Full Judgment Text
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 5210-5216 OF 2002
C.K. Gangadharan & Anr. ....
Appellants
Versus
Commissioner of Income Tax, Cochin ...Respondent
J U D G M E N T
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
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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
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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
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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
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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
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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. "
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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.
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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
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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
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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.
(AFTAB ALAM)
New Delhi,
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July 21, 2008
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