Full Judgment Text
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PETITIONER:
THE BHOPAL SUGAR INDUSTRIES LTD.
Vs.
RESPONDENT:
THE INCOME-TAX OFFICER, BHOPAL
DATE OF JUDGMENT:
02/09/1960
BENCH:
DAS, S.K.
BENCH:
DAS, S.K.
HIDAYATULLAH, M.
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)
ACT:
Directions by superior Tribunals-If could be refused to be
carried out-Principles of administration of justice.
HEADNOTE:
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.
JUDGMENT:
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 appellant.
K. N. Rajagopal Sastri and D. Gupta, for the respondent.
1960. September 2. The Judgment of the Court was delivered
by
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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 sugar-
cane 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
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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 sugar-
cane 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. 1-7-
9 per maund. This resulted in an agricultural income of Rs.
29,360, which the Appellate Assistant Commissioner allowed
to be deducted from the total income of the appellant com-
pany.
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
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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. 1-4-
6 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 fail ".
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
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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 parties.
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.
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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 farms-
to 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 Tribunal.
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 respond-
ent ; accordingly, he dismissed the application for the
issue of a writ made by the appellant company.
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
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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-’
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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 im-
pugned 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.
Appeal allowed.
(1) A.I.R. 1954 Cal 285.
(2) A.I.R. 1954 Nag. 82.
(3) A.I.R. 1955 Assam 201.
482
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