National Textile Corporation Ltd. (M.P) v. Commissioner Of Income-Tax

The Judgment of the Court was delivered by

A.M Sapre, J.:— This is an income-tax reference made by the Tribunal at the instance of the assessee under section 256(1) of the Income-tax Act, 1961, which arises out of an order dated December 27, 1996, passed by the Tribunal in I.T.A No. 778.Ind/1992 to answer the following questions of law:

“(i) Whether the Tribunal was justified and/or had the jurisdiction to ignore the decision of the High Court rendered in MCC No. 65 of ‘1993 decided on August 20, 1996 (CIT v. Premier Industries P. Ltd.’ [1997] 227 ITR 282 (MP)) on the ground that it does not lay down the correct principles of law on the issue involved therein?

(ii) Assuming the Tribunal was right in their observations, even then what was the procedure which the Tribunal should have followed in such eventuality?”

2. The facts necessary to answer the questions need mention in brief. As a matter of fact, for answering the questions referred, the facts relating to the merits of the case out of which this reference arises need not be taken note of in detail because no specific question of law on the merits of the controversy is referred to this court by the Tribunal. The assessee (appellant herein) is a public sector undertaking. They filed the return of their income for the assessment year 1989-90 declaring a loss of Rs. 23,29,51,718. The Assessing Officer, while processing the return, made adjustment in relation to certain items aggregating to Rs. 4,88,64,647 and worked out the loss at Rs. 18,40,87,071. Accordingly, an intimation was sent to the assessee under section 143(1)(a) ibid on September 30, 1991, wherein the Assessing Officer imposed an additional tax of Rs. 51,30,751 as per section 143(1A) of the Act. The assessee then filed an application under section 154 of the Act seeking rectification of the order of the Assessing Officer in relation to a prima facie adjustment made therein. The Assessing Officer, accordingly, considered the objections and passed an order dated March 31, 1992, under section 154 ibid whereby he revised the loss at Rs. 19,76,12,164 and, accordingly, charged an additional tax of Rs. 3,52,99,554.

3. The assessee felt aggrieved filed an appeal to the Commissioner of Income-tax (Appeals), who by order dated July 23, 1992, in substance allowed the appeal and held that since the net result after making adjustment was a loss and, hence, no additional tax was payable by the assessee. The Commissioner of Income-tax (Appeals), accordingly, deleted the additional tax imposed by the Assessing Officer under section 143(1A) of the Act.

4. The Revenue (Commissioner of Income-tax) felt aggrieved of the order of the Commissioner of Income-tax (Appeals), dated July 23, 1992, filed an appeal to the Tribunal. In this appeal, it was argued by the Revenue that Parliament has amended section 143(1A) by the Finance Acts, 1992 and 1993, and in particular clause (a) of sub-section (1A) of section 143, with retrospective effect from April 1, 1989, wherein it is, inter alia, provided that if loss declared in the return has been reduced as a result of a prima fade adjustment or where a prima facie adjustment has the effect of converting that loss into an income then the Assessing Officer shall calculate an additional tax equal to 20 per cent, of the tax that would have been chargeable on the amount of the prima facie adjustment as if it had been the total income of the assessee. The counsel for the Revenue, thus, by placing reliance on this retrospective amendment made in section 143(1 A) contended that imposition of the additional tax by the Assessing Officer was justified and that of the order of the Commissioner of Income-tax (Appeals) directing deletion of the additional tax was bad. He, thus, urged for setting aside of the order of the Commissioner of Income-tax (Appeals) and that of restoration of the order of the Assessing Officer. The counsel for the assessee, in reply, while supporting the order of the Commissioner of Income-tax (Appeals), contended that the view taken by the Commissioner of Income-tax (Appeals) is in conformity with the law laid down by the jurisdictional High Court, i.e, the Madhya Pradesh-High Court in the case of CIT v. Premier Industries Pvt. Ltd., MCC No. 65 of 1993, decided on August 20, 1996, ([1997] 227 ITR 282 (MP)) wherein the High Court on interpretation of section 143(1A) has taken the similar view and, hence, the appeal filed by the Revenue be dismissed by upholding the order of the Commissioner of Income-tax (Appeals) which does not call for any interference. It was also urged that since the Commissioner of Income-tax (Appeals) did not decide the appeal on the merits on other prima facie adjustment made by the Assessing Officer and, hence, the case be remanded.

5. The Tribunal, by order out of which this reference arises, accepted the contention of the Revenue and ignoring the law laid down by the jurisdictional High Court of the Madhya Pradesh rendered in Premier Industries Pvt. Ltd.'s case, [1997] 227 ITR 282 (MP) held that since the High Court has not taken into account the retrospective amendment made in section 143(1A) of the Act, hence the decision cannot be relied on. The Tribunal then allowed the appeal filed by the Revenue. This is what the Tribunal held:

“6. We have minutely gone through the decision of the hon'ble High Court of Madhya Pradesh in Premier Industries Pvt. Ltd. [1997] 227 ITR 282 (MP). The parties did not bring to the notice of the hon'ble High Court that retrospective amendment with effect from April 1, 1989, has been brought about by the Finance Act, 1993, by which clause (a) in sub-section (1A) of section 143 has been substituted and Explanation thereunder has been omitted retrospectively with effect from March 1, 1989. In Modi Cement Ltd. [1992] 193 ITR 91 (Delhi) and Indo Gulf Fertilizers (supra), their Lordships of the Delhi and the Allahabad High Courts had held that the provisions of section 143(1 A) of the Act as these were worded, were not applicable in loss cases. The amended provisions as contained in section 143(lA)(a)(ii)(B) provide that where the loss declared in the return is reduced or is converted into income as a result of a prima facie adjustment, the Assessing Officer shall calculate an additional income-tax equal to 20 per cent, of the tax that would have been chargeable on the amount of the adjustments as if it had been the total income of the assessee. In view of the amended provisions retrospectively with effect from April 1, 1989, the decision of the Commissioner of Income-tax (Appeals) is not sustainable. We, therefore, set aside his order and restore the order of the Assessing Officer imposing the additional income-tax.”

(emphasis1 supplied)

6. It is against this order, the assessee felt aggrieved and sought reference to this court under section 256(1) of the Act. In the meantime, the assessee made an application under section 254(2) ibid seeking rectification of order contending that the Commissioner of Income-tax (Appeals) has not decided the appeal on the merits on other points. The Tribunal, however, acceded to the request of the assessee and, accordingly, made reference to this court under section 256(1) of the Act on the aforementioned two questions of law for answer by this court.

7. Heard Shri G.M Chaphekar, senior advocate with Shri D.S Kale, advocate for the assessee and Mr. R.L Jain, senior advocate with Kum. Veena Mandlik, advocate for the Revenue.

8. Learned counsel for the assessee contended that the Tribunal, while allowing the appeal filed by the Revenue, erred in not placing reliance on the decision of the jurisdictional High Court (i.e, Madhya Pradesh High Court) rendered in the case of CIT v. Premier Industries Pvt. Ltd. —MCC No. 65 of 1993 decided on August 20, 1996 ([1997] 227 ITR 282 (MP)). According to the learned counsel, the decision of the jurisdictional High Court (MP) was binding on the Tribunal (M.P Bench) so long as it is holding the field. Learned counsel urged that it was not proper on the part of the Tribunal to ignore and/or decline to follow the decision of the Madhya Pradesh High Court on the ground that the High Court, while deciding the case, did not take note of certain amendments made in the Income-tax Act (i.e, in section 143(1A)). Learned counsel urged that the judicial proprietary demands that all subordinate courts/tribunals exercising powers under the supervision of the jurisdictional High Court are required to follow the decision of the High Court in letter and spirit and without making any adverse comments or finding fault with such decision. Learned counsel submitted that the proper course to deal with such situation, if it really arises in any case, is to place reliance on such decision by the Tribunal and leave the aggrieved party to pursue the matter to the High Court in appeal or reference, as the case may be, for reconsideration by a larger Bench of the concerned High Court. In reply, the learned counsel for the Revenue supported the reasoning of the Tribunal and urged for answering the question against the assessee.

9. Having heard the learned counsel for the parties and having perused the records of the case, we are inclined to answer the question in favour of the assessee and against the Revenue as indicated infra.

10. At the outset, we may observe that the questions referred to this court for answer do not relate to the merits of the controversy which was before the Assessing Officer, the Commissioner of Income-tax (Appeals) and the Tribunal. In other words, we are not called upon to examine the merits and demerits of the case, namely, whether the Tribunal was justified in holding that the assessee was not liable to pay the additional tax after adjusting the loss in accordance with the provisions of section 143(1A) of the Act or what is the true interpretation of section 143(1 A) of the Act and; whether the assessee (appellant) is liable to pay any additional tax in proceedings initiated by the Assessing Officer under section 143(1A) ibid if the net result after making all prima facie adjustments in the return of income work out to loss or whether decision rendered by this court in MCC No. 65 of 1993 (CIT v. Premier Industries P. Ltd., [1997] 227 ITR 282 (MP)) lays down correct principle of law or not? It is for the reason that, firstly, no specific question of law on the merits is referred to this court by the Tribunal, while making the reference. Secondly, in the absence of any question referred on any of these issues, the High Court cannot examine the issue on the merits in its limited reference jurisdiction under section 256(1) of the Act. That apart, no prayer was made either by the assessee or the Revenue for calling additional statement or questions from the Tribunal by taking recourse to the provisions of section 256(1) and/or (2) of the Act. Indeed, looking to the controversy that was debated before the Tribunal in an appeal filed by the Revenue out of which this reference arises and in the light of the finding recorded by the Tribunal, the reference could have been made by the Tribunal on all questions relating to the merits in addition to the questions referred. It was also possible because once the finding on the merits is recorded one way or the other then in such event, the Tribunal gets jurisdiction to refer the question to this court under section 256(1) of the Act for its answer on the merits. Likewise, when the Tribunal declines to make the reference under section 256(1) of the Act to this court as prayed by one party then an application can be made to this court under section 256(2) of the Act praying for direction to the Tribunal to refer the questions which, according to an aggrieved party arise out of the order of the Tribunal. These remedies though available, were not resorted to at any stage with the result that this court in its limited reference jurisdiction under section 256(1) of the Act is unable to embark upon any other issue except to confine its inquiries to the questions referred by the Tribunal.

11. Though, we may refrain ourselves from examining any other questions which, in our view, otherwise arise out of the order of the Tribunal but at the same time, we are constrained to observe that care should always be taken by the parties and in particular by the Revenue to ensure that reference is made on all referable questions of law arising out of the order of the Tribunal so that all the questions are answered in one reference by the High Court.

12. Coming now to question No. 1, which reads as under:

“(i) Whether the Tribunal was justified and/or had the jurisdiction to ignore the decision of the High Court rendered in MCC No. 65 of 1993 decided on August 20, 1996 (CIT v. Premier Industries P. Ltd., [1997] 227 ITR 282 (MP)) on the ground that it does not lay down the correct principles of law on the issue involved therein?”

13. In our view, this question was the subject-matter of judicial debate in several cases before the Supreme Court and the High Court in past. We can, therefore, say that this issue is no longer res integra and answered by the judicial decisions.

14. It is apposite to refer at the outset, as to what Salmond—a great author on Legal Jurisprudence—has said on the subject under consideration in his celebrated book on Jurisprudence. In the twelfth edition, at page 27, the author has commented on the subject “The hierarchy of authority” as under:

“28. The hierarchy of authority.— The general rule is that a court is bound by the decisions of all courts higher than itself. A High Court judge cannot question a decision of the court of appeal, nor can the court of appeal refuse to follow the judgments of the House of Lords. A corollary of the rule is that courts are bound only by the decisions of higher courts and not by those of lower or equal rank. A High Court judge is not bound by a previous High Court decision, though he will normally follow it on the principle of judicial comity, in order to avoid conflicts of authority and to secure certainty and uniformity in the administration of justice. If he refuses to follow it, he cannot Over rule it; both decisions stand and the resulting antinomy must wait for a higher court to settle.”

15. In one leading decision of the Supreme Court in Tirupati Balaji Developers P. Ltd. v. State of Bihar, (2004) 5 SCC 1 : AIR 2004 SC 2351, their Lordships, speaking through R.C Lahoti J. (as his Lordship then was and later C.J.I), explained in subtle way as to what should be the role of court as against their superior court under whom they function. It was a case where their Lordships were dealing with the role of the High Court qua the Supreme Court. A perusal of this decision would go to show that their Lordships, after examining the issue in the context of constitutional provisions and various judicial precedents, explained the role of courts qua their appellate court while deciding the cases. It is useful to refer to some of the apt observations of the Supreme Court contained in paras. 8 and 9 of the decision, which, in our view, must always be kept in mind by judges while deciding any ease and in particular when such situation arises before them (page 235 of 2004 AIR):

“8. Under the constitutional scheme as framed for the judiciary, the Supreme Court and the High Courts both are courts of record. The High Court is not a court ‘subordinate’ to the Supreme Court. In a way the canvass of judicial powers vesting in the High Court is wide inasmuch as it has jurisdiction to issue all prerogative writs conferred by article 226 of the Constitution for the enforcement of any of the rights conferred by Part III of the Constitution and for any other purpose while the original jurisdiction of the Supreme Court to issue prerogative writs remains confined to the enforcement of fundamental rights and to deal with some such matters, such as Presidential election or inter-State disputes which the Constitution does not envisage being heard and determined by High Courts. The High Court exercises power of superintendence under article 227 of the Constitution over all subordinate courts and tribunals; the Supreme Court has not been conferred with any power of superintendence. If the Supreme Court and the High Courts both were to be thought of as brothers in the administration of justice, the High Court has larger jurisdiction but the Supreme Court still remains the elder brother. There are a few provisions which give an edge, and assign a superior place in the hierarchy, to the Supreme Court over the High Courts. So far as the appellate jurisdiction is concerned, in all civil and criminal matters, the Supreme Court is the highest and the ultimate court of appeal. It is the final interpreter of the law. Under article 139A, the Supreme Court may transfer any case pending before one High Court to another High Court or may withdraw the case to itself. Under article 141, the law declared by the Supreme Court shall be binding on all courts, including High Courts, within the territory of India. Under article 144, all authorities, civil and judicial, in the territory of India—and that would include High Courts as well—shall act in aid of the Supreme Court.

9. In a unified hierarchical judicial system which India has accepted under its Constitution, vertically the Supreme Court is placed over the High Courts. The very fact that the Constitution confers an appellate power on the Supreme Court over the High Courts, certain consequences naturally flow and follow. Appeal implies in its natural and ordinary meaning the removal of a cause from any inferior court or tribunal to a superior one for the purpose of testing the soundness of decision and proceedings of the inferior court or tribunal. The superior forum shall have jurisdiction to reverse, confirm, annul or modify the decree or order of the forum appealed against and in the event of a remand the lower forum shall have to rehear the matter and comply with such directions as may accompany the order of remand. The appellate jurisdiction inherently carries with it a power to issue corrective direction binding on the forum below and failure on the part of latter to carry out such directions or show disrespect to or to question the propriety of such directions would—it is obvious—be destructive of the hierarchical system in administration of justice. The seekers of justice and the society would lose faith in both.”

16. In the case reported in East India Commercial Co. Ltd. v. Collector of Customs, AIR 1962 SC 1893, the question arose before the Supreme Court as to whether an administrative tribunal can ignore the law declared by the highest court in the State, i.e, High Court and initiate proceedings in direct violation of the law so declared? Answering the question in the negative, their Lordships ruled that the Tribunal cannot ignore the law laid down by the High Court on a particular issue. Their Lordships, speaking through Subba Rao (as his Lordship then was and later C.J.I), held as under (at pages 1904 and 1905):

“The Division Bench of the High Court held that a contravention of a condition imposed by a licence issued under the Act is not an offence under section 5 of the Act. This raises the question whether an administrative tribunal can ignore the law declared by the highest court in the State and initiate proceedings in direct violation of the law so declared. Under article 215, every High Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself. Under article 226, it has a plenary power to issue orders or writs for the enforcement of the fundamental rights and for any other purpose to any person or authority, including in appropriate cases any Government, within its territorial jurisdiction. Under article 227, it has jurisdiction over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction. It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of the Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior tribunal that all the tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working: otherwise, there would be confusion in the administration of law and respect for law would irretrievably suffer.”

17. It is apposite to also take note of one more decision of the Supreme Court dealing with somewhat similar issue. It is reported in Suganthi Suresh Kumar v. Jagdeeshan., [2002] 110 Comp Cas 133 (SC); (2002) 2 SCC 420. In this case, one decision of the Kerala High Court was cited before the High Court wherein the learned single judge of the Kerala High Court, while examining the case before him, bypassed or let us say ignored the decision of the Supreme Court cited before him by one party to the case. The learned single judge observed that since attention of the Supreme Court was not drawn specifically to the provisions of section 431 of the Code of Criminal Procedure, while deciding the case, hence, it is not possible for the High Court (Single Bench) to place any reliance on such decision of the Supreme Court. The single judge of the Kerala High Court thereupon proceeded to decide the case, before him without placing reliance on the decision of the Supreme Court. In other words, the single judge of the Kerala High Court ignored the decision of the Supreme Court by finding fault with it which had otherwise full application to the case. When the matter went to the Supreme Court, their Lordships, speaking through Thomas J., came down heavily on the single judge of the Kerala High Court and held that it is impermissible for the High Court to overrule the decision of the Supreme Court on the ground that the Supreme Court laid down the legal position without considering a particular section of Code of Criminal Procedure, which was not brought to their notice. It was held that it is not only a matter of discipline for the High Court in India, it is the mandate of the Constitution as provided in article 141 of the Constitution of India that the law declared by the Supreme Court shall be binding on all courts within the territory of India. In conclusion, the Supreme Court set aside the order of the High Court and held as under (page 136 of 110 Comp Cas):

“It is impermissible for the High Court to overrule the decision of the apex court on the ground that the Supreme Court laid down the legal position without considering any other point. It is not only a matter of discipline for the High Courts in India, it is the mandate of the Constitution as provided in article 141 that the law declared by the Supreme Court shall be binding on all courts within the territory of India. It was pointed out by this court in Anil Kumar Neotia v. Union of India, (1988) 2 SCC 587 : AIR 1988 SC 1353, that the High Court cannot question the correctness of the decision of the Supreme Court even though the point sought before the High Court was not considered by the Supreme Court.”

18. Further, in para 11, it was ruled as under (page 136 of 110 Comp Cas): “The said legal position would continue to hold good until it is overruled by a larger Bench of this court. Hence, the learned single judge of the High Court of Kerala has committed an impropriety by expressing that the said legal direction of this court should not be followed by the subordinate courts in Kerala. We express our disapproval of the course adopted by the said judge in Rajendran v. Jose, [2001] 3 KLT 431.”

19. The similar issue then came up for consideration before the Gujarat High Court in one income-tax matter in the case reported in Standard Radiators v. CIT, [1987] 165 ITR 178 (Guj). In this case, the decision of the Gujarat High Court in CIT v. Hasanali Khanbhai and Sons, [1987] 165 ITR 195 (Guj) was not taken note of by the income-tax authorities while examining the issues raised by the assessee and the Revenue either in assessment proceedings or at an appellate stage though the said decision was holding the field at the relevant time. In other words, the taxing authorities while deciding issues for framing assessment did not take note of the decision of the Gujarat High Court in CIT v. Hasanali Khanbhai and Sons, [1987] 165 ITR 195 (Guj) and framed the assessment in ignorance of the said decision. Since the view of the taxing authorities was not in conformity with the law laid down by the Gujarat High Court and, hence, the question arose before the taxing authorities, which later reached before the Gujarat High Court as to whether an order passed in ignorance of law laid down by the High Court can be rectified in section 154 proceedings? Their Lordships of the Gujarat High Court, after placing reliance on the law laid down by the Supreme Court in the case of East India Commercial Co. Ltd., AIR 1962 SC 1893, held that it is implicit in the power of supervision conferred on a superior court that all the tribunals subject to its supervision should confirm to the law laid down by it. It was held that the law laid down by the High Court has to be followed by the income-tax authorities situated in the area over which the High Court has jurisdiction. This is what their Lordships ruled in the concluding para after placing reliance on the decision of East India Commercial Co. Ltd., AIR 1962 SC 1893 (page 191 of 165 ITR):

“In view of this decision of the Supreme Court, the Income-tax Officer and the Appellate Assistant Commissioner were bound to follow the decision of this court in Hasanali Khanbhai and Sons' case, [1987] 165 ITR 195 (Guj). If they failed to do so, it would undermine the respect for the law laid down by the High Court and the constitutional authority of the High Court and their conduct-would, therefore, be apprehended by the principles underlining the law of contempt. Under the circumstances, it must be held that both the Income-tax Officer and the Appellate Assistant Commissioner were within their powers in rectifying the orders in the manner they have done.”

20. In the light of the aforesaid pronouncement of law laid down by the Supreme Court and the High Court and explained by Salmond in his book as to what should be the approach of courts/tribunals when any decision of Supreme Court and/or the High Court, i.e, superior court is cited before them, it is clear that all courts/tribunals functioning in a State are bound by the law laid down by the State High Court. It is neither permissible nor legal for any court and tribunal to comment upon the decision of the Supreme Court/High Court. Similarly, it is also not permissible for the Tribunal to comment upon the manner in which a particular decision was rendered by the Supreme Court/High Court. It is also not permissible for the Tribunal to sidetrack and/or ignore the decision of the High Court on the ground that it did not take into consideration a particular provision of law. If such approach is resorted to by the subordinate courts/tribunals then it is held to be not in conformity with the law laid down by the Supreme Court. It was deprecated by the Supreme Court as being improper.

21. Indeed, the principle of law laid down by the Supreme Court in the case of Suganthi Suresh Kumar, [2002] 110 Comp Cas 133 (SC); (2002) 2 SCC 420 and other case referred to supra would equally apply when such situation is faced by tribunals in relation to a decision of the jurisdictional High Court. In other words, when the High Court has no jurisdiction to comment upon any decision of the Supreme Court nor the High Court has a power to ignore such decision by virtue of the mandate contained in article 141 of the Constitution then on the same reasoning, the Tribunal being subordinate to the High Court has to follow the decision of the jurisdictional High Court without making any comment upon the said decision and/or without ignoring it on any ground except those which are well recognized as indicated hereinbelow. In other words, when the law laid down by the Supreme Court is binding on all courts/tribunals in the country by virtue of article 141 of the Constitution of India then the law laid down by the High Court is equally binding on courts/tribunals they being subordinate to the High Court by virtue of the powers conferred by articles 215, 226 and 227 of the Constitution of India and by the judicial precedents.

22. In our view, the Tribunal has full authority/jurisdiction to distinguish the decision when cited by any party be that of the Supreme Court and/or the High Court by pointing out its distinguishing features both on facts and law involved in the said decision. In other words, if the Tribunal feels that a decision cited by any party has no application to the facts of the case under consideration then the Tribunal has full jurisdiction to distinguish the said decision thereby not considering appropriate in the facts of that case to place any reliance on such decision. However, the reasons as to why the decision relied on by any party has no application and which are those distinguishing features due to which the said decision can have no application have to be specifically stated in the order. Such distinction is permissible in law because counsel may in his wisdom place reliance on several decisions in support of his submissions. It is for the court/tribunal to decide as to why a particular decision has no application to the facts of a case under consideration. Indeed, here lies the application of mind of the author of the decision to analytically discuss the cases on facts involved in the case cited by a party and then compare the same with the facts of the case before the Tribunal and then record the note of dissent. In doing this exercise, which is an integral part of judgment writing for recording a finding one way or other, the court/tribunal does not comment upon the ratio decided of the said decision nor holds that it does not lay down the correct principle of law. On the other hand, the Tribunal accepts the decision as laying down the correct principle of law but respectfully records its dissent due to dissimilarity in facts of both the cases.

23. In our opinion, therefore, the Tribunal had no jurisdiction to comment upon the decision of the jurisdictional High Court and in particular the manner in which it was rendered nor had jurisdiction to ignore the decision rendered in MCC No. 65 of 1993 decided on August 20, 1996 (CIT v. Premier Industries P. Ltd., [1997] 227 ITR 282 (MP)). It is for the reason that, firstly, it was a decision rendered by the jurisdictional High Court. Secondly, the Tribunal was functioning in the same State (MP) as subordinate to the High Court of Madhya Pradesh. Thirdly, the Tribunal had no jurisdiction to hold that the decision of the High Court is per incuriam. Though the Tribunal did not say so in so many words, but in effect it tantamounts to such declaration. Fourthly, the Tribunal had also no jurisdiction to find fault with the decision of the High Court so as to avoid its binding effect.

24. In view of the foregoing discussion, we answer question No. 1 in the negative by holding that the Tribunal was not justified in commenting upon the decision of the Madhya Pradesh High Court nor was justified in ignoring the decision rendered in MCC No. 65 of 1993 decided on August 20, 1996, (CIT v. Premier Industries P. Ltd., [1997] 227 ITR 282 (MP)) on the ground that it does not lay down the correct principle of law on the issue involved. In other words, we answer the question by holding that the Tribunal had no jurisdiction to ignore the decision of the High Court rendered in MCC No. 65 of 1993 decided on August 20, 1996 (CIT v. Premier Industries P. Ltd., [1997] 227 ITR 282 (MP)) on the ground that it does not lay down the correct principle of law on the issue involved therein.

25. This takes us to answer question No. 2, which reads as under:

“(ii) Assuming the Tribunal was right in their observations, even then what was the procedure which the Tribunal should have followed in such eventuality?”

26. A perusal of the aforesaid question No. 2 would show that it is consequential in nature to question No. 1. We have answered question. No. 1 by holding that the Tribunal was not justified in ignoring the decision of the High Court on the ground that it does not lay down the correct principle of law on the issue involved. However, the question that now arises for consideration is; what procedure should then have been followed by the Tribunal having ignored the decision of the High Court? In our view, in the first instance, as held supra, the Tribunal should not have ignored the decision of the jurisdictional High Court once it came to a conclusion that it is otherwise applicable to the issue involved in appeal. Instead, it should have placed reliance on such decision having found that it cannot be distinguished on facts and then proceed to decide the appeal accordingly. At best, in such eventuality, the Tribunal should have mentioned the submission of the Revenue about the decision cited and leave the issue at that stage. It was then for the parties to pray to the Tribunal to either make reference on the question proposed under section 256(1) ibid or to file an appeal to the High Court under section 260A ibid so that when the matter reaches the High Court then a prayer could be made to the High Court to reconsider such decision by constituting a larger Bench. It is for the High Court to decide as to whether it has laid down the correct principle of law and if not, whether it needs to be overruled and if so, to what extent and on what grounds. The matter can then be referred to a larger Bench of the High Court as per the procedure prescribed in the High Court Rules and Orders for deciding the correctness of such decision. It is for the reason that a jurisdiction to declare any decision of the High Court as laying down the correct principle of law or is per incuriam vests only in the Supreme Court of India, it being an appellate court for the High Court under article 136 of the Constitution as also being the highest court in the Indian judicial system and in the concerned High Court. As a matter of fact, a decision rendered by the “A” High Court cannot be overruled by the “B” High Court. In such circumstance, the “B” High Court can only record their dissent with the view taken by the “A” High Court by assigning their own reasoning. In other words, a power to overrule any decision of the High Court vests only with the Supreme Court and with the larger Bench of the same High Court. So long as the decision is not overruled, it continues to hold the field and is, therefore, binding on courts/tribunals subordinate to such High Court.

27. In view of the foregoing discussion, we answer question No. 2 accordingly as indicated in para. 26 (see above). No costs.