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Dlf Universal Ltd. v. Commissioner Of Income-Tax
Factual and Procedural Background
The assessee challenged an order dated March 30, 2007 of the Income-tax Appellate Tribunal, Delhi Bench “B” in I.T.A. No. 3622/Del/1995 for assessment year 1992-93. The central factual dispute on the merits was whether, on revaluation of the assessee's stock-in-trade, the Assessing Officer (AO) was justified in making an addition of Rs. 6.01 crores.
A closely identical issue had arisen earlier for the assessee in assessment year 1985-86. In that earlier year the AO made an addition which the Commissioner of Income-tax (Appeals) set aside by order dated October 29, 1990. The Revenue appealed and the Tribunal, in Appeal No. 873/Del/1991 (relevant to 1985-86), dismissed the Revenue's appeal on January 31, 2001, relying on the Commissioner's reasons.
For 1992-93, the AO again made an addition unfavourable to the assessee; the Commissioner dismissed the assessee's appeal on March 10, 1995; the assessee appealed to the Tribunal. Before the Tribunal the assessee argued that the Tribunal should follow its earlier decision for 1985-86. The Tribunal, however, declined to follow the earlier decision and rejected the contention on three grounds: (1) the earlier decision had taken into account an amendment to section 45(3) effective from April 1, 1988 (inapplicable to 1985-86); (2) some decisions relied upon in the present matter were not cited earlier; and (3) the issue was “sensitive” and had not been deliberated upon by the earlier Tribunal.
Legal Issues Presented
- Whether the Income-tax Appellate Tribunal was justified in differing with the view taken by a co-ordinate Bench of the Tribunal in respect of the same assessee for the assessment year 1985-86?
- Whether, on the merits, the Assessing Officer was justified in making an addition of Rs. 6.01 crores on revaluation of the assessee's stock-in-trade for assessment year 1992-93?
Arguments of the Parties
Assessee's Arguments
- The assessee urged that the issue raised for assessment year 1992-93 was identical to that decided in assessment year 1985-86, and thus the Tribunal should follow its earlier decision for 1985-86 in the present year.
Other Parties
The opinion does not contain a detailed account of the Revenue's or the Commissioner's legal arguments on the present appeal before the High Court beyond the factual and procedural history described above.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Union of India v. Shri P.D. Sharma, [2004] III AD (Delhi) 131 | That a co-ordinate Bench of the Tribunal is bound by an earlier view taken by a co-ordinate Bench; if it disagrees it must refer the matter to a larger Bench. | The Court relied on this decision to state the settled position that one Bench cannot take a contrary view to a co-ordinate Bench and must refer the matter to a larger Bench instead of differing. |
| Sundarjas Kanyalal Bhatija v. Collector, Thane, Maharashtra, [1990] 183 ITR 130 (SC); (1989) 3 SCC 396 | Judicial decorum/legal propriety requires that when a Bench does not agree with a decision of a co-ordinate Bench, the matter should be referred to a larger Bench; failure to do so subverts the judicial process. | The Court cited this Supreme Court authority to underline the requirement of referring conflicts between co-ordinate Benches to a larger Bench as a principle of judicial discipline and propriety. |
| Mahadeolal Kanodia v. Administrator-General Of West Bengal, AIR 1960 SC 936 | Earlier Supreme Court authority relied upon to support the principle that disagreement between Benches must be referred to a larger Bench. | The Court noted that the Sundarjas decision relied upon this earlier case; it was referenced as part of the chain of Supreme Court authority supporting the rule on bench conflicts. |
| Lala Shri Bhagwan v. Ram Chahd, AIR 1965 SC 1767 | Earlier Supreme Court authority relied upon to support the principle that disagreement between Benches must be referred to a larger Bench. | The Court observed that the Sundarjas decision also relied upon this earlier case, and used the chain of authorities to reinforce the requirement of referring conflicting views to a larger Bench. |
Court's Reasoning and Analysis
The Court first admitted the appeal and framed a substantial question of law focussing on whether the Tribunal was justified in differing with a co-ordinate Bench's view. The Court recited the factual and procedural history: the AO's addition in 1992-93, the earlier identical issue in 1985-86 where the Commissioner set aside the addition and the Tribunal subsequently dismissed the Revenue's appeal relying on the Commissioner's reasons.
The Tribunal in the present year refused to follow its earlier decision on three stated grounds: (1) that the earlier decision considered an amendment to section 45(3) effective from April 1, 1988 and thus allegedly inapplicable to 1985-86; (2) that some decisions relied upon in the present appeal were not cited previously; and (3) that the issue was “sensitive” and had not been deliberated upon by the earlier Tribunal.
The Court proceeded to state the settled legal principle—supported by the cited authorities—that a co-ordinate Bench cannot take a contrary view to an earlier co-ordinate Bench and, if it differs, the correct course is to refer the matter to a larger Bench. The Court relied on Union of India v. Shri P.D. Sharma and the Supreme Court authorities in Sundarjas Kanyalal Bhatija (which in turn relied on Mahadeolal Kanodia and Lala Shri Bhagwan) to underline that this is a matter of judicial propriety and discipline.
Applying that principle to the facts recited, the Court answered the substantial question in the negative (i.e., the Tribunal was not justified in differing with the earlier co-ordinate Bench) and remitted the matter to the Tribunal for fresh consideration in accordance with law.
Holding and Implications
Core Ruling: The Court answered the substantial question in the negative and remitted the matter to the Income-tax Appellate Tribunal for fresh consideration in accordance with law.
Implications:
- The Tribunal should not have declined to follow the earlier co-ordinate Bench's decision by itself; where a Bench disagrees with an earlier co-ordinate Bench, the appropriate step is to refer the conflict to a larger Bench rather than record a contrary view.
- The present case is remitted to the Tribunal for fresh consideration consistent with the binding principle on co-ordinate Benches. The opinion does not purport to decide the substantive tax question (the correctness of the Rs. 6.01 crore addition on revaluation) and does not create a new precedent beyond reaffirming the procedural principle on bench conflicts.
Madan B. Lokur, J.:— The assessee is aggrieved by an order dated March 30, 2007 passed by the Income-tax Appellate Tribunal, Delhi Bench “B” in I.T.A No. 3622.Del/1995 relevant for the assessment year 1992-93.
2. After hearing learned counsel for the parties, we admit this appeal and while dispensing with the filing of paper book, we frame the following substantial question of law for consideration:
“Whether the Income-tax Appellate Tribunal was justified in differing with the view taken by a co-ordinate Bench of the Tribunal in respect of the same assessee for the assessment year 1985-86 ?”
3. The question that arose on the merits of the case before the Tribunal was whether on revaluation of the stock-in-trade of the assessee, the Assessing Officer was justified in making an addition of Rs. 6.01 crores. An identical issue had arisen in the case of the assessee, though in respect of a different amount for the assessment year 1985-86. In respect of that assessment year, the Assessing Officer made an addition, but that was set aside by the Commissioner of Income-tax (Appeals) by a detailed order dated October 29, 1990.
4. Aggrieved by the order passed by the Commissioner of Income-tax (Appeals), the Revenue preferred an appeal which was heard and dismissed by the Tribunal on January 31, 2001, being Appeal No. 873.Del/1991 relevant for the assessment year 1985-86.
5. The Tribunal did not give its own reasons while disposing of the appeal of the Revenue but relied upon the basis and reasons given by the Commissioner, which it found to be sound and convincing, so as not to warrant any interference with the order passed by the Commissioner.
6. When the same issue arose in the present assessment year 1992-93, the Assessing Officer again took a view which was not favourable to the assessee with the result that the assessee preferred an appeal before the Commissioner, but by an order dated March 10, 1995, the Commissioner dismissed the appeal of the assessee.
7. Being aggrieved, the assessee preferred an appeal before the Tribunal and one of the points urged by the assessee was that since the issue raised in 1985-86 was identical, the order passed by the Tribunal in respect of that year should be followed by the Tribunal in this year also. The Tribunal considered that contention in paragraphs 30 to 32 of its order and rejected it on three grounds: firstly, that on the earlier occasion the Commissioner had taken into consideration an amendment to section 45(3) of the Act which came into force from April 1, 1988, which was, therefore, not applicable in respect of the assessment year 1985-86; secondly, that some of the decisions cited before the Tribunal in the present matter were not cited on the earlier occasion; thirdly, that the issue raised was “sensitive” and was not deliberated upon by the Tribunal on the earlier occasion. On this basis, the Tribunal declined to follow the order passed in respect of the assessment year 1985-86.
8. It is now well-settled that when one Bench of the Tribunal takes a view, then another Bench of the Tribunal cannot pass a contrary order but must, if it disagrees with that view, have the conflict resolved by referring the matter to a larger Bench. This is not only a matter of judicial propriety but also a matter of judicial discipline. In Union of India v. Shri P.D Sharma, [2004] III AD (Delhi) 131, a Division Bench of this court observed as follows:
“It is now trite Jaw that a co-ordinate Bench of the Tribunal cannot take a view contrary to a view expressed by earlier Bench. It is bound by the judgment of the co-ordinate Bench rendered earlier. In case it differs from the decision of the earlier Bench, the only course open to it to is to refer the matter to a larger Bench.”
9. In Sundarjas Kanyalal Bhatija v. Collector, Thane, Maharashtra, [1990] 183 ITR 130 (SC); (1989) 3 SCC 396, the Supreme Court held as follows (page 137):
“The judicial decorum and legal propriety demand that where a learned single judge or a Division Bench does not agree with the decision of Bench of co-ordinate jurisdiction, the matter shall be referred to a larger Bench. It is a subversion of judicial process not to follow this procedure.”
(emphasis supplied)
10. In arriving at this conclusion, the Supreme Court relied upon two of its earlier decisions, namely, Mahadeolal Kanodia v. Administrator-General Of West Bengal , AIR 1960 SC 936 and Lala Shri Bhagwan v. Ram Chahd, AIR 1965 SC 1767.
11. Under these circumstances, we answer the question in the negative and remit the matter to the Tribunal for a fresh consideration in accordance with law.
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