that is chargeable to interest tax.
The ITAT had also relied on
the provisions of The Hire-Purchase Act, 1972, which, in our opinion, is
palpably wrong as the said enactment was never enforced and was subsequently
repealed vide the Hire-Purchase (Repeal) Act, 2005.
The High Court of Kerala in
the case of CIT, Cochin v. M/s. Muthoot Leasing & Finance Ltd. by the
impugned judgment dated 10.03.2008 set aside and reversed the finding of the
ITAT, observing that the hire-purchase instalment includes “finance charges”,
which is nothing but interest, and therefore, interest tax is leviable on the
interest component. The transaction, though styled as a hire-purchase
agreement, the High Court held, is in fact a finance agreement for purchase of
a vehicle. The hirer, as a borrower, had been charged a flat rate of interest.
The hirer, on payment of instalments, had the option to purchase the vehicle
for one rupee, which was an empty formality, because the vehicle was already
registered in his name. As per Section 51 of the Motor Vehicles Act, 19885, the
registering authority is required to enter the details of the hire-purchase
agreement in the certificate of registration. The respondent –assessee therein
had the license to repossess the vehicle on default, but to get ownership they
had to apply for change in name under the provisions of the MV Act. Reliance
placed by the appellant – assessee on Circular No. 760 dated 13.01.1998 issued
by the CBDT was rejected, observing that the CBDT had earlier issued Circular
No. 738 dated 25.03.1996 clarifying that the interest recovered under the
hire-purchase agreement falls under Section 2(7) of the Act. For arriving at
the conclusion, reliance was placed on the decision of this Court in Sundaram
Finance Ltd. v. State of Kerala and Another.
The judgment in Sundaram
Finance Ltd. v. State of Kerala and Another AIR 1966 SC 1178 relates to the
true nature of hire in hire-purchase agreements as in the context of the sales
tax enactment. In the present case, however, we are dealing with and
interpreting Section 2(7) of the Act, which has been interpreted in two
decisions, that is, in the case of Sahara India Savings and Investment
Corporation Limited and State Bank of Patiala Through General Manager, which
have given a very limited and restricted meaning to Section 2(7) of the Act as
interest directly arising “on” loans and advances, and not any other interest,
be it interest earned on investment or interest payable on delayed payment of
the discounted bill of exchange.
Taxation depends upon the
language of the charging section and what is brought to tax within the four
corners of the charging section. Therefore, one should be careful and cautious
when applying the ratio of judgments relating to one tax enactment as a
precedent in a case relating to another tax enactment. This rule of caution is
important and should not be overlooked, more so when the language of the
enactment and the object and purpose of the enactment are different.
Findings of fact generally
recorded by the ITAT are treated as conclusive. The High Court can interfere
with the findings of fact while deciding a substantial question of law when the
findings are not supported by the material on record, so as to be treated as perverse.
For this, however, the High Court must frame a separate substantial question of
law and only then interfere with the findings of fact by the ITAT, while
applying the strict parameters.
In the present case, the
High Court did not frame a specific substantial question of law and thus, the
interference with the findings of fact is unwarranted.
This is not to say that the
tax authorities are not entitled to examine the surrounding facts and
circumstances to ascertain the true character and nature of the transaction,
regardless of the nomenclature given by the parties. Given the aforesaid legal
position, this matter could have been remanded to the assessing officer for
fresh adjudication and to re-examine all the transactions in light of the
aforesaid ratio and reasoning, keeping in mind the dictum laid in CIT, Kanpur v. Sahara India Savings and
Investment Corporation Ltd. (2009) 17 SCC 43; and State Bank of Patiala Through
General Manager v. CIT, Patiala (2015) 15 SCC 483. (which have held that a very limited and restricted meaning to Section
2(7) of the Act as interest directly arising “on” loans and advances, and not
any other interest, be it interest earned on investment or interest payable on
delayed payment of the discounted bill of exchange) to rule out cases where
camouflage or subterfuge of hire purchase has been adopted to avoid payment of
interest tax. This would have entailed not only looking at the documents but
also several other factors, which would have meant getting information and
ascertainment of facts in detail from the assessee and the hirer. However, at
this distinct point of time, we do not think that it would be appropriate to
pass an order of remand. It is to be also noted that the Interest Act, 1974 has
ceased to operate with effect from 31.03.2000.
Therefore, present appeals
are allowed and impugned High Court judgements are set aside. The additions
made by the assessing officer are set aside and the orders passed by the ITAT
deleting the additions in the case of the appellant – M/s. Muthoot Leasing and
Finance Ltd. and other cases are upheld. In the facts of the present case,
there would be no order as to costs. - [Muthoot Leasing and Finance Ltd. v.
CIT (2023) 146 taxmann.com 53 – Date of Judgement : 03.01.2023 (SC)]
ITAT
order not accepted by Department to be followed for succeeding Assessment years
unless operation of order is stayed/suspended
ITAT held that amount paid by assessee to its foreign parent
was not taxable and was hence not liable to TDS under section 195 and the order
was in appeal before High Court but was not stayed, there is no excuse for
Department not to follow the ITAT order in deciding cases of subsequent
assessment years unless the operation of ITAT’s impugned order has been
stayed/suspended by High Court/Supreme Court. In the result, High Court was
justified in quashing the order under section 201. However, it is also directed
that the matter be remitted to the Assessing Officer (TDS) at the stage of
issuance of show cause notice under Section 201 so that after the decision of
the High Court in the pending Appeal, the same can be proceeded further in
accordance with law and on merits. - [ITO (International Taxation) v. GIA
Laboratory (P) Ltd. (2022) 145 taxmann.com 650 (SC)]
As between conflicting
decisions of non-jurisdictional High Courts, ITAT must apply the
non-jurisdictional High Court decision of larger Bench
• Where there are conflicting decisions of non-jurisdictional High Courts
but no decision of jurisdictional High Court on an issue, ITAT should not as a
rule apply the view favourable to the assessee.
• We have much simpler and much more objective criteria readily
available, which is the strength of the bench of the Hon'ble non-jurisdictional
High Court which have rendered the judgment. There is one decision of the
division bench consisting of two Hon'ble judges, and there is another decision
of a single judge bench consisting of only one Hon'ble judge. The plurality in
the decision-making process makes the decisions of benches with a larger number
of Hon'ble judges being placed on a higher pedestal than the decisions of the
benches with a lesser number of Hon'ble judges.
• Between a division bench decision of a non-jurisdictional High Court
and a single judge bench of a non-jurisdictional High Court is concerned, it is
clear that a simple objective criterion of choice will require the division
bench decision to be preferred over the single judge bench decision.
• The judgment of Hon’ble Andhra Pradesh High Court in the case of Zuari
Cements Ltd. v. ACIT [WP No. 5557 of 2012 [Date of Judgment : 21.02.2013],, being
a division bench decision of Hon'ble non-jurisdictional High Court, is required
to be followed even if it is contrary to a single bench judgment of another
High Court in the case of Vedanta Ltd. (Related Assessment year : 2009-10). – [Wockhardt Ltd. v. DCIT (2022) 144 taxmann.com 27
(ITAT Mumbai)]
Assessing
Officer can not unfollow ITAT order merely because it was not acceptable by him
and was subject matter of an appeal unless its operation
had been suspended by competent court
Assessee claimed interest
income as capital receipt. Assessing Officer disallowed claim and made addition
treating interest income as revenue receipt. Even though Tribunal deleted
addition made by Assessing Officer but department had not accepted decision of
Tribunal and preferred appeal before High Court. Assessee made application
under section 264 before Commissioner seeking relief in terms of decision of
Tribunal but Commissioner rejected application on ground that various Courts
held interest income to be revenue in nature chargeable to tax and, therefore,
assessee did not have a case under section 264.
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 and is the
subject matter of an appeal cannot be a ground for not following it unless its
operation has been suspended by a competent Court. Paragraph 6 of the judgment
of the Apex Court in Union of India v. Kamlakshi Finance Corporation Ltd.
1992 taxmann.com 16 reads as under :
6. Sri Reddy is perhaps right
in saying that the officers were not actuated by any mala fides in passing the
impugned orders. They perhaps genuinely felt that the claim of the assessee was
not tenable and that, if it was accepted, the Revenue would suffer. But what
Sri Reddy overlooks is that we are not concerned here with the correctness or
otherwise of their conclusion or of any factual mala fides but with the fact
that the officers, in reaching in their conclusion, by-passed two appellate
orders in regard to the same issue which were placed before them, one of the
Collector (Appeals) and the other of the Tribunal. The High Court has, in our
view, rightly criticised this conduct of the Assistant Collectors and the
harassment to the assessee caused by the failure of these officers to give
effect to the orders of authorities higher to them in the appellate heirarchy.
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 Assistant Collectors working within his
jurisdiction and the order of the Tribunal is binding upon the Assistant
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.
It is not respondents’ case
that the order of ITAT or the operation of the said order has been suspended by
any Court. In the circumstances, we set aside the order dated 16th January,
2020 impugned in the petition and remand the matter for de novo consideration. Unless
there is a stay by a competent Court of the operation of the order of ITAT,
respondent no. 1 shall give effect to the same and pass an order in accordance
with law. Respondent shall grant personal hearing to petitioner and communicate
the date of personal hearing atleast one week in advance. If respondent wishes
to rely on any judgments or order passed by any Court or Tribunal, he shall provide
a copy thereof to petitioner and give them an opportunity to deal with those
judgments or distinguish those judgments and those submissions of petitioner
shall also be dealt with in the assessment order. Petition disposed
accordingly. [Matter remanded] (Related Assessment years : 2012-13 to 2015-16) – [Karanja Terminal & Logistic
(P) Ltd. (2022) 139 taxmann.com 159 (Bom.)]
In case of an assessee,
facts and circumstances being same, Tribunal is required to follow order passed
by it in respect of earlier assessment year
The question came up for
consideration before the Third Member was as to whether the earlier order of
Tribunal in assessee’s own case, fact and circumstances being same, was binding
on the Bench (which also decided the case of the assessee for earlier
assessment year) for all these assessment years under consideration. The
Tribunal is to follow the decision of another Bench where facts are the same.
This is a treaty law. The only other alternative is to refer the matter to the
larger Bench if the Members of this Bench are not willing to follow the earlier
order. In this case, there is no dispute that the facts and circumstances are
the same as appearing in the assessment year 2002-03 except change in figures
and it is also true that the very same Members decided the issues for
assessment year 2002-03 in favour of the assessee. In such circumstances, the
only course left to the Bench was to follow the earlier decision in order to
gain confidence of public in the judicial system. In case the Accountant Member
wanted to deviate from the earlier order, the only course left was to refer the
matter to the larger Bench with the concurrence of the Judicial Member which,
in this case had not happened. Hence, it is opined that the Accountant Member
should have restrained from dissenting or he should have persuaded the Member
for referring the matter to the larger Bench. For the sake of uniformity, at
least, the very same Bench should have followed its own order. The Bench should
not come to a conclusion contrary to the conclusion reached in the earlier
order of the Tribunal. In this case, the Bench being the same, definitely
contrary view should not have been taken. Thus, the legal issue has to be
decided by holding that the Bench should follow its earlier order. (Related
Assessment years : 2003-04 to 2005-06) – [ACIT,
Calicut v. Chandragiri Construction Co. (2012) 147 TTJ 249 : 136
ITD 133 : 21 taxmann.com 167 (ITAT Cochin)]
A decision of a Division
Bench and Third Member Bench is binding on the Single member Bench. A decision
of a Special Bench is binding on all the Benches of the Tribunal. A decision of
the Special Bench can be distinguished or disregarded if there is any contrary
view of the jurisdictional High Court or of the Supreme Court. A Co-ordinate
Bench should follow the view of another Co-ordinate Bench or else refer the
matter to a Larger Bench through the President. The CIT (A) being subordinate
to the Tribunal is bound to follow the view of the Tribunal. - [Agrawal
Warehousing of Leasing Ltd. v. CIT (2002) 257 ITR 235 : 177 CTR 15 (MP)]
Where there are two
conflicting views rendered by two Benches of Tribunal consisting of two members
each - It would be appropriate to have matter heard by a Larger Bench of
Tribunal
It
would be appropriate to have the matter heard by a Larger Bench of the Tribunal
because ex facie there are two views rendered by two Benches of the
Tribunal consisting of two members each. One bench has decided in favour of the
assessee while another has decided against the assessee. The controversy,
therefore, needs to be resolved and judicial propriety requires that in a
situation such as thus the matter should be heard by a Larger Bench [i.e.
decided by a three-member Bench of the Tribunal].—[Thirani Chemicals Ltd. v.
DCIT (2009) 180 Taxman 474 (Delhi)]
Judicial discipline
demands that subordinate authorities shall accept the decisions of Tribunal as
binding precedent
The
Supreme Court held that the Collector was bound to follow the orders of the
Board unless there was an order of a higher authority or the jurisdictional
High Court or Supreme Court to the contrary. So far as the Collector is
concerned, the order of the Board was binding upon him provided the goods were
identical specially when the order of the Board was in the case of the
appellant himself. The Supreme Court, however, did not express any opinion as
to whether the goods considered in the order and the goods imported under the
present consignment are identical. This being a matter of fact to be examined,
the Supreme Court remitted the matter back to the Appellate Collector for
disposing of the same in accordance with law and in light of the observations
made by the Supreme Court. – [Khalid Automobiles v. UOI (1995) Supp.(4) SCC
652/1997 96 ELT 509 (SC)
NOTE:
The ratio is applicable
to other similar statutes including Income-tax Act, 1961. In Russel
Properties (P) Ltd. v. A. Chowdhury, Addl CIT (1977) 109 ITR 229 (Cal), it
was held that an assessment order passed by ITO following an earlier decision
of the Tribunal in which the Tribunal followed Supreme Court decision cannot be
said to be erroneous and hence not amenable to CIT’s revisional jurisdiction
under section 263. In Shri Govindram Seksaria Charity Trust v. ITO (1987)
168 ITR 387 (MP), where the Tribunal set aside the order of the CIT under
section 263 of the Act and the department was aggrieved by the order of the
Tribunal, it was held that till the time the order of the Tribunal was not set
aside, the assessing officer cannot proceed with the order under section 143(3)
r.w.s. 263 of the Act, though the department might be aggrieved. In Siemens
India Ltd v. ITO (1983) 143 ITR 120 (Bom.) (at, 139) court held that merely
because an appeal has been filed or a special leave application is pending
against it does not denude the decision of its binding effect.
[4] Privy
Council’s decisions View taken by the Privy Council is binding on the High
Courts in India till the Supreme Court has decided otherwise
The Privy Council was
the highest appellate authority of British India for matters arising out of the
ordinary law. After the post-independence, the Privy Council was abolished. The
Indian constituent assembly passed the abolition of Privy Council Jurisdiction
Act 1949 to abolish the jurisdiction of Privy Council in respect of appeals
from India and also to provide for pending appeals. The Supreme court has inherited the jurisdiction
of the Privy Council after its abolition. The jurisdiction of the Supreme court
under the present constitution is much more extensive than that of the Federal
Court and the Privy Council. The Supreme Court is a court of record and can
review its own decision. Pre-Constitution Privy Council decisions are binding
on the High Court unless it is overruled by the Supreme Court. Supreme Court
has the power to overrule the Privy Council decisions and after overruling the
decision and not binding.
As a result of this
state of law, if there is a decision of the Privy Council rendered before 1950
on a particular point, the same would continue to be binding on the High Court,
unless, of course, there is a decision to the contrary by the Supreme Court. - [Punjabai
v. Shamrao AIR 1955 (Nag) 293; Salzgitter Industrie Bau GMBH v. CIT (1990) 184
ITR 7 (Bom.)]
After 1950, however, any
decision rendered by the Privy Council on any question arising in any High
Court of India or on the construction of any statute of a foreign country, even
though in pari materia with its counterpart enactment in India, would
not be binding on the High Courts. —[Jubilee Mills Ltd v. CIT (1958) 34 ITR
30 (Bom) reversed on another point in (1963) 48 ITR 9 (SC)]
The Constitution of
India, by Article 141, expressly provides that the law of the land is as
declared by the Supreme Court, and that it is only the decision of the Supreme
Court that would be binding on the High Courts. Any views expressed by the
Privy Council on any relevant matter would only be of persuasive value. The obiter
dicta in any decision of the Privy Council, after 26th January, 1950, do
not have any compelling force as they had before that date, but such decisions
would always be viewed with great respect by the Supreme Court, and a fortiori
by the High Courts. Any decision of the House of Lords (in U.K.) likewise, is
only an authority of persuasive value entitled to great respect. - [Chief
Controlling Revenue Authority v. Maharashtra Sugar Mills Ltd. AIR 1950 (SC)
218, 221, per Kania, CJ; Jubilee Mills Ltd. v. CIT (1958) 34 ITR 30, 39 (Bom.);
CIT v. Bai Shirinbai K Kooka (1962) 46 ITR 86, 95 (SC)]
Section 119: Central
Board of Direct Taxes – Instructions – Circulars binding on revenue
Supreme Court held that
the aforesaid circular issued by the Board would be binding on all officers and
persons employed in the execution of the Act. Supreme Court observed that the
circular clarified that it was likely that some companies might have advanced
loans to their shareholders as a result of genuine transactions of loans and
the provision was not intended to affect such transactions. Therefore, past
transactions which would normally have attracted the stringent provisions of
section 12(1B) were substantially granted exemption from the operation of the
said provisions if the past loans were genuinely refunded to the companies.
Such circular issued by the CBDT would be binding on the revenue authorities.
(Related Assessment year : 1956-57) – [Navnitlal C. Javeri v. K. K. Sen AAC
(1965) 56 ITR 198 (SC)]
Interim orders of courts
Interim orders passed by
particular courts on certain considerations are not precedents for other cases
which may be on similar facts. Every Bench hearing a matter on the facts and
circumstances of each case should have the right to grant interim orders on
such terms as it considers fit and proper and if it had granted the interim
order at one stage, it should have the right to vary or alter such interim
orders. - [Susanta Kumar Nayak v. Union of India (1990) 185 ITR 627 (Cal.)]
Decision of a foreign Court has no
binding force in India
It was held that
precedent of the American Court may have a persuasive value only.—[State v.
Makudan Singh AIR 1986 Pat. 38 (FB)]
It was held that decision of a
foreign court has only persuasive value, it has no binding force in the courts
of India. - [World Wide Agencies (P) Ltd. v. Mrs. Margarat T. Desor AIR 1990
(SC) 737]
Effective Date of a Notification
A notification has to be
published in Official Gazette, which is then made available to public. In UOI
v. Ganesh Das Bhojraj 116 ELT 431 : AIR 2000 SC 1102 : 2000(2) SCAl E 17 : 2000
AIR SCW 764 (SC 3 member bench), it has been held that notification comes
into operation from date of publication in Official Gazette. The gazette is
official record evidencing public affairs. Court is required to presume its
contents as genuine under sections 35 & 38 of Evidence Act, unless contrary
is proved. Thus, notification comes into effect on the day it is published in
Official Gazette and no further publication is required. [Minority view was
that this should apply only to civil liability and not criminal liability].
Doctrine of finality has to be applied in a strict
legal sense
Every
new discovery or argumentative novelty can not undo or compel reconsideration
of binding precedents. While dealing with the issue this court in
Ambika Prasad Mishra v. State of U.P. & Anr. held that it is wise to
remember that fatal flaws silenced by earlier rulings cannot survive after
death because a decision does not lose its authority 'merely because it was
badly argued, inadequately considered and fallaciously reasoned. – [Ambika Prasad Mishra v. State of UP AIR
1980 S.C. 1762 (SC)]
If
a decision has held the field for long and citizens as well as tax department
have acted upon it, the court will not disturbe the law so laid down even if it
comes to the conclusion that the earlier decision was worng
It has been stated over and
over again by this court as well as by the Judicial Committee that the words “assessment”
and “assessee” are used in different places in the Act with different meanings.
Therefore in finding out the true meaning of those words in any provision, we
have to see to the context in which the word is used and the purpose intended
to be achieved. It is true that sub-sections (1), (3) and (4) of section 23
require the Income-tax Officer to “assess the total income of the assessee and
determine the sum payable by him”. In other words, in those provisions the word
“assess” has been used with reference to computation of the income of the
assessee and not the determination of his tax liability. But in section 34(3)
the word used is not “assess” but “assessment”. The question for decision is
what is the meaning of that word? As long back as September 24, 1953, the High
Court of Madras in R.M.P.R. Viswanathan Chettiar v. CIT (1954) 25 ITR
79 (Mad.)’s case came to the conclusion that the word “assessment” in
the proviso to section 34(3) means not merely the computation of the income of
the assessee but also the determination of the tax payable by him. No other
High Court has taken a contrary view. The revenue must have in all these years
acted on the basis of that decision of the Madras High Court. Interpretation of
a provision in a taxing statute rendered years back and accepted and acted upon
by the department should not be easily departed from. It may be that another
view of the law is possible but law is not a mere mental exercise. The courts
while reconsidering decisions rendered a long time back particularly under
taxing statutes cannot ignore the harm that is likely to happen by unsettling
law that had been once settled. We may also note that the Act has been repealed
by the Income-tax Act, 1961. The corresponding provisions of the 1961 Act are
materially different from the provisions referred to earlier. Under these
circumstances we do not think that we would be justified in departing from the
interpretation placed by the Madras High Court in Viswanathan Chettiar’s case
(Supra), though a different view of the law may be
reasonably possible.
Hence,
the revenue’s appeal was to be dismissed. – [CIT v. Balkrishna Malhotra,
81 ITR 579 (SC)]
