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RADHA SWAMI SATSANG v. INCOME-TAX OFFICER

Income Tax Appellate Tribunal

Apr 26, 1982

Judgment

Subsequent
References

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Summary of Opinion — IT Reference No. 948 of 1975 (Per Shri D.S. Meenakshisundaram, Judicial Member)

Factual and Procedural Background

The Tribunal referred the following question of law to the Allahabad High Court in IT Reference No. 948 of 1975:

"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the income derived by the Radha Swami Satsang, a religious institution, is entitled to exemption under sections 11 and 12 of the Income-tax Act, 1961?"

By judgment dated 7-7-1980 the Allahabad High Court answered that question in the negative, in favour of the revenue and against the assessee. The matter then returned for the Tribunal to pass an order under section 260(1) of the Income-tax Act, 1961, conformably to the High Court's judgment.

At the hearing before the Tribunal, the assessee's counsel sought consideration of alternative grounds that had not been decided earlier by the Tribunal (including an estoppel plea and grounds asserting entitlement to refund and that the assessments were bad in law). The Tribunal's earlier appellate order dated 24-8-1974 had observed that, in the view it had taken, even on an independent and fresh examination the assessee was entitled to exemption and therefore it was unnecessary to consider the estoppel plea; the assessee now urged that the Tribunal should nevertheless decide that alternative plea and other undeclared grounds while giving effect to the High Court's decision.

Legal Issues Presented

Whether the income of Radha Swami Satsang, a religious institution, is entitled to exemption under sections 11 and 12 of the Income-tax Act, 1961 (the question referred to the Allahabad High Court).
Whether the Tribunal should, while giving effect to the High Court's answer to the referred question, decide alternative grounds left open earlier by the Tribunal — specifically an estoppel plea and grounds claiming refund and that the assessments were bad in law.
Whether the doctrine of estoppel (including promissory estoppel) or stare decisis can operate so as to prevent the revenue from taking a position under the statute (i.e., whether estoppel can operate against statutory obligations).

Arguments of the Parties

Assessee's Arguments (Shri G.C. Sharma)

Although the High Court decided the referred question against the assessee, alternative submissions made before the Tribunal at the original hearing remain to be considered and disposed of.
Paragraph 20 of the Tribunal's order dated 24-8-1974 shows the Tribunal left open the estoppel question as unnecessary to decide; therefore the estoppel ground should now be considered.
The estoppel argument is reflected in ground No. 2 for all three years: "Because the authorities below have been arbitrary and unjust in deviating from the past without any fresh evidence or record."
The assessee also pressed grounds (for 1967-68: grounds No. 1 and 9; for 1968-69 and 1969-70: grounds Nos. 1 and 11) which assert (a) that refunds claimed should have been allowed and (b) that the assessments are bad in law; counsel submitted these were legal issues for decision and had not been withdrawn.
If the Tribunal does not accept the earlier points, the counsel asked that certain additions made by the ITO sustained by the AAC be deleted for lack of basis.
Counsel relied on three decisions (Commissioner of Income-Tax, A.P. v. Hyderabad Deccan Liquor Syndicate; Udhavdas Kewalram v. CIT; and CIT v. Hanumanbux Inderchand) to support the contention that grounds not decided earlier by the Tribunal should be decided while giving effect to the order of the High Court/Commissioner.
Counsel additionally relied on authorities and text extracts to advance a stare decisis argument (and quoted from reference works), seeking to show consistency should have bound departmental authorities.

Revenue's Arguments (Shri M.M. Prasad)

The assessee cannot, by urging alternative grounds, seek indirectly to obtain a favourable outcome despite the High Court's adverse answer on the referred question regarding exemption under sections 11 and 12.
It is not permissible in law for the assessee to obtain relief in that manner; the Tribunal must give effect to the High Court's decision and should not traverse beyond its jurisdiction in doing so.
The estoppel/estoppel-based submissions are misconceived because there can be no estoppel against statute.
The contention based on grounds Nos. 1 and 9 (refund/assessment bad in law) should not be allowed to be raised for the first time at this stage because those contentions do not appear to have been argued at the original hearing of the appeals.
The departmental additions to the assessee's income were, according to the revenue, fully justified and should be upheld.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Commissioner Of Income-Tax, A.P. v. Hyderabad Deccan Liquor Syndicate [1974] 95 ITR 130 (AP)	The counsel relied on this decision to support the contention that grounds not decided earlier by the Tribunal have to be decided by it while giving effect to another order.	The opinion records that this decision was relied upon by the assessee's counsel; the Court considered the reliance but concluded it was not appropriate to reopen alternative grounds in view of the High Court's decision and the Tribunal's prior independent examination.
Udhavdas Kewalram v. CIT [1967] 66 ITR 462 (SC)	Relied upon by the assessee's counsel (alongside other cases) for the proposition that the Tribunal should decide undecided grounds when giving effect to an order.	The Court noted the reliance but did not accept the invitation to decide the estoppel/alternative grounds for reasons given in its analysis (jurisdictional limits and estoppel against statute).
CIT v. Hanumanbux Inderchand [1980] 125 ITR 248 (Gauhati)	Relied upon by the assessee's counsel as authority supporting the need to decide grounds left undecided earlier.	The Court recorded that this case was cited by counsel; it nonetheless declined to decide the alternative grounds in the present proceedings for the reasons set out in its reasoning.
CIT v. B. Malhotra [1971] 2 SCC 547 / [1973] 2 SCC 35	Quoted by counsel (via secondary works) about stare decisis; as a precedent the Court noted that the rule of stare decisis applies to decisions of a High Court or the Supreme Court.	The Court observed that the passages relied on support its conclusion that stare decisis would apply only to decisions of a High Court or the Supreme Court and not to decisions of departmental authorities or the Tribunal.
British Indian Corporation Ltd. v. CIT [1966] 60 ITR 793 (All.)	Discussed English and Indian case law on res judicata in tax litigation and the limited effect of earlier decisions of the same High Court in a later reference.	The Court referred to this decision to show that an earlier High Court decision did not operate as res judicata as a matter of pure law where accounting periods and sums differed, and that stare decisis effect may be limited.
British India Corporation Ltd. v. CEPT/CIT [1958] 33 ITR 826	Earlier decision of the High Court in the same matter (considered in British Indian Corporation Ltd. v. CIT).	The Court noted that the earlier decision did not operate as res judicata vis-à-vis a later reference because of differences in periods and amounts; used to illustrate limits of res judicata/stare decisis in tax contexts.
Ahmedabad Manufacturing & Calico Printing Co. Ltd. v. CEPT [1960] 38 ITR 675 (SC)	Shown in the opinion as a decision that affected the res judicata/stare decisis analysis in related cases.	The Court cited this decision (as having overruled or affected earlier local High Court rulings) in explaining why departmental or Tribunal decisions do not attract stare decisis like High Court or Supreme Court decisions do.
Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [1979] 118 ITR 326	Establishes that promissory estoppel cannot be applied in the teeth of an obligation or liability imposed by law and cannot be invoked to compel performance of an act prohibited by law; no estoppel against exercise of legislative power.	The Court relied on this Supreme Court decision to support the proposition that estoppel cannot be invoked against statutory duties or public duties cast by statute and therefore rejected the estoppel ground.
CIT v. B.N. Bhattachargee [1979] 118 ITR 461	Clarifies the nature and limits of estoppel, emphasizing that estoppel is a rule of equity and cannot operate to impede statutory powers or public duties.	The Court cited and followed this decision to conclude that estoppel is inapplicable where public duties cast by statute are involved; this supported rejection of the assessee's estoppel plea.
Maritime Electric Co. Ltd. v. General Dairies Ltd. [1937] AC 610	Authority cited in Halsbury to illustrate that where statute imposes a positive duty, the person charged cannot be prevented by estoppel from performing statutory powers.	Reproduced in the Court's reasoning (via Halsbury) as support for the view that estoppel cannot operate against statutory provisions; used to buttress the rejection of the estoppel argument.
Hudson v. Hudson [1948] (citation as in Halsbury)	Cited (via Halsbury) for the proposition that statutory duties require courts to inquire into truth notwithstanding estoppel; a petitioner in a divorce suit cannot obtain relief simply on estoppel.	Referred to as an illustration of the limit of estoppel where statutory inquiry or duties are involved; relied on to show estoppel's inapplicability in the present context.
High Trees' case [1947] 1 KB 130 (KB)	Identified as the English origin for modern promissory estoppel principles (Lord Denning and Law Revision Committee formulation).	The Court cited High Trees (as discussed in secondary authority) to explain the nature of promissory estoppel but held that even promissory estoppel cannot override statutory obligations; therefore it did not assist the assessee.

Court's Reasoning and Analysis

The Court considered submissions of both sides, the Tribunal's earlier appellate order dated 24-8-1974 (particularly paragraph 20), the judgment of the Allahabad High Court dated 7-7-1980, and the authorities cited.

The Tribunal's paragraph 20 had stated that, on an independent and fresh examination of the whole issue for the assessment years under consideration, the Tribunal was of the view that the assessee was entitled to exemption; consequently the Tribunal found it unnecessary to decide the estoppel issue. The Tribunal also observed the tension between two well-settled principles: (a) each assessment year is self-contained and authorities may examine facts and law independently (i.e., no automatic estoppel/res judicata across years), and (b) earlier decisions should not be lightly departed from and consistency is desirable unless facts or law change. The Tribunal avoided resolving the conflict because it had concluded the assessee would succeed on re-examination.

The Court here reasoned as follows (as explicitly stated in the opinion):

It would be a futile exercise to decide the estoppel/alternative grounds now because there has already been an independent and fresh examination of the whole issue for the three assessment years — both by the Tribunal and by the High Court.
The Tribunal cannot traverse beyond its jurisdiction while giving effect to the High Court's judgment on the question that was referred to the High Court; accordingly, the Tribunal should not re-open matters in a way that conflicts with the High Court's answer to the referred question.
The assessee cannot, under the guise of urging an alternative plea not originally decided by the Tribunal, obtain indirectly a decision in its favour contrary to the High Court's answer on the referred question.
There can be no estoppel against a statute; promissory estoppel or equitable estoppel cannot be invoked to prevent the exercise of statutory powers or to nullify statutory duties (citing Motilal Padampat and CIT v. B.N. Bhattachargee and authorities in Halsbury).
The assessee's reliance on the rule of stare decisis was misplaced because the prior departmental/Commissioner decisions relied upon were not decisions of a High Court or the Supreme Court; therefore stare decisis (as binding precedent) does not attach to such departmental decisions in the same manner.
The Court found the textual extracts and secondary authorities cited by the assessee's counsel (Words and Phrases; Interpretation of Statutes by Vepa P. Sarathi; extracts from CIT v. B. Malhotra) did not alter these conclusions, since those sources support the limited application of stare decisis to High Court and Supreme Court decisions only.

On the basis of the above reasoning and the authorities cited, the Court concluded that the estoppel/stare decisis line of argument could not be sustained and that it was unnecessary (and inappropriate) to decide the estoppel ground in the present exercise of giving effect to the High Court's judgment.

Holding and Implications

Holding:

The Court rejected ground No. 2 (the estoppel ground) in all three assessment years.

Implications / Consequences:

As recorded in the opinion, the High Court had answered the referred question against the assessee (i.e., the assessee was not entitled to exemption under sections 11 and 12 on the referred question); the Tribunal is to pass an order under section 260(1) conformable to that judgment.
The specific alternative plea of estoppel (ground No. 2) was rejected for all three years on the grounds that estoppel cannot operate against statutory obligations and because it would be futile to re-decide the point after independent examinations by the Tribunal and the High Court.
The Court followed Supreme Court authority (Motilal Padampat; CIT v. B.N. Bhattachargee) and relevant High Court authority in reaching this conclusion.
No broader new precedent or expansive novel legal rule was announced by the Court in the reproduced portions of the opinion; the immediate effect is the rejection of ground No. 2 and adherence to the High Court's negative answer on the referred question. (The opinion does not set out any additional broader implications beyond these immediate effects.)

Note: Paragraphs 9 to 11 of the opinion were not reproduced in the provided text and therefore are not summarized here.

Show all summary ...

Per Shri D.S. Meenakshisundaram, Judicial Member - In IT Reference No. 948 of 1975, the following question of law was referred to the Allahabad High Court:

By their judgment dated 7-7-1980, their Lordships of the Allahabad High Court have answered the question in the negative, in favour of the department and against the assessee. Now the matter comes up for passing an order under section 260(1) of the Income-tax Act, 1961 ('the Act'), conformably to the judgment of their Lordships referred to above.

2. When the matter came up for hearing, Shri G.C. Sharma, the learned counsel for the assessee, submitted that though the decision of the High Court on the question referred to them, has gone against the assessee, still the alternative submission made by the assessee to the Tribunal at the time of original hearing of the appeals, remains to be considered and disposed of. In this connection, he invited our attention to paragraph 20 of the order of the Tribunal dated 24-8-1974, where the Tribunal held that in the view they had taken that even on an independent and fresh examination of the whole issue for the assessment years under considera-tion, the assessee is entitled to exemption, it was unnecessary to consider how far the assessee was justified in its argument based on 'estoppel'. He, therefore, submitted that the assessee's submission on the basis of the estoppel should be considered now and disposed of by the Tribunal. According to the learned counsel, the argument based on the ground of estoppel would be clear from ground No. 2 in all the three years, which is as follows :

"2. Because the authorities below have been arbitrary and unjust in deviating from the past without any fresh evidence or record."

3. The learned counsel next contended that he was pressing ground No. 1, read with ground No. 9, in the appeal for 1967-68, the corresponding grounds being ground Nos. 1 and 11 in the appeals for 1968-69 and 1969-70. These two grounds read as follows :

"1. Because the refund claimed should have been allowed."

"9. Because the assessment is bad in law."

Shri G.C. Sharma, the learned counsel, submitted that the assessee had submitted applications for refund along with returns of income for these three years and that these applications filed by the assessee for refund could not be converted by the ITO into proceedings for assessment of the total income of the assessee for these three assessment years. Accord-ing to Shri Sharma this was a legal ground which should be decided now as this has not been withdrawn by the appellant specifically.

4. Shri Sharma then argued that the AAC erred in sustaining the following additions which were made by the ITO to the income of the assessee :

According to the learned counsel, there was no basis for these additions made by the departmental authorities and that the same should be deleted, in case we do not agree with his submissions set out earlier. Shri Sharma relied on the following three decisions in support of his contentions that grounds which were not decided earlier by the Tribunal have to be decided by it while giving effect to the order of the High Commissioner Of Income-Tax, A.P v. Hyderabad Deccan Liquor Syndicate [1974] 95 ITR 130 (AP) ; Udhavdas Kewalram v. CIT [1967] 66 ITR 462 (SC) and CIT v. Hanumanbux Inderchand [1980] 125 ITR 248 (Gauhati).

5. Shri M.M. Prasad for the revenue contested every one of the conten- tions urged on behalf of the assessee and submitted that what the assessee was seeking to do was to indirectly get a decision in its favour in spite of the answer given by the High Court against the assessee on the crucial question that was referred to the High Court regarding the exemption of the assessee's income under sections 11 and 12 of the Act. Shri Prasad submitted that this was not permissible in law. He, however, submitted that the assessee's contentions based on the ground of estoppel were mis-conceived as there could be no estoppel against statute. He then argued that the contention based on ground Nos. 1 and 9 should not be allowed to be taken for the first time at this stage of the appeals, as no such con-tention seems to have been argued at the time of hearing of the appeals. Shri Prasad also submitted that the additions made by the departmental authorities were fully justified and that the same should be upheld.

6. We have carefully considered the submissions urged on both sides in the light of the authorities cited and relied on by the learned counsel. In para 20 of the appellate order dated 24-8-1974, the Tribunal disposed of the alternative contention based on the ground of estoppel in the following words :

"20. In the view we have taken that even on an independent and a fresh examination of the whole issue for the assessment years under considera- tion the assessee is entitled to exemption, it is unnecessary to consider how far the assessee is justified in its argument based on 'estoppel'. The assessee's contention that the position in the years under appeal is not different from the position in the earlier years (except for the non- existence of the Satguru) appears to be correct. We are of opinion that the non-existence of the Satguru is a difference which goes in favour of the assessee and that to the extent the departmental authorities purported to depart from the earlier position on the ground that the position of facts was different, their orders cannot be supported. We do not, how- ever, wish to discuss the issue whether even without a change in the facts it was open to them or not to come to a different conclusion. This is rather a difficult issue because both the principles are well-settled. The first is that for income-tax purposes each year is a self-contained period and it is open to the authorities to examine the facts and the position at law independently without being bogged by a rule of estoppel or res judicata. Equally, it is well-settled that the decision arrived at on earlier occasion should not be lightly departed from and that there should be a consistency of approach unless there is a change either in the factual position or the legal position. To what extent either of these two rules operate in the event of there being a conflict between them is a difficult question to decide. Since we have taken the view that even if the position is re-examined the assessee is entitled to succeed, it is unnecessary to resolve this conflict in the present case."

It is in the light of the above observations that the learned counsel for the assessee contends that we should decide this ground which was left open by the Tribunal. In our view, such an exercise will be a futile exer- cise in view of the fact that there has been an independent and fresh examination of the whole issue for the three assessment years under consideration of the assessee's claim for exemption not only by the Tribunal but also by the High Court. In fact, it is not open to the Tribunal to traverse beyond its jurisdiction while giving effect to the judgment of the High Court on the question referred by the Tribunal to the High Court. As rightly contended by the revenue, the assessee cannot the guise of urging an alternative plea which was not originally decided by the Tribunal (sic). Further, there cannot be any estoppel against a statute. Realising this position in law the learned counsel did not rightly put his case on the ground of estoppel but relied on the rule of 'stare decisis'. In support of this plea, the learned counsel has given quotations from 'Words and Phrases'. But a perusal of the extracts from this book clearly shows that this rule of stare decisis is inapplicable in the present case. The decision or the Commissioner given in the assessment years 1937-38 and 1938-39 and followed by the department in all the subsequent assessment years up to and inclusive of the assessment year 1963-64 are not decisions of any High Court or the Supreme Court to which alone this rule of stare decisis would be applicable. It is not, therefore, neces- sary for us to discuss in detail the extracts given from the book 'Words and Phrases' or the extracts from the book of Interpretation of Statutes by Vepa P. Sarathi in which the learned author has relied on the decision in the case of CIT v. B. Malhotra [1971] 2 SCC 547/[1973] 2 SCC 35. In fact the extract relied on by the learned counsel from these two deci-sions only support our conclusion that the rule of stare decisis would be applicable only to decisions of a High Court or the Supreme Court and not to any decisions either of the departmental authorities or even of the Tribunal. In British Indian Corporation Ltd. v. CIT [1966] 60 ITR 793 (All.), their Lordships of the Allahabad High Court reviewed English and Indian case law on the question of res judicata in tax litigation and held that the decision of the same High Court in the earlier reference in the case of the same assessee which was reported in British India Cor-poration Ltd. v. CEPT/CIT [1958] 33 ITR 826 did not operate as res judicata as a matter of pure law. Their Lordships further held that in the said case there was no identity between the question of the earlier reference and the present question because the chargeable accounting periods and the sums were different, and that the earlier decision did not also have effect as stare decisis as it was overruled by the decision in Ahmedabad Manufacturing & Calico Printing Co. Ltd. v. CEPT [1960] 38 ITR 675 (SC).

7. In this connection we may usefully refer to the decisions of the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 118 ITR 326 and CIT v. B.N. Bhattachargee [1979] 118 ITR 461. In the first case, the Supreme Court held that the doctrine of promissory estoppel cannot be applied in the teeth of an obligation or liability im- posed by law, that promissory estoppel cannot be invoked to compel the Government or even a private party to do an act prohibited by law, that there can also be no promissory estoppel against the exercise of legislative power and that the Legislature can never be precluded from exercising its legislative function by resort to the doctrine of promissory estoppel. In the latter judgment, the Supreme Court again considered the rule of estoppel and held as follows :

"What, in essence, is estoppel ? Estoppel is a rule of equity which forbids truth being pleaded or representation, on which faith another has acted to his detriment, being retracted. Even extending the rule into the new flanged empire of promissory estoppel it cannot go beyond the limits of the Law Revision Committee in England which Lord Denning allowed to blossom in High Trees' case [1947] 1 KB 130 (KB). see Discipline of Law by Lord Denning, page 202 :

'We, therefore, recommend that a promise which the promisor knows, or reasonably should know, will be relied upon by the promisee, shall be enforceable if the promisee has altered his position to his detriment in reliance on the promise.' "

The soul of estoppel is equity, not facility for inequity. Nor is estoppel against statute permissible because public policy animating a statutory provision may then become the casualty. Halsbury has noted this sensible nicety (Halsbury's 1aws of England, para 1515) :

'Where a statute, enacted for the benefit of a section of the public im- poses a duty of a positive kind, the person charged with the performance of the duty cannot by estoppel be prevented from exercising his statutory powers.' [Maritime Electric Co. Ltd. v. General Dairies Ltd. [1937] AC 610; [1937] 1 All ER 748 (PC)].

'A petitioner in a divorce suit cannot obtain relief simply because the respondent is estopped from denying the charges, as the Court has a statutory duty to inquire into the truth of a petition.' [Hudson v. Hudson [1948] p. 292 ; Halsbury's Laws of England, para 1515].

The luminous footnote cites rulings and states that :

'This rule probably also applies where the statute bestows a discretion rather than imposing a duty.' [Halsbury's Laws of England, 4th Edn., p. 109].

To sum up, where public duties cast by statute are involved, private parties cannot prevent performance by invoking estoppel. We do not discuss further since the facts here exclude estoppel." [Emphasis supplied by us] (p. 484)

8. In our view, these two decisions of the Supreme Court as well as the decision of the Allahabad High Court directly answer the assessee's contentions on the alternative plea of estoppel or stare decisis as was sought to be argued by the learned counsel for the assessee. We, therefore, respectfully follow these decisions and reject ground No. 2 in all the three years.

9 to 11. [These paras are not reproduced here as they involve minor issues.]