C.K. Gangadharan
& ANR Vs. Commissioner of Income Tax, Cochin [2008] INSC 1186 (21 July
2008)
Judgment
CIVIL APPELLATE
JURISDICTION CIVIL APPEAL NOS. 5210-5216 OF 2002 C.K. Gangadharan & Anr.
....
Appellants Versus
Commissioner of Income Tax, Cochin ...Respondent
Dr. ARIJIT PASAYAT,
J.
1. By order dated
13.3.2008, a reference was made to larger Bench and that is how these cases are
before us. The order, of reference, inter-alia, reads as follows:
" xxx xxx xxx In
view of the aforesaid position, we are of the opinion that matter requires
consideration by a larger Bench to the extent whether revenue can be precluded
from defending itself by relying upon the contrary decision.
We make it clear that
we are not doubting the correctness of the view taken by this Court in the
cases of Union of India v. Kaumudini Narayan Dalal (2001)10 SCC 231, CIT v.
Narendra Doshi (2004) 2 SCC 801 and CIT v. Shivsagar Estate (2004) 9 SCC 420 to
the effect that if the revenue has not challenged the correctness of the law
laid down by the High Court and accepted it in the case of one assessee, then
it is not open to the Revenue to challenge its correctness in the case of other
assesses, without just cause.
Registry is directed
to place the papers before the Hon'ble Chief Justice of India for appropriate
orders."
2. In terms of the
reference what is required to be decided is whether revenue can be precluded
from defending itself by relying upon the contrary decisions. It is to be noted
that various High Courts have taken contrary views. While some of the courts
have decided in favour of the assessee, other High Courts have decided in
favour of the revenue.
3. For deciding the
issue few decisions of this Court need to be noted.
4. In Bharat Sanchar
Nigam Ltd. and Anr. v. Union of India and Ors. (2006 (3) SCC 1), it was noted
as follows:
"20. The
decisions cited have uniformly held that res judicata does not apply in matters
pertaining to tax for different assessment years because res judicata applies
to debar Courts from entertaining issues on the same cause of action whereas
the cause of action for each assessment year is distinct. The Courts will
generally adopt an earlier pronouncement of the law or a conclusion of fact
unless there is a new ground urged or a material change in the factual
position. The reason why Courts have held parties to the opinion expressed in a
decision in one assessment year to the same opinion in a subsequent year is not
because of any principle of res judicata but because of the theory of precedent
or the precedential value of the earlier pronouncement. Where facts and law in
a subsequent assessment year are the same, no authority whether quasi judicial
or judicial can generally be permitted to take a different view. This mandate
is subject only to the usual gateways of distinguishing the earlier decision or
where the earlier decision is per incuriam. However, these are fetters only on
a coordinate bench which, failing the possibility of availing of either of these
gateways, may yet differ with the view expressed and refer the matter to a
bench of superior strength or in some cases to a bench of superior
jurisdiction.
22. A decision can be
set aside in the same lis on a prayer for review or an application for recall
or Under Article 32 in the peculiar circumstances mentioned in Hurra v. Hurra
(2002 (4) SCC 388). As we have said overruling of a decision takes place in a
subsequent lis where the precedential value of the decision is called in
question. No one can dispute that in our judicial system it is open to a Court
of superior jurisdiction or strength before which a decision of a Bench of
lower strength is cited as an authority, to overrule it. This overruling would
not operate to upset the binding nature of the decision on the parties to an
earlier lis in that lis, for whom the principle of res judicata would continue
to operate. But in tax cases relating to a subsequent year involving the same
issue as an earlier year, the court can differ from the view expressed if the
case is distinguishable or per incuriam. The decision in State of U.P. v. Union
of India (2003 (3) SCC 239) related to the year 1988.
Admittedly, the
present dispute relates to a subsequent period. Here a coordinate Bench has
referred the matter to a Larger Bench. This Bench being of superior strength,
we can, if we so find, declare that the earlier decision does not represent the
law. None of the 4 decisions cited by the State of U.P. are authorities for
the proposition that we cannot, in the circumstances of this case, do so. This
preliminary objection of the State of U.P. is therefore rejected."
5. In State of
Maharashtra v. Digambar (1995 (4) SCC 683), the position was highlighted by
this Court as follows:
"16. We are
unable to appreciate that objection raised against the prosecution of this
appeal by the appellant or other S.L.Ps filed in similar matters. Sometimes, as
it was stated on behalf of the State, the State Government may not choose to
file appeals against certain judgments of the High Court rendered in Writ
petitions when they are considered as stray cases and not worthwhile invoking
the discretionary jurisdiction of this Court under Article 136 of the
Constitution, for seeking redressal therefore. At other times, it is also possible
for the State, not to file appeals before this Court in some matters on account
of improper advice or negligence or improper conduct of officers concerned. It
is further possible, that even where S.L.Ps are filed by the State against
judgments of High Court, such S.L.Ps may not be entertained by this Court in
exercise of its discretionary jurisdiction under Article 136 of the
Constitution either because they are considered as individual cases or because
they are considered as cases not involving stakes which may adversely affect
the interest of the 5 State. Therefore, the circumstance of the non- filing of
the appeals by the State in some similar matters or the rejection of some
S.L.Ps in limine by this Court in some other similar matters by itself, in our
view, cannot be held as a bar against the State in filing an S.L.P. or S.L.Ps
in other similar matters where it is considered on behalf of the State that
non- filing of such S.L.P. or S.L.Ps and pursuing them is likely to seriously
jeopardise the interest of the State or public interest."
6. In Government of
W.B. v. Tarun K. Roy and Ors. (2004 (1) SCC 347) reference was made to the
judgment in Digambar case (supra) and State of Bihar and Ors. v. Ramdeo Yadav
and Ors. (1996 (3) SCC 493). It was noted as follows:
"28. In the
aforementioned situation, the Division Bench of the Calcutta High Court
manifestly erred in refusing to consider the contentions of the appellant on
their own merit, particularly, when the question as regard difference in the
grant of scale of pay on the ground of different educational qualification
stands concluded by a judgment of this Court in Debdas Kumar (1991 Supp (1) SCC
138) (supra). If the judgment of Debdas Kumar (supra) is to be followed &
finding of fact was required to be arrived at that they are similarly situated
to the case of Debdas Kumar (supra) which in turn would mean that they are also
holders of diploma in engineering.
They admittedly being
not, the contention of the appellants could not be rejected. Non-filing of an
appeal, in any event, would not be a ground for refusing to consider a matter
on its own merits. (See State of Maharashtra v. Digambar 1995 (4) SCC 683).
29. In State of Bihar
and Ors. v. Ramdeo Yadav and Ors. (1996 (3) SCC 493) wherein this Court noticed
Debdas Kumar (supra) holding:
"Shri B.B.
Singh, the learned counsel for the appellant contended that though an appeal
against the earlier order of the High Court has not been filed, since larger
public interest is involved in the interpretation given by the High Court
following its earlier judgment, the matter requires consideration by this
Court. We find force in this contention. In the similar circumstances, this
Court in State of Maharashtra v. Digambar, (1995) 4 SCC 633) and in State of
West Bengal v. Debdas Kumar, (1991) Suppl. SCC 138), had held that though an
appeal was not filed against an earlier order, when public interest is involved
in interpretation of law, the Court is entitled to go into the question. "
7. In Ramdeo's case
(supra) reference was made to State of W.B. v. Debdas Kumar (1991 Suppl. (1)
SCC 138), wherein it was observed at para 5 as follows:
"5. It is then
contended that Section 3(2) and (3) make distinction between the employees
covered by those provisions and the employees of the aided schools taken over
under Section 3(2). Until the taking over by operation of Section 3(4)
recommendation is complete, they do not become the employees of the Government
under Section 4 of the Act. The Government in exercise of the power under
Section 8 constituted a committee and directed to enquire and recommend the
feasibility to take over the schools. On the recommendation made by them, the
Government have taken decision on January 13, 1981 by which date the
respondents were not duly appointed as the employees of the taken over
institution. Therefore, the High Court cannot issue a mandamus directing the
Government to act in violation of law."
8. In Commissioner of
Central Excise, Raipur v. Hira Cement (2006 (2) SCC 439) at para 24 the position
was reiterated.
9. In Chief Secretary
to Government of Andhra Pradesh and Anr. v. V.J. Cornelius and Ors. (1981 (2)
SCC 347) it was observed that equity is not relevant factor for the purpose of
interpretation.
10. It will be
relevant to note that in Karam Chari v. Union of India and Ors. (2000 (243) ITR
143) and Union of India v. Kaumudini Narayan Dalal and Anr. (2001 (249) ITR),
this Court observed that without a just cause revenue cannot file the appeal in
one case while deciding not to file appeal in another case. This position was
also noted in Commissioner of Income Tax v. Shivsagar Estate (2004 (9) SCC
420).
11. The order of
reference would go to show that same was necessary because of certain
observations in Berger Paints India Ltd. V. Commissioner of Income Tax,
Caluctta (2004 (12) SCC 42). The decision in Union of India and Ors. v.
Kaumudini Narayan Dalal and Anr. (2001 (10) SCC 231) was explained in Himalatha
Gargya v. Commissioner of Income Tax, A.P. and Anr. (2003 (9) SCC 510) at para
14. It has been stated in the said case that the fact that different High
Courts have taken different views and some of the High Courts are in favour of
the revenue constituted "just cause" for the revenue to prefer an appeal.
This Court took the view that having not assailed the correctness of the order
in one case, it would normally not be permissible to do so in another case on
the logic that the revenue cannot pick and choose. There is also another aspect
which is the certainty in law.
12. If the assessee
takes the stand that the revenue acted mala fide in not preferring appeal in
one case and filing the appeal in other case, it has to establish mala fides.
As a matter of fact, as rightly contended by the learned counsel for the
revenue, there may be certain cases where because of the small amount of
revenue involved, no appeal is filed. Policy decisions have been taken not to
prefer appeal where the revenue involved is below a certain amount. Similarly,
where the effect of decision is revenue neutral there may not be any need for
preferring the appeal. All these certainly provide the foundation for making a
departure.
13. In answering the
reference, we hold that merely because in some cases the revenue has not
preferred appeal that does not operate as a bar for the revenue to prefer an
appeal in another case where there is just cause for doing so or it is in
public interest to do so or for a pronouncement by the higher Court when
divergent views are expressed by the Tribunals or the High Courts.
14. The matter shall
be placed before the concerned Bench for disposal of the appeals.
...............................J.
(Dr.
ARIJIT PASAYAT) ...............................J.
(P.
SATHASIVAM) ...............................J.
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