Himachal Pradesh High Court
East Bourne Hotels Pvt. Ltd vs Union Of India And Others on 30 May, 2025
Bench: Tarlok Singh Chauhan, Sushil Kukreja
( 2025:HHC:16793 ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.
CWP No.3335 of 2025 Reserved on:28.05.2025 Decided on: 30th May, 2025 East Bourne Hotels Pvt. Ltd. .......Petitioner versus Union of India and others ...Respondents Coram The Hon'ble Mr. Justice Tarlok Singh Chauhan, Judge. The Hon'ble Mr. Justice Sushil Kukreja, Judge. Whether approved for reporting?1 Yes.
For the petitioner: Mr. Vishal Mohan, Senior
Advocate with Mr.Praveen
Sharma and Mr. Abhinav
Bazwaria, Advocates.
For the respondents: Mr. N.L. Thakur, Senior Panel
Counsel for respondent No.1.
Mr. Neeraj Sharma and
Mr.Ishan Kashyap, Advocates
for respondent No.2.
Tarlok Singh Chauhan, Judge
The instant petition has been filed for grant of the following substantive reliefs:-
"a) Issue a writ in the nature of Certiorari quashing the order dt. 03.01.2025 (Annexure P-10) passed by National Faceless Appeal Centre, dismissing the Appeal of the Petitioner against order dt. 29.03.2024 (Annexure P-8) passed by the Assessing Officer u/s 154 of the 1 Whether the reporters of Local Papers may be allowed to see the judgment? Yes.
( 2025:HHC:16793) 2 Income Tax Act, 1961, arbitrarily making disallowance of Rs.1,19,92,960/- u/s 80IC of the Income Tax Act, 1961 by defying the order of the Income Tax Appellate Tribunal with impunity whereby the same was allowed by the Income Tax Appellate Tribunal in favour of the Petitioner;
b) Issue a writ in the nature of Certiorari quashing the order dt. 29.03.2024 (Annexure P-8) passed by the Respondent No. 3 through which the order dt. 25.02.2020 (Annexure P-6) has been withdrawn under the garb of passing an order u/s 154 of the I.T. Act, 1961, in violation of the law laid down by the Hon'ble Supreme Court in the case of T.S. Balaram, ITO Vs. Volkart Bros, reported in [1971] 82 ITR 40.
c) Issue a writ, order, or direction, especially in the nature of Mandamus, directing the Respondents to restore the order dt.25.02.2020 (Annexure P-6), wherein the Appeal effect was given to the order of the Income Tax Appellate Tribunal dt. 09.08.2019 (Annexure P-5), and in the interim, the demand raised vide order dt. 29.03.2024 (Annexure P-8) be not given effect by staying the operation of impugned order dt. 29.03.2024 (Annexure P-8)."
2. The petitioner is a private limited Company and engaged in the business of running hotels and restaurants. The petitioner for the assessment year 2010-11 filed the return of income on 26.03.2011 declaring nil income after claiming deduction under Section 80IC of the Income Tax Act, 1961 ( for short 'the Act') amounting to Rs.1,19,92,957/-, which was processed on 18.08.2011.
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3. The Assessing Officer made the scrutiny assessment under Section 143(3) of the Act and disallowed the deduction under Section 80IC of the Act. The petitioner challenged the order dated 18.03.2013 before the Commissioner of Income Tax (Appeals), Chandigarh, but the appeal of the petitioner was dismissed vide order dated. 05.02.2015 without considering the submissions made therein.
4. The petitioner filed the appeal before the Income Tax Appellate Tribunal (ITAT) and the same was considered by the ITAT on merits and was allowed vide order dated 09.08.2019. The respondents thereafter filed M.A. No. 22/Chd/2020 before the ITAT under Section 254 of the Act for rectification on the ground that the issue of disallowance under Section 80IC of the Act was not discussed.
5. The Assessing Officer, during the pendency of the miscellaneous application, gave effect to the order of the ITAT dated 09.08.2019 and accepted the claim of the petitioner in respect of deduction under Section 80IC of the Act by allowing the relief vide order dated 25.02.2020.
6. The Assessing Officer thereafter issued notice under Section 154 of the Act on 21.11.2023 to revise the appeal effect order dated 25.02.2020 under the garb of mistake. The ( 2025:HHC:16793) 4 Assessing Officer vide letter dated 02.12.2024 initiated the recovery proceedings.
7. The appeal filed by the petitioner against order dated 29.03.2024 was dismissed by the National Faceless Appeal Centre (NFAC) vide order dated 03.01.2025 without considering the aspect that under Section 154, as the Assessing Officer lacks jurisdiction to decide the issue on merits, and the issue of disallowance under Section 80IC was not within the scope of Section 154 of the Act as the same was required to be established by long drawn process of reasoning, hence the instant petition.
8. Respondents No.2 and 3 have contested the petition by filing reply, wherein, preliminary objections regarding the maintainability of the writ petition on the ground that the petitioner has an alternate and efficacious remedy under the Act, have been raised. In addition thereto, it has been averred that the impugned rectification dated 29.03.2024 (Annexure P-
8) was validly passed under Section 154 of the Act. The rectification was necessitated by an apparent mistake in the appeal effect order dated 25.02.2020, which had granted relief to the petitioner despite the fact that the substantive issue of eligibility as an "eco tourism" project under Section 80IC of the Act was never adjudicated in petitioner's favour by the appellate ( 2025:HHC:16793) 5 authorities. The ITAT order dated 09.08.2019 (Annexure P-5) was limited to the issue of delayed filing of return and did not decide the core issue of eligibility on merits, as is evident from the subsequent order dated 12.09.2023 (Annexure P-7). Therefore, the Assessing Authority was well within its jurisdiction to rectify the mistake apparent from the record and exercise power under Section 154 of the Act.
9. We have heard learned counsel for the parties and have also gone through the record of the case carefully.
10. At the outset, it needs to be observed that aggrieved by the assessment order passed by the Assessing Authority, the petitioner had filed appeal before the Commissioner of Income Tax (Appeals), which, however, came to be dismissed and aggrieved thereby, he had approached the ITAT, which allowed the appeal filed by the assessee.
11. In the appeal so filed before the authorities below, the petitioner had questioned the rejection of its claim for deduction under Section 80IC of the Act and, therefore, it does not lie in the mouth of the respondents to urge that the petitioner had not questioned the substantive issue of eligibility as an "eco tourism" project under Section 80IC.
12. The filing of an appeal questioning the findings under Section 80IC pre-supposes that it is a case of party that it ( 2025:HHC:16793) 6 is eligible for deduction being an "eco tourism" project and further argued that such deductions have wrongly been denied in its favour. This is precisely, how even the respondents understood the order of the ITAT and accordingly gave effect to it, as is evident from the order dated 25.02.2020 (Annexure P-6). Therefore, it is too late in the day and rather the respondents are estopped from proceeding any further with this matter, given the fact that order dated 25.02.2020 (Annexure P-6) as passed by the Assistant Commissioner of Income Tax Circle, Shimla was never assailed by the respondents and, therefore, has attained finality.
13. That apart, the respondents are otherwise not legally entitled to carry out proceedings under Section 154 of the Act, given the fact that it was the respondents themselves who filed an application before the ITAT, Chandigarh for recalling of order dated 09.08.2019 (Annexure P-5), wherein, it was averred as under:-
Brief facts of the case and reason for filing of Miscellaneous Application Return declaring Nil income was e-filed by the assessee on 26.03.2011 after claiming deduction is mounting to Rs.1, 19.92.957/- for the A.Y. 2010 The same was processed u/s
143)(1) of the Act. The case was selected for Scrutiny through CASS. Assessee's claim of deduction u/s 80IC to the tune of Rs. 1,19.92.957/- being profit derived from hotel business was rejected by the A.O. considering the fact that business of ( 2025:HHC:16793) 7 assessee is not eligible for claim of deduction u/s 80IC, as the business activities of the assessee does not fall under Eco-tourism. Further the Assessing Officer also invoked the provisions of section 80AC, since assessee failed to furnish return u/s 139(1).
2. Aggrieved, the assessee preferred an appeal before Ld. CIT(A), Shimla at Salan, who adjudicated the matter as under:-
I have perused the facts of the case, the action of the A.O and the submissions of the appellant and relevant provisions of law. Since the appellant has failed to fulfill the basic requirement of law i.e. to submit the return of income in time, as provided in section 80AC, definitely it does not quality for deduction u/s 80IC of the Act. As such disallowance made by the A.O at Rs. 1,19,92.957/- is confirmed and appeal of the assessee is dismissed".
3. Against the orders of the Ld CIT(A), the assessee further filed appeal before Hon'ble ITAT and the Hon'ble ITAT decided the issue in favour of the assessee vide order dated 09.08.2019 in ITAT No. 301/ Chd/2015. Hon'ble ITAT while making decision in favour of the assessee has not discussed the very point of fact on the basis of which the assessing officer has denied the claim of deduction of the assessee company u/s 80IC of the income fax Act. In the present case the hotel run by the assessee is located in the most urbanized and prime location of the capital city and is not located in the area as per 'eco-tourism policy of the state of Himachal Pradesh. The hotel run by the assessee company is neither approved as eco-tourism hotel by the Department of tourism [HP] nor approved by the H.P. state Environment Protection & Pollution Control Board. The assessee has not been carrying on community based eco-tourism activity.
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4. In the present case Hon'ble ITAT has adjudicated the appeal on the issue of claim of deduction u/s 80IC of the Income Tax Act, 1961 in contravention to section 80AC of the Income Tax Act. However, the main reason for disallowance of claim of deduction under section 801C by the Assessing Officer was failure to prove Eco-tourism activities of the assessee which remained not discussed in the appeal order. Hence, there is a apparent mistake in the order of the Hon'ble ITAT.
5. Moreover, in the light of Hon'ble Uttarakhand High Court Judgment in the case of Anchal Hotel Pvt. Ltd. the assessee does not fulfill the conditions laid down to qualify a hotel under Eco-tourism. The Assessing Officer has made additions mainly holding that the activities of the assessee do not qualify to be involved in Eco-tourism. The assessee's contention tu obtain Objection Certificate from Himachal Pradesh State Environment Protection Pollution Board, to establish that it was carrying out eco fourism activity, as is in the present case, was not accepted by the Hon'ble ITAT in ITA No.418/Chd/2017 dated 30.05.2019 in the case of DCIT V/s M/s. Hotel Landmark wherein, appeal of the revenue was plawed on the issue of disallowance u/s 80tC by the AO, in favour, holding the decision of the Hon'ble Uttarakhand High Court in the case of Aanchal Hotels Pvt. Ltd.
6. In view of above stated facts there appears to be mistake apparent from the record and it is prayed that the same may be rectified."
14. However, the ITAT rejected the application vide order dated 12.09.2023 (Annexure P-7), by observing as under:-
"4. We have heard the rival contentions and perused the material available on the record. We ( 2025:HHC:16793) 9 find that the limited grievance which has been considered by the Coordinate Bench relates to rejection of claim of the assessee under section 80IC of the Act, for the reason that the returned income was filed late beyond the due date prescribed under section 139/1) of the Act, and thereafter, the matter was decided following the decision of the Coordinate Bench in case of M/s Symbiosis Pharmaceuticals P. Ltd. Vs. DCIT. Now, coming to the Revenue's contention that the deduction under section 80IC of the Act was denied by the AO not just for delayed filing of return of income but also for failure to prove eco-tourism activity of the assessee, we find that there is nothing on record that the said issue was raised before. the Coordinate Bench or anywhere emanating from the order so passed by the Coordinate Bench, in view of the same, where the matter is neither contested by either of the parties nor anywhere referred or brought to the notice of the Coordinate Bench. we do not see any mistake apparent on the face of the record in terms of the order passed by the Coordinate Bench.
5. In the result. Miscellaneous Application filed by the Revenue is dismissed."
15. It would be noticed that the respondents had sought the recalling of order precisely on the ground that the petitioner was not entitled to deduction under Section 80IC, as the hotel run by the assessee is located in the most urbanized and prime ( 2025:HHC:16793) 10 location of the capital city and is not located in the area as per "eco tourism" policy of the State of Himachal Pradesh.
16. It is further averred that the hotel run by the assessee company is neither approved as "eco-tourism" hotel by the Department of tourism of H.P nor approved by the H.P. State Environment Protection & Pollution Control Board and that the assessee has not been carrying on community based eco- tourism activity. But the application, as observed above, came to be rejected by the ITAT and the same has attained finality between the parties.
17. In such circumstances, it was thus not open to the respondents to have proceeded under Section 154 of the Act and rather this action of the respondents is not only without jurisdiction, but otherwise clearly amounts to judicial impropriety.
18. The order passed by the Assistant Commissioner of Income Tax dated 25.02.2020 (Annexure P-6) had attained finality and was thus binding upon the parties including the respondents. Similarly, the order dated 12.09.2023 passed by the ITAT (Annexure P-7) was also binding on all the authorities working under the jurisdiction of the ITAT.
19. The principal of judicial discipline requires that the orders of the higher appellate authorities should be followed ( 2025:HHC:16793) 11 unreservedly by the subordinate authorities. In our considered view, the action of the Assistant Commissioner of Income Tax in issuing order under Section 154 of the Act is clearly subversive to judicial discipline and amounts to gross impropriety. So long the aforesaid orders were operative and had attained finality, the Assessing Authority had no option but to give effect to the orders so passed and rather had already given effect to these orders, as noted in the order dated 25.02.2020 (Annexure P-6).
20. Judicial discipline requires decorum known to law which warrants that the appellate directions should be followed in the hierarchical system by the Courts/quasi-judicial authorities, which exist in this country. It is, therefore, necessary for each lower tier to accept loyally the decision of the higher tier. The judicial or quasi-judicial system only works if someone is allowed to have the last word and if the last word, once spoken is loyally accepted.
21. Once the order rendered by the ITAT and the earlier order passed by the Assistant Commissioner of Income Tax dated 25.02.2020 (Annexure P-6) were absolutely clear and unambiguous, then judicial comity, discipline, con-committal, pragmatisim, poignantly point, per force to observe constitutional proprietary and adhere to the decision so rendered by the authorities.
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22. It is settled proposition of law that when a subordinate authority refuses to implement the judgment of the Appellate Authority, the situation is akin to anarchy and will result in complete breakdown of the judicial/quasi-judicial stem.
23. It would be apt to refer to some of the decisions of the Hon'ble Supreme Court relating to the principles laid down with regard to the necessity for the lower authority to comply with the directions given by the Appellate Authority. Those decisions are as under:-
(iii) Union of India vs. Kamalkshi finance Corporation (1984) 2 SCC 324
(ii) Smt. Kausalya Devi Bogra & Ors. vs.Land Acquisition Officer, Aurangabad & Anr. (1992) Supp (1) SCC 443
(i) Tirupati Balaji Developers (P) Ltd. vs. State of Bihar (2004) 5 SCC 1
(iv) Kishore Samrite vs. State of UP & Ors. (2013) 2 SCC
398.
24. The principles that can be culled out from these judgments are as follows:-
(a) There are two important postulates of constituting the appellate jurisdiction:
(i) the existence of the relation of superior and inferior court; and
(ii) the power in the former to review decisions of the latter. The superior forum shall have jurisdiction to reverse, confirm, annul or modify the decree or order of the forum appealed against. In the event of a remand the ( 2025:HHC:16793) 13 lower forum shall have to rehear the matter and comply with such directions as may accompany the order of remand.
(b) The appellate jurisdiction inherently carries with it a power to issue corrective directions binding on the forum below and failure on the part of the latter to carry out such directions or show disrespect to appeal or to question the propriety of such direction would-it is oblivious-be destructive of the hierarchical system in the administration of justice.
(c) The principles of judicial discipline require 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 subordinate authority cannot and should not be the ground for not following the said directions.
(d) The directions of the appellate authority is certainly binding on the courts subordinate thereto. Judicial discipline required and decorum known to law warrants that appellate directions should be taken as binding and followed.
(e) willful refusal to implement the judgment of the appellate authority not only subvert the rule of law but also constitute judicial impropriety.
(f) Judicial discipline and propriety are two significant facets of administration of justice. Every court is obliged to adhere to these principles to ensure hierarchal discipline on the one hand and proper dispensation of justice on the other.
25. Reverting back to the facts of the present case, clearly respondent No.3 has indulged in mis-adventure in sitting over the orders passed by its higher authorities, which orders, as observed above, have already attained finality and thus the ( 2025:HHC:16793) 14 proceedings clearly are without jurisdiction and in such circumstances, the petitioner is well within its right to file the instant writ petition.
26. In view of the discussion made and for the reasons stated here-in-above, we find merit in the instant petition and the same is allowed. Consequently, order dated 29.03.2024 (Annexure P-8) passed by respondent No. 3 i.e., the Assistant Commissioner of Income Tax and order dated 03.01.2025 (Annexure P-10) passed by National Faceless Appeal Centre are quashed and set aside.
27. The writ petition is disposed of in the aforesaid terms, so also the pending applications, if any.
( Tarlok Singh Chauhan )
Judge
May 30, 2025 ( Sushil Kukreja )
(naveen) Judge