Suresh Desai And Associates v. Commissioner Of Income-Tax.

R.C Lahoti, J.— This is a petition under Section 256(2) of the Income-tax Act, 1961 filed on 30.11.1993 seeking mandamus to the ITAT New Delhi to draw up a statement of case and refer the questions stated in the petition for the opinion of the High Court.

2. It is not necessary to state the questions of law on which the reference is being sought for looking at the nature of preliminary objection raised by the respondent to the maintainability of the petition, which is being disposed of by this order. The relevant facts only need be noticed in brief.

3. The petitioner assessee was a firm engaged in the business of production of motion pictures at Bombay. During the assessment year 1980-1981 the firm had produced a film by the name of SUHAAG. The muharat was performed on 12.1.1996 The production of the film was completed in or about October, 1979. The film was released on 16.11.1979 A search and seizure action conducted by the Directorate of Enforcement, was carried out at the business premises of the assessee firm and its partners etc under Section 132 of the Income-tax Act somewhere at the end of 1979. The original assessment order was passed on 25.3.1983 by the Assessing Officer at Bombay who. The assessee filed an appeal before the CIT (Appeals) Bombay who by order dated 3.10.1983, directed the assessing officer to afford the assessee an opportunity of hearing and recomplete the assessment in accordance with law. The Deputy Commissioner (Assessment) Bombay the passed the order of assessment. An appeal was preferred which was heard and decided by CIT(Appeals) Bombay on 19.12.1988 The assessee and the Revenue, both preferred appeals to the ITAT Delhi which were disposed of by order dated 29.10.1992 by ITAT, Delhi Bench, New Delhi.

4. The assessee filed an application under Section 256(1) of the Act setting out a few questions and seeking reference to the High Court, which application was also dismissed by ITAT Delhi forming an opinion that no referable question of law arose out of the order of the Tribunal.

5. In the abovesaid background of facts the present application has been filed before the High Court of Delhi at New Delhi.

6. A preliminary objection to maintainability of application has been raised on behalf of the Revenue submitting that the application does not lie before Delhi High Court. If at all, the application should have been filed before the High Court of Bom-bay, i.e the High Court exercising jurisdiction over the assessing authority having jurisdiction to assess the assessee at the relevant time.

7. On behalf of the petitioner, it is submitted that the appellate order of the Tribunal wherefrom the questions of law are being said to arise having been passed by the Tribunal at Delhi, reference application filed at New Delhi is competent. It was also submitted that addition the jurisdiction of the High Court of Delhi is spelled out additionally by the fact that on 8-12-92 the Commissioner of Income-tax-VIII has in exercise of the powers conferred by sub-section (1) of Section 127 of the Act, passed an order whereby the powers of the assessing officer qua the assessee have been conferred on an assessing officer at Delhi.

8. In our opinion, the question of territorial jurisdiction of the High Court who would be competent to hear a reference under Section 256(1) of the Act or an application under Section 256(2) of the Act is no more res integra in view of the law settled by a Division Bench decision of this Court in the case of Seth Banarsi Dass Gupta v. CIT (Central) (1978) 113 ITR 817. In that case, the assessee a Hindu Undivided Family resided and carried on business in Meerut. The assessment orders were passed by the Income-tax Officer at Meerut and appeals therefrom were heard by the Appellate Assistant Commissioner at Meerut. Further appeals were heard by Delhi Bench of ITAT. Later, a reference under Section 256 was made to the High Court of Delhi. A preliminary objection to the competence of the High Court of Delhi by reference to its territorial jurisdiction was raised on behalf of the Revenue which was upheld by the Division Bench. It was pointed out that there were no statutory provisions determining the proper High Court to which the reference should be made by the Tribunal. The Division Bench having analysed several provisions of Income-tax Act, held that the reference was maintainable only before the Allahabad High Court and not before High Court of Delhi. A perusal of the judgment, extensively dealing with all the relevant aspects, reveals the following reasonings given and observations made by the Division Bench:—

i) Section 64 which has relevance for determining jurisdiction of assessing officer by reference to place where assessee carries on business, profession or vocation, has no relevance for determining jurisdiction of appellate authority/tribunal;

ii) In considering the question as to the High Court to which a bench having jurisdiction over more than one State has to make a reference, the basis adopted for determining the jurisdiction of the Bench of the Tribunal would be more appropriate than the basis adopted for determining the jurisdiction of the ITO;

iii) It would be quite appropriate for the Bench to refer the question of law arising out of its own order in appeal to the High Court of the State from which the appeal had come.

iv) The suggestion that the place of the location of the Bench which heard and determines an appeal may be adopted as the basis for the determination of the jurisdiction of the High Court to which question of law arising out of the order should be referred cannot be accepted. Reference cannot be made to the High Court of Delhi merely because Delhi Bench of Tribunal situated within the territorial jurisdiction of High Court heard the appeal.

9. The above said view has been followed and reiterated again by a Division Bench of High Court of Delhi in Birla Cotton & Spg Mills v. CIT Rajasthan 123 ITR 354. It has been held that the Court to which the reference should be made would be the court having jurisdiction over the territory in which the office of the assessing officer was situate.

10. Not only we are bound to follow the view taken by two Division Benches of High Court of Delhi referred to hereinabove, which have held the field for about two decades, we too find ourselves in entire agreement with the view so taken.

11. There is yet another reason why the abovesaid view should prevail. The territorial jurisdiction of the ITAT extends over several States though each of such States has its own High Court. There is unanimity of opinion amongst different High Courts that decisions of the High Court are binding on the subordinate courts and authorities or Tribunal under its superintendence throughout the territory in relation to which it exercises jurisdiction. The binding authority does not extend beyond its territorial jurisdiction. The decision of one High Court is not a binding precedent for another High Court or for courts or Tribunals outside its territorial jurisdiction. (See- CIT v. Thana Electricity Supply Ltd, 206 ITR 727 Bombay; CIT v. Ved Parkash, 178 ITR 332 Pb & Har; State of A.P v. CTO, 169 ITR 564 A.P; CIT v. Mohan Lal Kansal, 114 ITR 583 P&H and Benoy Kumar v. I.T Commr AIR 1954 CAL 225).

12. In the case of CIT v. Thana Electricity Supply Ltd (supra), the Division Bench of Bombay High Court has held:

“A conjoint reading of sections 257 and 260 of the Income-tax Act, 1961, shows that the Act itself contemplates independent decisions of various High Courts on the question of law referred to them. It has visualised the possibility of conflict of opinion between different High Courts on the same question of law and has also made specific provision to take care of such a situation in suitable cases. In fact, in the light of the clear language of section 260 of the Act, every High Court is required to give its own opinion on a particular question of law. It should not follow, as a matter of course, only with a view to achieve uniformity in the matter of interpretation, the decision of another High Court, if such decision is contrary to its own opinion. Such action will be contrary to the clear mandate of section 260 of the Act. It will amount to abdication of its duty by the High Court to give “its decision” on the point of law referred to it.”

13. In CIT v. Ved Parkash (supra) the Division Bench of Punjab & Haryana High Court have held:

“as the decision of a High Court is binding only upon the authorities, Tribunals and Courts functioning within its territorial jurisdiction, no Tribunal beyond such jurisdiction can treat or hold as constitutionally invalid any provision of the Income-tax Act solely for the reason that the High Court of another State may have declared the said provision to be ultra vires. To grant such a power to the Tribunal or even to a High Court, in a reference under Section 256 of the Income-tax Act would again amount to conferring jurisdiction upon them to pronounce upon the constitutional validly of the provisions of the statute creating them, which would clearly be contrary to the well-settled position in law.”

“unless and until the Supreme Court or the High Court of the State in question, under Article 226 of the Constitution, declares a provision of the Act to be ultra vires, it must be taken to be constitutionally valid and treated as such.”

14. On account of the abovesaid doctrine of precedents and the rule of binding efficacy of the law laid down by the High Court within its territorial jurisdiction. The questions of law arising for decision in a reference should by determined by the High Court which exercises territorial jurisdiction over the situs of the assessing officer Else it would result in serious anomalies. An assessee affected by an assessment order at Bombay may invoke the jurisdiction of Delhi High Court to take advantage of the law laid down by it and suited to him and thus get rid of the law laid down to the contrary by the High Court of Bombay not suited to the assessee. This cannot be allowed.

15. We are, therefore, clearly of the opinion that in so far as the present case is concerned, the jurisdiction under sub section (1) and (2) of Section 256 vests in the High Court of Bombay and certainly not in the High Court of Delhi.

16. We find no merit in the submission of the learned counsel for the petitioner-as-sessee that by subsequent event the High Court of Delhi acquires jurisdictional competence to hear the petition.

17. As already stated the case in hand arises out of the assessment-year 1980-1981. It appears that for some assessment years (other than the assessment year 1980-1981) the assessment records of the petitioner have been ordered to be transferred from Bombay to Delhi sometime in the year 1988 which were pending at Bombay at that time. So far as the assessment for the year 1980-1981 is concerned, it had stood concluded. The said transfer has taken place under Section 127(1) of the Act. It is not that the jurisdiction to make assessment in respect of matters arising at Bombay has been conferred or transferred to Delhi by reference to territory or persons or classes of persons or income or class of income or cases or classes of cases as contemplated by Section 120 of the Act. Such transfer of assessment cases for a few years other than the year in question has no relevance and no bearing on the territorial jurisdic-tional competence of the High Court of Delhi to hear the present application under Section 256(2) of the Act.

18. For the foregoing reasons the petition is dismissed though without any order as to the costs. Needless to say the petitioner's right to invoke the jurisdiction of the competent High Court by filing an appropriate application under Section 256(2) is not taken away by this dismissal.