AIR-CONDITIONING SPECIALISTS (PVT.) LTD. VS UNION OF INDIA
1998 PTD 2155
[221 I T R 739]
[Gujarat High Court (India)]
Before C. K. Thakkar and Rajesh Balia, JJ
AIR-CONDITIONING SPECIALISTS (PVT.) LTD.
versus
UNION OF INDIA and others
Special Civil Application No.6546 of 1986, decided on 23/03/1995.
(a) Income-tax-
----High Court---Effect of decision High Court---Decision of High Court is binding on Authorities and Tribunal under its jurisdiction.
The law declared by the highest Court in the State is binding on Authorities or Tribunals under its superintendence and they cannot ignore it, either in initiating a proceeding or deciding on the rights involved in such a proceeding.
Bhopal Sugar Industries Ltd. v. ITO (1960) 40 ITR 618 (SC); East India Commercial Co. Ltd v. Collector of Customs AIR 1962 SC 1893; Padmanabha Setty v. Papiah Setty AIR 1966 SC 1824; Kausalya Devi Bogra v. Land Acquisition Officer AIR 1984 SC 892 and Bishnu Ram Borah v. Parag Saikia AIR 1984 SC 898 fol.
(b) Income-tax
---Revision---C.I.T.---Jurisdiction of C.I.T.---C.I.T. cannot ignore decision of High Court on ground that appeal from decision of High Court was pending before Supreme Court---Indian Income Tax Act, 1961, S.264-- Constitution of India, Art.226.
The Commissioner of Income-tax is a "Tribunal" subject to the supervisory jurisdiction of the High Court under Article 227 of the Constitution. Hence, he is bound to obey the law declared by the High Court. It is not open to the Commissioner of Income-tax to ignore the decision of the jurisdictional High Court or refuse to follow it on the ground that the verdict had not beer, accepted by the Department and that the matter was carried further and was pending before the Supreme Court. When a point is concluded by the decision of the Court, all subordinate Courts and inferior Tribunals within the territory of the State and subject to the supervisory jurisdiction of the High Court are bound by it and must scrupulously follow the said decision in letter and spirit.
(c) Income-tax---
----Refund---Interest---Advance tax---Advance tax paid after expiry of stipulated period but before end of financial year ---Assessee entitled to interest---Indian Income Tax Act, 1961, S. 214.
Gujarat High Court in the case of Bharat Textile Works (1978) 114 ITR 28 had held that if payment of advance tax was made before the expiry of the financial year in question, the assessee was entitled to interest under section 214 of the Income Tax Act, 1961. The Commissioner of Income-tax was not justified in refusing to set aside the order of the Income-tax 'Officer and grant interest under section 214 of the Act. His order was liable to be quashed, and the assessee was entitled to interest.
Bharat Textile Works v. ITO (1978) 114 ITR 28 (Guj.) fol.
Baradakanta Mishra v. Bhimsen Dixit AIR 1972 SC 2466; Cassell & Co. Ltd. v. Broome (1972) 1 All. ER 801 (HL) and Chimanlal S. Patel v. CIT (1994) 210 ITR 419 (Guj.) ref.
J.G. Shah for Petitioner.
M.J. Thakore for R.P. Bhatt & Co. for Respondents.
JUDGMENT
C.K. THAKKAR, J. ---This petition is filed by the petitioner for a writ of mandamus and/or any other appropriate writ, order or direction quashing and setting aside an order passed by the Commissioner of Income- tax, Baroda, on October 14, 1985, Annexure "A" to the petition and by directing the respondent authorities to pay interest to the petitioner in accordance with the provisions of section 214 of the Income Tax Act, 1961 (hereinafter, referred to as "the Act"), on the excess amount paid by him.
It is the case of the petitioner that it is a partnership-firm engaged in the business of air-conditioning, having its principal office at Baroda. The petitioner filed Income-tax returns for the assessment years 1980-81 and 1981-82 before the Income-tax Officer, Circle-1, Ward-A. The Income-tax Officer made the assessment order and held that the petitioner was entitled to refund of certain amounts. He, however, did not allow interest on the ground that the last instalment of the advance tax was not paid by the petitioner within the stipulated period, though it was paid before the end of the financial year.
Being aggrieved by the said action, the petitioner approached the Commissioner of Income-tax, Baroda, by filing a revision under section 264 of the Act. The Commissioner of Income-tax, Baroda, rejected the revision, inter alia, observing that the Income-tax Officer was right in not allowing interest on the ground that the last instalment of advance tax was not paid within time. It could not, therefore, be said that the action of the Income-tax Officer in not paying interest was improper or illegal. The attention of the Commissioner of Income-tax was invited to a decision of this Court in the case of Bharat Textile Works v. ITO (1978) 114 ITR 28 in which it was held that if payment of advance tax was made before the expiry of the financial year in question, the assessee was entitled to interest under section 214 of the Act. Regarding that decision the Commissioner observed: .
"As the decision has not been accepted by the Department, at present the claim of the assessee is rejected. If the Supreme Court, in the case of Bharat Textile Works decides the issue in favour of the taxpayers, then the ratio of the Supreme Court's decision in the case of Bharat Textile Works would apply to the assessee also and the Income-tax Officer would give effect to the Supreme Court's decision in the case of the assessee also for these years."
Mr. J.G. Shah, learned counsel for the petitioner, submitted that the point was concluded by the decision of this Court in the case of Bharat Textile Works (1978) 114 ITR 28. He strenuously argued that the action of the Commissioner of Income-tax (respondent No.2) in not following the decision in the case of Bharat Textile Works (1978) 114 ITR 28 was illegal and improper. He was bound to follow the law declared by this Court. It is not open to a subordinate Court or an inferior Tribunal to ignore or keep aside a decision of this Court and to decide the matter as per his sweet-will. The impugned order thus suffers from legal infirmity and requires to be interfered with.
Mr. M. J. Thakore, learned counsel appearing for the Revenue, on the other hand, submitted that the matter is pending before the Supreme Court and it cannot be said that any error of law apparent on the face of record has been committed by the second respondent in not granting the prayer of the petitioner. He, therefore, submitted that the petition requires to be dismissed.
Having given anxious and thoughtful consideration, we are of the opinion that petition requires to be allowed. It is not disputed even by the Revenue that the point is concluded by a pronouncement of this Court in the case of Bharat Textile Works (1978) 114 ITR 28. Mr. Thakore' frankly admitted that above view is reiterated subsequently by this Court in the case of Chimanlal Patel v. CIT (1994) 210 ITR 419.
In view of the above legal position, the petition requires to be allowed and the order passed by the second respondent which is clearly contrary to law, requires to be quashed and set aside.
We may, however, add that it was not open to the second respondent to ignore the law laid down by this Court when it was an inferior Tribunal subject to the Supervisory jurisdiction of this Court. It was not proper on his part not to follow a binding decision of this Court on the ground that the Department had not accepted that decision and had filed an appeal and the matter was pending in the Supreme Court. It cannot be disputed and is not disputed that the second respondent is a "Tribunal" subject to the supervisory jurisdiction of this Court under Article 227 of the Constitution. Hence, he is bound to obey the law declared by this Court.
The apex Court of the country in no uncertain terms held that the law declared by a High Court is binding on all subordinate Courts and Tribunals within the territory to which it exercises the jurisdiction. In Bhopal Sugar Industries Ltd. v. ITO (1960) 40 ITR 618 (SC), the Income-tax Officer (subordinate authority) refused to carry out clear and unambiguous directions of the Income-tax Appellate Tribunal superior authority) Deprecating it, their Lordships of the Supreme Court observed (page 622):
"Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of Courts. If a subordinate Tribunal refuses to carry out directions given to it by a superior Tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice...: '
A direct question arose before the Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs, AIR 1962 SC 1893. In that case, proceedings were initiated by the Collector of Customs against the petitioner-company on allegations that it had violated conditions of licence and illegally disposed of goods and thereby committed an offence punishable under the Customs Act. The High Court confirmed the order of acquittal passed by the trial Court holding that it cannot be said that ' a condition of the licence amounted to an order under the Act' and, therefore, no offence was committed by the company. The High Court also passed an order directing the seized/goods to be sold and the sale proceeds to be deposited in the Court. After those proceedings, notice was issued by the Collector on the company to show cause why the amount should not be confiscated and penalty should not be imposed. It was contended on behalf of the company that once the High Court decided that the breach of condition of licence could not be said to be a breach of order, the Collector had no jurisdiction to issue show-cause notice. It was submitted that the decision of High Court on a point was binding on all subordinate Courts and inferior Tribunals within its territorial jurisdiction. The notice was, therefore, liable to be quashed. The precise question before the Supreme Court was as to whether or not the decision rendered by High Court would bind all subordinate Courts and inferior Tribunal within its territorial jurisdiction. It was argued that there was no provision similar to Article 141 of the Constitution making the law declared by a High Court binding on all Courts and Tribunals within its territorial jurisdiction. Considering relevant provisions of the Constitution and the power of High Court, Subba Rao, J. (as he then was), observed (page 1905);
'This raises the question whether an administrative Tribunal can ignore the law declared by the highest Court in the State and initiate proceedings in direct violation of the law so declared. Under Article 215, every High Court shall be a Court of record and shall have all the powers of such a Court including the power to punish for contempt of itself. Under Article 226, it has a plenary power to issue orders or writs for the enforcement of the fundamental rights and for any other purpose to any person or authority, including in appropriate cases any Government within its territorial jurisdiction. Under Article 227 it has jurisdiction over all Courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that Court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate Courts can equally do so, for there is no specific provision, just like in the case -of the Supreme Court, making the law declared by the High Court binding on subordinate Court. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise, there would be confusion in the administration of law and respect for law would irretrievably suffer. We, therefore, hold that the law declared by the highest Court in the State is binding on authorities or Tribunals under its superintendence, and that they cannot ignore it either in initiating a proceeding or deciding on the rights involved in such a proceeding. "
The above view has been reiterated by the Supreme Court in a number of subsequent decisions (see M. Padmanabha Setty v. K.P. Papiah Setty, AIR 1966 SC 1824; Kausalya Devi Bogra v. Land Acquisition Officer, AIR 1984 SC 892 and Bishna-Ram Borah v. Parag Saikia, AIR 1984 SC 898).
In our opinion, the submission of learned counsel for the petitioner, is well-founded and deserves to be upheld. It is not even the case of the Department that the decision of this Court in Bharat Textile Works' case (1978) 114 ITR 28,has been stayed by the Supreme Court. Hence, so far as this Court is concerned, the point is concluded. It is settled law that unless and until the decision is reversed by a superior Court, it holds the field. It also cannot be gainsaid that the second respondent is an inferior Tribunal subject to supervisory jurisdiction of this Court and this Court can exercise jurisdiction over him by invoking Article 227 of the Constitution. In our considered view, therefore, it was not open to the second respondent to ignore the decision of this Court or to refuse to follow it on a specious plea of verdict being not accepted by the Department and that the matter was carried further and was pending before the Supreme Court.
In Baradakanta Mishra v. Bhimsen Dixit, AIR 1972 SC 2466, when a member of the superior judicial service functioning as the Commissioner of Hindu Religious Endowments, Orissa, refused to follow the decision of the High Court, contempt proceeding had been initiated against him and he was punished by the High Court. When the matter was carried by the appellant to the Supreme Court, dismissing the appeal and extending further the principle laid down in the decision of East India Commercial Co. Ltd.'s case, AIR 1962 SC 1893, the Court held (page 2469):
"The conduct of the appellant in not following the previous decision of the High Court is calculated to create confusion in the administration of law. It will undermine respect for law laid down by the High Court and impair the constitutional authority of the High Court."
In this connection, we may emphasise that it would indeed be appropriate to keep in mind the following observations of Lord Diplock in Cassell & Co. Ltd. v. Broome (1972) 1 All ER 901, 874 (HL):
It is inevitable in an hierarchical system of Courts that there are decisions of the supreme appellate Tribunal which do not attract the l " unanimous approval of all members of the judiciary. When I sat m the Court of Appeal I sometimes thought the House of Lords was wrong in overruling me. Even since that time there have been occasions, of which the instant appeal itself is one, when, alone or in company, I have dissented from a decision of the majority of this House. But the judicial system only works if someone is allowed to have the last word and if that last word, once spoken, is loyally accepted.
We are very clear and we have no doubt in our minds that when a point is concluded by a decision of this Court, all subordinate Court and inferior Tribunal within the territory of this State and subject to the supervisory jurisdiction of this Court are bound by it and must scrupulously follow the said decision in letter and spirit. Since the second respondent has not decided the matter in accordance with law laid down by this Court in the case of Bharat Textile Works (1978) 114 ITR 28, the order passed by him requires to be quashed and set aside.
In the result, the petition is allowed. The respondent authorities are directed to pay interest to the petitioner in accordance with law on the amount refunded to him. Rule is accordingly made absolute with no order as to costs.
M.B.A./1321/FCPetition allowed.