The Bhopal Sugar Industries Ltd. Vs.
The Income-Tax Officer, Bhopal  INSC 139 (2 September 1960)
GUPTA, K.C. DAS SHAH, J.C.
AYYANGAR, N. RAJAGOPALA
CITATION: 1961 AIR 182 1961 SCR (1) 474
CITATOR INFO :
D 1961 SC 402 (10,14) F 1984 SC 898 (12)
Directions by superior Tribunals-If could be
refused to be carried out-Principles of administration of justice.
The Income-tax Appellate Tribunal in the
exercise of its appellate jurisdiction gave certain directions to the
respondent, an Income-tax Officer, in connection with the ascertainment of the
market value of sugarcane grown by the appellant at their farm and used by them
for the manufacture of sugar. The appellant asked the Income tax Officer to
give effect to the said order and directions of the Tribunal but was informed
that no relief could be given. Thus the Income-tax Officer failed to carry out
the directions of the Tribunal.
Held, that the refusal to carry out the
directions which a superior Tribunal had given in exercise of its appellate
powers was in effect a denial of justice and was further more destructive 475
of one of the basic principles in the administration of justice based as it is
in this country on a hierarchy of courts; and the result of such refusal would
lead to chaos in the administration of justice.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 407 of 1956.
Appeal from the judgment and order dated
February 14, 1956, of the former Judicial Commissioner's Court, Bhopal, in
Misc. Civil Case No. 24 of 1955.
Sanat P. Mehta and S. N. Andley, for the
K. N. Rajagopal Sastri and D. Gupta, for the
1960. September 2. The Judgment of the Court
was delivered by S. K. DAS J.-This is an appeal on a certificate under Art. 133
of the Constitution. The short question for decision is whether the learned
Judicial Commissioner of Bhopal rightly dismissed a petition under Art. 226 of
the Constitution made by the Bhopal Sugar Industries, Limited, hereinafter
referred to as the appellant company, praying for the issue of an appropriate
order or direction in the nature of a writ of mandamus to compel the Income-tax
Officer, Bhopal, respondent herein, to carry-out certain directions given by
the Income-tax Appellate Tribunal, Bombay, to the said officer in an appeal
preferred by the appellant company from an order of assessment made against it
by the respondent.
The relevant facts are these. The appellant
company carries on the business of manufacturing and selling sugar in various
grades and quantities. It has its factory at Sehore which was formerly in the
Bhopal State and is now situate in the State of Madhya Pradesh. It purchased
sugarcane from local cultivators and also grew its own sugar-cane in farms situate
in that State, such sugar-cane being used for its manufacture of sugar. During
the year of account ending on September 30, 1950, the appellant company
purchased 7,72,217 maunds of sugar-cane from local 61 476 cultivators at
various purchasing centers, 14 in number, situate at a distance of about 8 to
22 miles from its factory. The price paid was Rs. 1-4-6 per maund, that being
the price fixed, by the then State of Bhopal. The average cost of transporting
the sugar-cane from the various centers to the factory was stated to be Rs.
0-4-9 per maund. During the same period the appellant company grew its own
sugarcane to the extent of 6,78,490 maunds and brought the same along with the
cultivators' sugar-cane to its factory for manufacturing sugar. For the
sugar-cane grown on its own farms the appellant company claimed Rs. 1-13-0 per
maund as its market value (including Rs. 0-4-9 as average transport charges),
the total market value for 6,78,490 maunds thus coming to Rs. 12,29,763. The
appellant company deducted from the aforesaid, market value a sum of Rs.
9,77,772 as agricultural expenses, namely, expenses of harvesting, loading,
etc., and claimed the balance of Rs. 2,51,991 as agricultural income to be
deducted from the computation of its total income for the assessment year
1951-52. The respondent accepted the figure of Rs. 9,77,772 as agricultural
expenses but computed the market value of 6,78,490 maunds of sugar-cane grown
on the appellant company's own farms at Rs. 9,33,000 at the rate of Rs. 1-6-0 per
maund; thus according to this computation there was a loss of Rs. 44,772 and
the respondent held in his assessment order that the appellant company was not
entitled to claim any deduction of agricultural income for the assessment year.
The appellant company then appealed to the
Appellate Assistant Commissioner, Jubbalpore, who determined the market value
of the sugar-cane grown on the appellant company's own farms at Rs. 10,07,132
at the rate of Rs. 1-79 per maund. This resulted in an agricultural income of
29,360, which the Appellate Assistant
Commissioner allowed to be deducted from the total income of the appellant company.
Not satisfied with the order of the Appellate
Assistant Commissioner, the appellant company preferred 477 an appeal to the
Income-tax Appellate Tribunal, Bombay, and claimed that the market value of the
sugar-cane grown on its farms should be Rs. 1-13-0 per maund and not Rs. 1-7-9.
There was no dispute before the Tribunal as
to the agricultural expenses, and the question which the Tribunal had to decide
related to the market value of 6,78,490 maunds of sugar-cane grown on the
appellant company's own farms.
After referring to r. 23 of the Income-tax
Rules and certain other matters, the Tribunal said:
" We are, therefore, inclined to think
that 'market' within the meaning of rule 23 is not the centers but the factory
where the assessee company manufactures sugar. This being the position in order
to find out the market value, we have to add the transport charges from the centers
to the factory. We were told that the transport charges amounted to Rs. 0-4-9
per maund. We have not been able to verify this figure. In our opinion,
therefore, the sugar-cane produced-by the assessee company in its own farms has
to be valued at Rs. 1-4-6 per maund plus the average transport charges per
maund from the centers to the factory".
The Tribunal then gave the following
directions to the respondent :
" We would, therefore, direct the
Income-tax Officer to ascertain the average transport charges per maund from
the centers to the factory and to add to it the rate of Rs. 1-46 per mand and
on that basis work out the market value of the sugar-cane grown by the assessee
company in its own farms. If the market value comes to more than Rs. 1-7-9 per
maund further relief to the necessary extent will be given by the Income-tax
Officer. If, however, the market value is less than Rs. 1-7-9 the appeal must
The Commissioner of Income-tax then applied
to the Tribunal for a reference under s. 66(1) of the Income-tax Act, stating
that a question of law arose out of the Tribunal's order in as much as the
Tribunal was not justified, in the opinion of the Department, to add average
transport charges to the price of 478 Rs. 1-4-6 per maund of sugar-cane grown
by the appellant company. This application woos, however, withdrawn on August
4, 1954. The order of the Tribunal thus became final and was binding on the
In the meantime, the appellant company moved
the respondent to give effect to the directions of the Tribunal. After some
abortive correspondence between the respondent and his higher officers on one
side and the appellant company on the other, the respondent informed the
appellant company on March 24, 1955, that no relief could be given to it. In
his letter of that date the respondent said:
"In this connection your attention is
invited to the order of the Tribunal to ascertain the cost of transportation of
the sugar-cane from the farms to the factory which could only be considered in
working out the market value of the agricultural produce. As is evident from
your account books you are found to have debited a sum of Rs. 59,116 only out
of the total transportation expenses to your agricultural produce account.
Naturally, therefore, only the expenses so incurred by you can be considered in
working out the market value of the agricultural sugar-cane. By adding the
transportation charges to the valuation of sugar-cane at Rs. 1/4/6 on 6,78,490
maunds of agricultural produce the total cost of the agricultural produce would
be Rs. 9,28,431.
Against this by the order of the Appellate
Assistant Commissioner the value of the farm cane was taken at Rs. 10,07,132
and thus the excess allowance of Rs. 78,701 has already been allowed to you.
Thus as the market value of the agricultural produce does not in any case
exceed Rs. 1-7-9 as held by the Appellate Assistant Commissioner the result of
the Tribunal's order as per their finding given in para 8 of the order results
in no relief being given to you." It is worthy of note here that while the
Tribunal had directed the respondent to ascertain the average transport charges
from the centers to the factory, the respondent referred to the cost of
transportation from the farmsto the factory. Clearly enough, the respondent
misread the direction of the Tribunal and failed 479 to carry it out. He
proceeded on a basis which was in contravention of the direction of the
In these circumstances, the appellant company
moved the Judicial Commissioner, Bhopal, then exercising the powers of a High
Court for that area, for the issue of a writ to compel the respondent to carry
out the directions given by the Tribunal. The learned Judicial Commissioner
found in express terms that the respondent had acted arbitrarily and in clear
violation of the directions given by the Tribunal ;
in other words, he found that the respondent
had disregarded the order of the Tribunal, failed to carry out his duty
according to law and had acted illegally. Having found this, the learned Judicial
Commissioner went on to examine the correctness or otherwise of the order of
the Tribunal and found that the Tribunal went wrong in not treating the centers
as 'markets' within the meaning of r. 23 of the Income-tax Rules. He then came
to the conclusion that in view of the error committed by the Tribunal, there
was no manifest injustice as a result of the order of the respondent ;
accordingly, he dismissed the application for the issue of a writ made by the
We think that the learned Judicial
Commissioner was clearly in error in holding that no manifest injustice
resulted from the order of the respondent conveyed in his letter dated March
24, 1955. By that order the respondent virtually refused to carry out the
directions which a superior tribunal had given to him in exercise of its
appellate powers in respect of an order of assessment made by him.
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 and we have indeed found it very
difficult to appreciate the process of reasoning by which the learned Judicial
Commissioner while roundly condemning the respondent for refusing to carry out
the directions of the superior 480 tribunal, yet held that no manifest
injustice resulted from such refusal.
It must be remembered that the order of the
Tribunal dated April 22, 1954, was not under challenge before the Judicial
Commissioner. That order had become final and binding on the parties, and the
respondent could not question it in any way. As a matter of fact the
Commissioner of Income-tax had made an application for a reference, which
application was subsequently withdrawn. The Judicial Commissioner was not
sitting in appeal over the Tribunal and we do not think that in the
circumstances of this case it was open to him to say that the order of the
Tribunal was wrong and, therefore, there was no injustice in disregarding that
order. As we have said earlier, such view is destructive of one of the basic
principles of the administration of justice.
In fairness to him it must be stated that
learned counsel for the respondent did not attempt to support the judgment of
the Judicial Commissioner on the ground that no manifest injustice resulted
from the refusal of the respondent to carry out the directions of a superior
tribunal. He conceded that even if the order of the Tribunal was wrong, a
subordinate and inferior tribunal could not disregard it; he readily recognised
the sanctity and importance of the basic principle that a subordinate tribunal
must carry out the directions of a superior tribunal. He argued, however, that
the order of the Tribunal was unintelligible and the respondent did his best to
understand it according to his light. This argument advanced on behalf of the
respondent appears to us to be somewhat disingenuous. We find no difficulty in
understanding the order of the Tribunal; it directed the respondent " to
ascertain the average transport charges per maund from the centers to the
factory and add to it the rate of Rs. 1-4-6 per maund of sugar-cane". The
direction is clear and unambiguous. The respondent instead of ascertaining the
average transport charges per maund from the centers to the factory, referred
to the transport charges from the farms to the factory and on that footing
disregarded the directions of the Tribunal ; for-' 481 the respondent to say
thereafter that the order of the Tribunal was not intelligible betrays a
regrettable lack of candour. We must, therefore, reject the argument of learned
counsel for the respondent.
The learned Judicial Commissioner referred to
three decisions in support of the proposition that a direction or order in the
nature of a writ of mandamus cannot be claimed as of right, nor need such a
writ issue for every omission or irregularity; Bimal Chand v. Chairman, Jiagunj
Azimgunj Municipality (1); Gram Panchayat, Vidul of Vidul v. Multi Purpose
Co-operative Society of Vidul (2) and Messrs.
Senairam Doongarmall v. Commr. of Income Tax,
Assam (3). In the view which we have expressed, namely, that by the impugned
order the respondent failed to carry out a legal duty imposed on him and such
failure was destructive of a basic principle of justice, a writ of mandamus
should issue ex debito justiciae to compel the respondent to carry out the
directions given to him by the Income-tax Appellate Tribunal, Bombay, and it is
unnecessary to consider the decisions referred to above except merely to state
that in none of them arose any question of condoning a refusal by an inferior
tribunal to carry out the directions given to that tribunal by a superior
tribunal in the undoubted exercise of its appellate powers, on the ground that
the order of the superior tribunal was wrong.
We must, therefore, allow this appeal, set
aside the judgment and order of the Judicial Commissioner dated February 14,
1956 and issue an order directing the respondent to carry out the directions
given by the Income tax Appellate Tribunal, Bombay, in its judgment and order
dated April 22, 1954. The appellant company will be entitled to its costs in
the proceedings before the Judicial Commissioner and in this Court.
(1) A.I.R. 1954 Cal 285.
(2) A.I.R. 1954 Nag. 82.
(3) A.I.R. 1955 Assam 201.