REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2092 OF 2006

Commissioner of Income Tax  ....Appellant

Central, Kanpur

Versus

J.K. Charitable Trust ....Respondent

Kamal Tower, Kanpur

With

CIVIL APPEAL NO. 1698 OF 2008

With

CIVIL APPEAL NO. 1699 OF 2008

With

CIVIL APPEAL NO. 2423 OF 2006

With

CIVIL APPEAL NO. 682 OF 2007

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J U D G M E N T

Dr. ARIJIT PASAYAT, J.  

1. Challenge in these appeals in each case is to the order passed by a

Division Bench of the Allahabad High Court answering the reference made

by  the  Income  Tax  Appellate  Tribunal,  Allahabad  Bench  (in  short  the

‘ITAT’) under Section 256(1) of the Income Tax Act,  1961 (in short the

‘Act’) in favour of the assessee and against the revenue.  For answering the

references in favour of the assessee the High Court relied upon its judgment

for  two  previous  assessment  years  i.e.  1972-73  and  1973-74  in  the

assessee’s case which is reported in Commissioner of Income Tax v. J.K.

Charitable Trust (1992 (196) IIR 31).  The present dispute relates to several

assessment years, i.e. 1972-73  (in respect of an assessment re done under

Section 147(1) of the Act) and assessment years 1975-76 to 1982-83.   

2. Learned  counsel  for  the  revenue  appellant  submitted  that  each

assessment year is a separate assessment unit and the factual scenario has to

be seen.  Dispute relates to the question whether the respondent, assessee’s

trust was hit by the provisions of Section 13(1)(c) and 13(2)(a)(f) & (h) of

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the Act and therefore cannot be  given the benefit of exemption provided

under Section 11 of the Act.   

3. Learned counsel for the assessee submitted that for several years no

appeal has  been filed even though the factual position is the same i.e. for

the  assessment  years  1983-84  upto  assessment  year  2007-08.  Even  no

appeal  was  filed  against  the  decision  reported  in  [1992(196)  ITR  31]

(supra).  It is also pointed out that several other High Courts have taken a

similar view and no appeal was preferred by the revenue against any of the

judgments of the different High Courts.  Reference is made to the decisions

reported in CIT, Bombay City VII v. Trustees of the Jadi Trust [(1982) 133

ITR 494],  CIT v.  Hindusthan Charity Trust [(1983) 139 ITR 913],  CIT v.

Sarladevi  Sarabhai Trust No.2 [1988 (172) ITR 698] and  CIT v.  Nirmala

Bakubhai Foundation  [1996 (226) ITR 394].  The first two judgments have

been rendered by the Bombay and Calcutta High Court respectively while

the other  two decisions are of the Gujarat High Court.

4. Learned counsel for the revenue submitted that even though appeal

has not been preferred in respect of some assessment years, that does not

create  a bar  for  the revenue filing  an appeal  for  other  assessment  years.

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Reliance is placed on a decision of this Court in C.K. Gagadharan & Anr. v.

Commissioner of Income Tax [(2008)304 ITR 61 (SC)].

5. The  factual  scenario  is  undisputed  that  for  a  large  number  of

assessment years no appeal has been filed.

6. The basic question therefore is whether the revenue can be precluded

from filing an appeal even though in respect of some other years involving

identical dispute no appeal is filed.

7. For deciding the issue a few decisions of this Court need to be noted.

8. In Bharat Sanchar Nigam Ltd. v. Union of India (2006 (3) SCC 1) it

was noted as follows:

“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 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 the  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

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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.

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.”

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9. In State of Maharashtra v. Digambar (1995(4) SCC 683) the position

was highlighted by this court as follows:

“We  are  unable  to  appreciate  the  objection  raised against the prosecution of this appeal by the appellant or other SLPs 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 therefor. 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 SLPs are filed by the State against judgments of the High Court, such SLPs 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 SLPs 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 SLP or SLPs in other similar matters where it  is  considered on behalf  of the State that non- filing of such SLP or SLPs and pursuing them is likely to seriously  jeopardise  the  interest  of  the  State  or  public interest.”

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10. In  Government of West Bengal v.  Tarun K. Roy [2004(1)SCC 347]

reference was made to the judgments in Digambar’s case (supra) and State

of Bihar v. Ramdeo Yadav (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 appellants on their  own  merit,  particularly,  when  the  question  as regards  difference  in  the  grant  of  scale  of  pay on  the ground  of  different  educational  qualification  stands concluded by a judgment of this Court in State of West Bengal v. Debdas Kumar {(1991) Supp(1) SCC 138]. If the judgment of  Debdas Kumar’s case (supra) is to be followed, a 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 v. Ramdeo Yadav (1996) 3 SCC 493) wherein this Court  noticed  Debdas Kumar’s case (supra) by holding: (SCC p. 494, para 4)

“4.  Shri  B.B. Singh, the learned counsel  for the appellants, 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  Digambar’s  case (supra) and in Debdas Kumar’s case (supra) had held that though an appeal was not filed against an earlier order, when public interest is involved

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in interpretation of law, the Court  is entitled to go into the question.”

11. In Ramdeo’s  case  (supra)  reference  was made to  Debdas  Kumar’s

case (supra) wherein it was observed at paragraph 5 as follows:

“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 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 13-1-1981 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.”

12. In  Commissioner  of  Central  Excise  v.  Hira  Cement  (2006(2)SCC

439) at paragraph 24 the position was reiterated.

13. In  Chief  Secretary  to  Government  of  Andhra  Pradesh  v.  V.J.

Cornelius [(1981) 2 SCC 347] it was observed that equity is not a relevant

factor for the purpose of interpretation.

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14. It will be relevant to note that in Karamchari Union v. Union of India

[(2000)243 ITR 143 (SC) ]  and Union of India v. Kaumudini Narayan Dalal

[(2001)  249 ITR 219]  this  Court  observed that  without  a  just  cause  the

Revenue cannot file  the appeal  in one case while deciding not  to file  an

appeal in another case.  This position was also noted in CIT v. Shivsagar

Estate [(2004)9 SCC 420].

15. In  C.K.  Gangadharan’s  case  (supra)  this  Court  held  that  where

different  High  Courts  have  taken  different  views  and  some of  the  High

Courts have decided in favour of the revenue, same  is a just cause for the

revenue to prefer an appeal.

16. 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 malafides.  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  the  decision  is  revenue

neutral  there  may not  be  any need  for  preferring  the  appeal.   All  these

certainly provide the foundation for making a departure.

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17. In C.K. Gangadharan’s case (supra) it was held that merely because in

some cases  revenue has not preferred an 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  different

High Courts.   In this  case,  it  is  accepted  by the  learned counsel  for  the

appellant-revenue that the fact situation in all the assessment years is same.

According  to  him,  if  the  fact  situation  changes  then  the  revenue  can

certainly prefer an appeal notwithstanding the fact that for some years no

appeal was preferred.  This question is of academic interest in the present

appeals as undisputedly the fact situation is the same.

18. The  appeals  are  without  merit  and  are  accordingly  dismissed.  No

costs.  

  ……..................................J. (Dr. ARIJIT PASAYAT)

……..................................J. (C.K. THAKKER)

….......................................J. (LOKESHWAR SINGH PANTA)

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New Delhi;

November 7, 2008

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