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
JUDGMENT
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
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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 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
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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 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
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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. (AFTAB ALAM)
New Delhi, July 21, 2008
