Income Tax Appellate Tribunal - Chandigarh
M/S Gilco Exports Ltd., Chandigarh vs Acit, C-2(1), Chandigarh on 31 July, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH
BENCH 'A' CHANDIGARH
ीमती दवा संह, या"यक सद#य एवं, एवं ीमती अ नपण
ू ा& ग(ु ता, लेखा सद#य
BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM
आयकर अपील सं./ ITA No. 1244/CHD/2018
नधा रण वष / Assessment Year : 2013-14
M/s Gilco Exports Ltd., बनाम The ACIT,
SCO No. 91, Ist Floor, Indl. Area, VS Circle 2(1),
Phase-II, Chandigarh. Chandigarh.
थायी लेखा सं./PAN /TAN No: AABCG6774B
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Vineet Krishan
राज व क ओर से/ Revenue by : Smt. Chander Kanta, Sr.DR
सन
ु वाई क तार%ख/Date of Hearing : 08.07.2019
उदघोषणा क तार%ख/Date of Pronouncement : 31 .07.2019
आदे श/ORDER
PER DIVA SINGH Th e present appeal has been filed by the assessee wherein the corre ctness of the order dated 12.07.2018 of CI T( A)-4, Lu dhiana per taining to 20 13 -1 4 assess me nt ye ars is assailed on the following grounds :
1. That the order passed under section 250(6) by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana in Appeal No. 23/ROT (10277) CHD/ IT/CIT (A)-4/LDH/ 2016-17 dated 12.07.2018 is contrary to law and facts of the case.
2. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals) gravelly erred in upholding the action of the Id.
Assessing Officer who had made addition of Rs. 4,22,124/- on account of payment of EPF and ESI was made late, though the same was paid before the due date of filing of return.
ITA 1244/CHD/2018 A.Y. 2013-14 Page 2 of 21
3. That the appellant craves to add, amend or alter any ground of appeal before or at the time of hearing of appeal, with the permission of the Hon'ble Income Tax Appellate Tribunal, Chandigarh.
2. Th e ld . A R Mr. Vineet Kri shan appe aring on be half of the assessee submitted that the point at issue is fully covered in favour of assessee by virtue of the order of the jurisdictional High Court in the case of CIT Vs Hemla Emb roi de ry Mills (P ) Ltd ., 2 0 14 ) 366 I TR 1 6 7 (P& H) . Inviting attention to page 2 and 3 of the assessment order it was submitted that there is no dispute that the payments have been made late in terms of the specific Acts, however, the fact that payments have been made before the due date of filing of the return is also an accepted fact. It was his su bmission th at the I TA T Chand igarh Ben ch i n its latest or de r dated 29 .0 3.201 9 in I TA 1 2 43 /CHD /201 8 in the case of M/s Ne w Ti me Contr actor s an d Builder P.Ltd . Vs D CI T (copy filed) following the aforesaid decision of the jurisdictional High Court granted relief to the assessee on identical facts and circumstance s. It was his submission that there is no contrary decision of the jurisdictional High Court.
3. Th e ld. Sr .DR Ms . Ch ander Kanta inviti ng attenti on to para 4.1 of the impugned order submitted that the assessee admittedly had deposited an amount of Rs. 4,22,124/- in EPF and ESI late and the AO invoking provisions of Section ITA 1244/CHD/2018 A.Y. 2013-14 Page 3 of 21 36(1)(va) of the Act made an addition of the said amount. Reliance was placed on the impugned order in support of the argument that the assessee's claim was not allowable in law. Reference was made to the decision of the Gujrat High Court i n the case of CI T Vs G ujrat State Road Tr ansp or t Corp. 366 I TR 17 0 (Guj) w hi ch had been re lied upon by the CI T(A ). Accordingly, relying on the said decision, it was her submission that the assessee's appeal may be dismissed.
4. We have heard the rival submissions and perused the material available on record. Admittedly on facts, there is no dispute that as per the requirements of the specific Acts there was a delay in depositing the employees' contribution w hi ch had bee n collec ted by the asse ssee. Th e f act that the amounts were deposited before the filing of the return is also an admitted fact and is not in dispute. T h e C I T( A ) h a s upheld the additions made in the impugned order relying upon the decision of the Gujrat High Court in the case of CIT Vs G uj rat State Road Tr ansport Corp. 366 I TR 1 7 0 (G uj rat)) on which heavy reliance has been placed by the Revenue. The assessee as noted, relies on the order of the Co-ordinate Be nch d ated 29.03 .2019 i n t he case of New Time Contract ors and Builders where the issue was decided in the following manner :
ITA 1244/CHD/2018 A.Y. 2013-14 Page 4 of 21 (10) We have considered the submissions of both the parties and perused the material available on record. In the present case, it is an admitted fact that there was delay in depositing the employees' contribution of provident fund and ESIC. However, it is accepted by the AO that the deposit was made before filing of the return of income on 27.09.2013. (11) On a similar issue the Hon'ble Jurisdictional High Court in the case of CIT vs. Hernia Embroydery Mills-(p.) Ltd.(supra) held as under:
"The second proviso to section 43B of the Income-tax Act, 1961, omitted by the Finance Act, 2003, with effect from April 1, 2004, was clarificatory in nature and was to operate retrospectively. Thus, the assessee, for the assessment year 2003-04, was entitled to deduction in respect of the employer's and employees' contributions to the employees' State Insurance and provident fund as the contributions had been deposited prior to the filing of the return under section 139(1)."
So respectfully following the ratio laid down by the Hon'ble Jurisdictional High Court in the aforesaid referred to case, the impugned addition made by the AO and sustained by the Ld. CIT(A) is deleted. (12) In the result the appeal of the assessee is allowed." 4.1 A perusal of the above order passed by the Co-ordinate Bench shows that ultimately the assessee relies on the decision of the jurisdictional High Court as opposed to the decision rendered by a non jurisdictional High Court relied upon by the Revenue. In order to put the legal principles in perspective, it will not be out of place to refer to the well understood legal position that the decision of the Apex Court in terms of Article 141 of the Constitution of India, not only as a matter of judicial discipline but as a constitutional m a n d a t e i s a b i n d i n g p r e c e d e n t f o r a l l C o u r t s a n d Tr i b u n a l s in the country. The s ai d Arti cle in unamb iguous ter ms lays down that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. No doubt there is no such similar provision qua the High Courts, ITA 1244/CHD/2018 A.Y. 2013-14 Page 5 of 21 however, there can be no dispute or confusion on the impact of Article 227 of the Constitution which vests the High Court w i t h t h e p o w e r t o s u p e r v i s e t h e f u n c t i o n s o f t h e Tr i b u n a l s and authorities within its territorial jurisdiction. The imp ort and impact of the said Article has been addressed over the years in many landmark decisions. Thu s, to our understanding we believe that it is well understood and accepted that for any authority within its territorial jurisdiction subjected to its superintendence, the decision rendered by the High Court is a binding precedent to be followed. Th e said principle , we fi nd looki ng at the de cis ion arrived at in the impugned order perhaps needs to be addressed and re-iterated again. Reference in this context may be made to the decision rendered by the Apex Court in the case of East India Commercial Co. Ltd. V Collector of Customs, AIR 1962 (S.C) 1893 where it was held as far back as in 1962 "that the law declared by the highest court in the state is binding on authorities or Tribunals under its superintende nce and they cannot igno re it." For addressing the position of the High Court, reference may be made to the decision of the Apex Court in the case of Baradakanta Mishra v. Bhimsen Dixit AIR 1972 SC 2466 wherein the Court held that it would be anomalous to suggest that a Tribunal over wh i c h a H i g h C o u r t h a s s u p e r i n t e n d e n c e c a n i g n o r e t h e l a w ITA 1244/CHD/2018 A.Y. 2013-14 Page 6 of 21 d e c l a r e d b y i t a n d if a T r i b u n a l c a n d o s o , a l l t h e s u b o r d i n a t e c o u r t s c a n e q u a l l y d o s o , f o r t h e r e i s n o s p e c if i c p r o v i s i o n a s in respect of Supreme Court, making the law declared by the High Court binding on subordinate Courts. T he court f urther observed that it is implicit in the p o we r of supervision co nf erred on a superior T ribu n al th a t al l th e T ribun al s subjec t t o i t s s u p e r v i s i o n s h o u l d c o n f i r m t o t h e l a w l a i d d o wn b y i t . If t h e T r i b u n a l s d e f y t h e i r j u r i s d i c t i o n a l H i g h C o u r t , t h e r e wo u l d b e c o n f u s i o n i n t h e a d m i n i s t r a t i o n o f l a w. " At this point, we may also refer to the decision of the Allahabad High Court in K. N. Agarwal v. CIT [1991] 189 ITR 769 wherein the Court felt the need to address the import and necessity for the Assessing Officers to follow the judgements of the Court, it was obse rve d- "Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing off icer and since he acts in a quasi judicial capacity, the discipline of such functioning demands that he sh ould f ollo w the decision of the T ribu nal or the H igh Court, a s the case may be" . The Cou rt in clear unambiguous terms held addressing the Assessing Officer that, "He cannot ignore merely on the ground that the T ribunal's order is the subjec t matter of revision in the High Court or the High Court's decision is under appeal bef ore the Supreme Court." The Court hel d that, "Permittin g h im to t a k e s u c h a v i e w wo u l d i n t r o d u c e j u d i c i a l i n d i s c i p l i n e , wh i c h ITA 1244/CHD/2018 A.Y. 2013-14 Page 7 of 21 i s n o t c a l l e d f o r e v e n i n s u c h c a s e s . I t wo u l d l e a d t o a c h a o t i c situ ation".
4.2 In similar view, it would also be appropriate to refer to the decision of the Hon'ble Andhra Pradesh High Court in the case of State of A.P. v. CTO (1988) 169 ITR 564 (A.P) where the Court held that it is impermissible for the authorities and the Tri bu nal s t o i gnore 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 be ing taken to file an appeal. Addressing these oft repeated pleas, the Court went on to clearly opine a n d h o l d t h a t " If a n y a u t h o r i t y o r t h e T r i b u n a l r e f u s e s t o follo w any decision of the High Court on the above grounds, it wo u l d b e c l e a r l y g u i l t y o f c o m m i t t i n g c o n t e m p t o f t h e H i g h Court an d is l iab le to be proce eded again st. " Th e resor t to the decision of another High Court by the First Appellate Authority ignoring the decisions of the jurisdictional High Court, the Court held, runs counter to judicial discipline. A perusal of decisions would show that the constant thread which binds these decisions in similar category of decisions as per the constant refrain is that 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 ITA 1244/CHD/2018 A.Y. 2013-14 Page 8 of 21 jurisdiction of that High Court it may, at best, have persuasive value for other High Courts. Howeve r, as far as t h e I TA T i s c o n c e r n e d , a l o n e d e c i s i o n o f a n y H i g h C o u r t o f the country being higher in hierarchy in the scheme of things bec omes a bi nd in g precede nt for the ITA T w he rever the Ben ch of the I TA T may b e situate d. However, at the s ame ti me i n the face of the de cis ion of the jur isdic tional Hi gh Court no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Tribunal within their territorial jurisdiction are concerned. It is well settled that any such attempt will go counter to the ve ry doctrine of stare decisis and als o the various decisions of the S upre me Court w hi ch have interp re ted the scope and ambit thereof. The issue as far as the present proceedings are concerned, can be said to have been addressed by the said decision. In the facts of the present case, we have a decision of the jurisdictional High Court which stands in the eyes of law and we also have a decision of the non- j urisdiction al H igh Cou rt on wh ic h the ld . CI T(A ) has p laced reliance. Considering the fact that the assessee is within the territorial jurisdiction of the Hon'ble Punjab & Haryana H igh Cour t and the l d. CI T(A ) an authority also w ithin the territorial jurisdiction of the Hon'ble Punjab & Haryana High ITA 1244/CHD/2018 A.Y. 2013-14 Page 9 of 21 C o u r t , w e f i n d t h a t t h e C I T( A ) i n t h e f a c t s o f t h e p r e s e n t case has erred in relying upon the decision of the non- jurisdictional High Court ignoring the binding precedent available.
4.3 Reference may also be made to the decision of the Hon'ble Gujrat High Court in the case of Air Conditioning Specialists Pvt. Ltd. vs. Union of India & Ors. (1996)221 ITR 739 (Guj.) where the said issue came up for consideration. The Court in unambiguous terms addressing the settled position held that the Commissioner of Income Tax is a " Tri bu nal" subje ct to the s upe rv isory jurisdicti on of the High Court under Article 227 of the Constitution. Hence, he is b ound to obey the la w decl are d b y the Hi gh C ourt. The Cou rt in clear terms held that it was not open to the Commissioner of Income Tax to i gnore the deci sion of the jur isdi cti onal High Court or refuse to follow it on the ground that the verdict had not been accepted by the Department and that the matter was carried further and was pending before the Supreme Court. The Court held that when a point is concluded by a decision of the Court, all subordinate courts and i nferior Tr ib unals withi n the terri tory 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.
ITA 1244/CHD/2018 A.Y. 2013-14 Page 10 of 21 4.4 Similarly in CIT vs. G. Dalabhai & Co-226 ITR 922, the Hon'ble Gujarat High Court again recorded its anguish in the face of the obduracy of the officers and remarked - "Bef ore p a r t i n g wi t h t h e c a s e , w e n o t i c e w i t h a n g u i s h t h e l a n g u a g e used by the Income Tax Off icer in his assessment order saying that " with due respect to the decision of the Gujarat H igh Cou rt, I do n ot f ollo w th e sa me'. The Income Tax O fficer in not following the decision of the Gujarat High Court within whose supervisory territory he was functioning, is far from satisfactory. Th e Cour t held that "it is the least we can say. T he minimum decorum of the system of hierarchy th at T ribunals in the administration of justice and their judicial subordination to the High Court of the territory in wh i c h t h e y f u n c t i o n r e q u i r e s t h a t t h e y r e s t r a i n i n t h e u s e o f p r o p e r e x p r e s s i o n wh i l e f o l l o wi n g o r n o t f o l l o wi n g t h e d e c i s i o n of the High Court."
4 .5. Th e Apex Court w ay b ack in 1 984 add resse d in cler terms in Bishnu Ram Borah and Another vs. Parag Saikia & Ors. AIR 1984 SC 898 held that "the board of Revenue any o t h e r s u b o r d i n a t e t r i b u n a l i s s u b j e c t t o t h e wr i t j u r i s d i c t i o n o f the High Court under Article 226 of the Constitution. Just as the judgments and orders of the Supreme Court have to be f aithf ull y obeyed an d carried ou t th roughou t the terri tory of India unde r Article 142 of the Constitu tion, so should be the ITA 1244/CHD/2018 A.Y. 2013-14 Page 11 of 21 judgments and orders of the High Court by all inf erior courts and Tribunals subject to their s upervisory jurisdiction within the S tate under Arts. 226 and 227 of the Constitu tion. T he Board of Revenue cannot ref use to carry out the directions of the High Court. (1961) 1 SCR 474, Foll. (Para 12)"
4.6 In this genre, it may not be out of place to refer to the oft quoted decision of the Bombay High Court in the case of CIT Vs Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom) or alternately in the genre of cases being cited, it is necessary to also refer to this decision wherein the Court while enunciating the general principles which are in regard to precedents held that the decisions of the High Courts are binding on the subordinating Courts and authorities or Tribunals in its superintendence throughout the territories in relation to which it exercise jurisdiction. For ready reference, the relevant general principles are extracted hereunder :
(a) The law declared by the Supreme Court being binding on all courts in India, the decisions of the Supreme Court are binding on all courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. WTiat is binding is, of course, the ratio of the decision and not every expression found therein.
(b) The decisions of the High Court are binding on the subordinate courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not attend beyond its territorial jurisdiction.
(c) The position in regard to the binding nature of the decisions of a High Court on different Benches of the same court, may be summed as follows :
(i) A single judge of a High Court is bound by the decision of another single judge or a Division Bench of the same High Court. It would be ITA 1244/CHD/2018 A.Y. 2013-14 Page 12 of 21 judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked.
(ii) A Division Bench of a High Court should follow the decision of another Division Bench of equal strength or a Full Bench of the same High Court.
If one Division Bench differs from another Division Bench of the same High Court, it should refer the case to a larger Bench.
(iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions.
(c) the decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its territorial jurisdiction.
(d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court 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. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution.
4.7 Similar to the position discussed above with regard to the binding nature of judicial precedent, the Court's opinion on judicial discipline also need be referred to as held in the decision of the Supreme Court in the case of Union of India vs. Kamalakshi Finance Corporation Ltd. AIR 1992 SC 711 wherein the Court held that judicial discipline requires that decision of higher authority should to be followe d in the ITA 1244/CHD/2018 A.Y. 2013-14 Page 13 of 21 case of quasi-judicial authority and, therefore, a lower officer is bound to follow the decision of the higher authority e.g. Assessing Officer is bound to follow the decision of the Tribunal particularly so in the case of the same assessee. This principle requires that decisions of higher authorities su ch as Tri b unal sh ould be followe d b y lower off icers, viz ., CI T( A) and Assessi ng Officer . Eve n dec ision of the Tr ib unal, not a jur isdictional Tri bunal , is requi re d to be followed by the lower authority. Sometimes, an argument is made and also pu t on rec ord th at the Depar tme nt h as not ac cepted the de ci sion of the Tr i bun al and Ap peal has be en p re fer red to the H igh Cour t. The re sort to su ch language h as n ot met judicial approval. The Cou rt has held un less the order of the higher authority is stayed in appeal, it operates as a valid binding decision to the lower authority not only in the case of the same assessee but also in other cases where the same law point is involved. Reference may also be made to the speaking observation of the Apex Court in the said decision addressing the binding precedent of higher Courts where the Court fe lt the ne ed to hold that, "it cannot be too vehemently emphasized that it is of utmos t importance that in disposing of the quasi-judicial issues bef ore them, revenue off ic ers are bo und by th e dec ision of the appel late authorities. The Court wh i l e holding that the order of the Appellate ITA 1244/CHD/2018 A.Y. 2013-14 Page 14 of 21 Collector is binding on the Assistan t Collectors working within his jurisdiction we n t on to hold that; "the order of the T ribunal is binding upon the Assistant Collectors and the Appellate Collectors who f unction unde r the jurisdiction of the T ribunal. T he principles of judicial discipline require that the o r d e r s o f t h e h i g h e r a p p e l l a t e a u t h o r i t i e s s h o u l d b e f o l l o we d unrese rvedly by the subordinate authorities. The mere f act th at the order of the appellate authority is not "acceptable" to the de par tmen t" The Court held; "in itself an objectionable phrase - and is the subject matter of an appeal can f urnish no g r o u n d f o r n o t f o l l o wi n g i t u n l e s s i t s o p e r a t i o n h a s b e e n s u s p e n d e d b y a c o m p e t e n t c o u r t . If t h i s h e a l t h y r u l e i s n o t f o l l o we d , the result will only be undue harassment to a s s e s s e e a n d c h a o s i n a d m i n i s t r a t i o n o f t a x l a ws . "
4.8 Th e said pr inci ple has been re-iterate d over the ye ar s in a number of cases. Reference may also be made to the decision of the Apex Court in the case of Bhopal Sugar Industries vs. Income Tax Officer, Bhopal [AIR 1961 SC 182] wherein at page 622 it was held ;
(a) 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 Tribunal, yet held that no manifest injustice resulted from such refus al.
ITA 1244/CHD/2018 A.Y. 2013-14 Page 15 of 21 4.9 It may also be appropriate to refer to the recent decision dated 28.03.2017 of the Apex Court in CIT(A) No.2315/2007 in the case of DCIT Vs M/s Raghuvir Synthetics Ltd., Ahmedabad. A perusal of the said decision would show that the issue for consideration before the Apex Court in the said decision was whether a particular adjustment made by the AO u/s 143(1)(a) of the Act held to be an impermissible adjustment by the First Appellate Authority on account of the fact that the issue was debatable was correct or not. The view of the CI T( A) on further challenge by the Revenue be fore the I TA T and the Hi gh Cou rt w as consisten tly upheld. The is sue was car rie d in ap pe al bef ore the Apex Court. The Apex Court held that in view of the decisions of the jurisdictional High Court on the said issue available on the d a t e w h e n t h e d e c i s i o n o f t h e C I T( A ) , I TA T a n d t h e H i g h Court were considered, the issue could not be said to be debatable the adjustment made by the Assessing Officer in terms of the binding precedent of the jurisdictional High Court was held to be permissible. It was held that as far as the Courts and Tribunal within the territorial jurisdiction of Gujrat High Court were concerned in the face of the binding precedents available in the decisions of the Gujrat High Court itself available on the issue in the case of Ahmedabad Mfg. & Calico (P) Ltd . Vs CI T ( 19 86 ) 1 62 I TR 8 00 (Guj ) and ITA 1244/CHD/2018 A.Y. 2013-14 Page 16 of 21 A l e m b i c G l a s s I n d u s t r i e s L t d . V C I T ( 1 9 9 3 ) 2 0 2 I TR 2 1 4 ( G u j ) the issue could be said to be well settled and there was no debate. For the purposes of the present order, the ratio of the decisions is not relevant, however for the sake of completeness, it may be noted that these decisions held that the nature of expenditure being conte mplated by the Assessing Officer was a capital expenditure. In the circumstances, considering the fact that the registered office of the assessee in the facts of the said case was in the State of Gujrat, the Apex Court held that the law laid down by the Gujrat High Court in the aforesaid decisions was binding. Accordingly, the Court held that it can be said that as far as for an assessee within the jurisdiction of the Gujrat High Court, the issue could not be considered to be debatable. In v i e w t h e r e o f , t h e o r d e r s o f t h e C I T ( A ) , I TA T a s w e l l a s t h e decision of the Hon'ble Gujrat High Court were set aside as having been wrongly held that for an assessee, in the jurisdiction of the State High Court, the issue could be considered to be debatable. For ready reference, paras 11 and 12 of the aforesaid decision are e xtracted hereunder :
11. Even though it is a debatable issue but as Gujarat High Court in the case of Ahmedabad Mfg. & Calico (P) Ltd. (supra) had taken a view that it is capital expenditure which was subsequently followed by Alembic Glass Industries Ltd. V. CIT (supra) and the registered office of the respondent assessee being in the State of Gujarat, the law laid down by the Gujarat High Court was binding. (See Taylor Instrument Com. (India) Ltd. v. Commissioner of Income Tax - (1998) 232 ITR 771, Commissioner of Gift Tax v. J.K. Jain - (1998) 230 ITR 839, Commissioner of Income ITA 1244/CHD/2018 A.Y. 2013-14 Page 17 of 21 Tax v. Sunil Kumar - (1995) 212 ITR 238, Commissioner of Income Tax v. Thana Electricity Supply Ltd. - (1994) 206 ITR 727, Indian Tube Company Ltd. v.
Commissioner of Income Tax & Ors. - (1993) 203 ITR 54, Commissioner of Income Tax v. P.C. Joshi & B.C. Joshi - (1993) 202 ITR 1017 and Commissioner of Income Tax, West Bengal, Calcutta v. Raja Benoy Kumar Sahas Roy - (1957) 32 ITR 466). Therefore, so far as the present case is concerned, it cannot be said that the issue was a debatable one.
12. In view of the above submissions, in our considered view the order passed by the CIT (Appeals), the Income Tax Appellate Tribunal and also the order of the Gujarat High Court impugned herein cannot sustain and are set aside as they have wrongly held that the issue was debatable and could not be considered in the proceedings under section 143 (1) of the Act. 4.10 At this point, it may be salutary to again refer to the decision of Gujrat High Court in Air Conditioning Specialists (P) Ltd. v. Union of India and Ors. (1996) 221 ITR 739 (Guj. In the facts of the said case the assessee had filed writ of mandamus seeking quashing and setting aside of the order p assed b y CI T, Bar oda. The ir Lor dship s in the facts of the said case held ;
We may, however, add that it was not open to the second respondent (CIT) 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 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 Art. 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 jurisdiction. In Bhopal Sugar Industry vs. ITO (1960) 40 ITR 618 (SC) : AIR 1961 SC 182, the ITO (subordinate authority) refused to carry out the clear and unambiguous directions of the Tribunal (superior authority). Deprecating it, their Lordships of the Supreme Court observed :
ITA 1244/CHD/2018 A.Y. 2013-14 Page 18 of 21 "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 the appellate powers, the result will be chaos in the administration of justice".
A direct question arose before the Hon'ble Supreme Court in East India Commercial Co. Ltd. vs. Collector of Customs AIR 1962 SC 1893. In that case, proceedings were initiated by Collector of Customs against 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, a 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 a 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 Hon'ble Supreme Court was as to whether or not the decision rendered by a High Court would bind all subordinate Courts and inferior tribunals within its territorial jurisdiction. It was argued that there was no provision similar to Art. 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 power of High Court, Subbarao, J. (as he then was), observed:
"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 Art. 215every 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 Art. 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 Art. 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 the Court, and start proceedings in direct violation of it. If a tribunal can do so, all the ITA 1244/CHD/2018 A.Y. 2013-14 Page 19 of 21 subordinate Courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate Courts. 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 Padmanabha Seity vs. Papiah Seity AIR 1966 SC 1824, Kaushalya Devi vs. Land Acq. Officer, Aurangabad AIR 1984 SC 892, Bishnu Ram Bohra vs. Parag Saikia AIR 1984 SC 898).
In our opinion, submission of the 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 Textiles Works (supra) has been stayed by the Hon'ble Supreme Court. Hence, so far as this Court is concerned, the point is concluded. It is settled law that unless and until 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 Art. 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 matter was carried further and was pending before Supreme Court. In Baradakanta vs. Bhimsen Dixit AIR 1972 SC 2465, when a member of superior judicial service functioning as 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. (supra), the Court held :
"The conduct of the appellant in not following previous decision of the High Court is calculated to create confusion in the administration of law. It will undermine respect of law laid down by the High Court and impair the constitutional authority of the High Court".
ITA 1244/CHD/2018 A.Y. 2013-14 Page 20 of 21
14. In this connection we may emphasise that it would indeed be appropriate to keep in mind the following observations of Lord Diplock in Casell & Co. Ltd. vs. Broome & Anr. 1972 (1) All ER 801 :
"It is inevitable in a hierarchical system of Courts that there are decisions of the supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary. When I sat in the Court of Appeal I sometimes thought the House of Lords was wrong in overruling me. Ever 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 Courts and inferior tribunals 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 Textiles Works (supra), the order passed by him requires to be quashed and set aside."
(emphasis supplied)
5. Thu s, on a consideration of the position of law as repeatedly enunciated by the different High Courts as well as the Apex Cou rt , we hold th at the CI T( A) has erred i n ign oring the decision of the jurisdictional High Court on the issue and relying upon the decision of the non jurisdictional High Court when he was duty bound to follow the binding precedent available of the jurisdictional High Court in the case of Hemla Embroidery Mills P.Ltd. (supra) which decision stands in the eyes of law as on date. Accordingly, the grounds raised by the assessee is allowed. Said order ITA 1244/CHD/2018 A.Y. 2013-14 Page 21 of 21 was pronounced in the Open Court at the time of hearing itself.
6. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 31st July,2019.
Sd/- Sd/-
( अ नपण
ू ा& ग(ु ता ) ( दवा संह )
(ANNAPURNA GUPTA) (DIVA SINGH)
लेखा सद#य/ Accountant Member या"यक सद#य/ Judicial Member