IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 5210-5216 OF 2002

C.K. Gangadharan & Anr.   .... Appellants

Versus

Commissioner of Income Tax, Cochin ...Respondent

J U D G M E N T

Dr. ARIJIT PASAYAT, J.  

1. By order dated 13.3.2008, a reference was made to larger

Bench and that is how these cases are before us.  The order,

of reference, inter-alia, reads as follows:

“ xxx xxx xxx

In view of the aforesaid position, we are of  the  opinion  that  matter  requires consideration by a larger Bench to the extent whether  revenue  can  be  precluded  from defending itself  by relying upon the contrary decision.

We  make  it  clear  that  we  are  not doubting the correctness of the view taken by this  Court  in  the  cases  of  Union  of  India  v. Kaumudini Narayan Dalal (2001)10 SCC 231, CIT v. Narendra Doshi (2004) 2 SCC 801 and CIT v. Shivsagar Estate (2004) 9 SCC 420 to the  effect  that  if  the  revenue  has  not challenged  the  correctness  of  the  law  laid down by the High Court and accepted it in the case of one assessee, then it is not open to the Revenue  to  challenge  its  correctness  in  the case of other assesses, without just cause.

Registry  is  directed  to  place  the  papers before  the  Hon’ble  Chief  Justice  of  India  for appropriate orders.”

2. In terms of the reference what is required to be decided

is whether revenue can be precluded from defending itself by

relying upon the contrary decisions.   It  is  to  be  noted that

various High Courts have taken contrary views. While some of

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the courts have decided in favour of the assessee, other High

Courts have decided in favour of the revenue.     

3. For deciding the issue few decisions of this Court need to

be noted.   

4. In Bharat Sanchar Nigam Ltd. and Anr. v. Union of India

and Ors. (2006 (3) SCC 1), it was noted as follows:

“20.  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 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 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

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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.

22. 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

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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.”  

5. In State of Maharashtra v. Digambar (1995 (4) SCC 683),

the position was highlighted by this Court as follows:

“16. We are unable to appreciate that objection raised against the prosecution of  this appeal by the appellant or other S.L.Ps 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  therefore.  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 S.L.Ps are  filed by the  State  against  judgments  of  High  Court, such  S.L.Ps  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

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State. Therefore, the circumstance of the non- filing  of  the  appeals  by  the  State  in  some similar matters or the rejection of some S.L.Ps 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 S.L.P. or S.L.Ps  in  other  similar  matters  where  it  is considered  on  behalf  of  the  State  that  non- filing  of  such  S.L.P.  or  S.L.Ps  and  pursuing them  is  likely  to  seriously  jeopardise  the interest of the State or public interest.”

6. In  Government of W.B. v.  Tarun K. Roy and Ors. (2004

(1) SCC 347) reference was made to the judgment in Digambar

case (supra) and State of Bihar and Ors. v. Ramdeo Yadav and

Ors. (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  appellant  on  their  own merit,  particularly,  when  the  question  as regard difference in the grant of scale of pay on the  ground  of  different  educational qualification stands concluded by a judgment of this Court in Debdas Kumar (1991 Supp (1) SCC 138) (supra).  If  the judgment of  Debdas Kumar (supra)  is to  be  followed & 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

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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  and  Ors. v.  Ramdeo Yadav  and Ors. (1996  (3)  SCC 493)  wherein this  Court  noticed  Debdas  Kumar (supra) holding:

"Shri B.B. Singh, the learned counsel for the appellant 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 State of Maharashtra v. Digambar, (1995) 4 SCC 633) and in State of West Bengal v.  Debdas  Kumar,  (1991)  Suppl.  SCC 138), had held that though an appeal was not  filed  against  an earlier  order,  when public  interest  is  involved  in interpretation of law, the Court is entitled to go into the question. "

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7. In Ramdeo’s case (supra) reference was made to State of

W.B. v. Debdas Kumar (1991 Suppl. (1) SCC 138), wherein it

was observed at para 5 as follows:

“5. 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 January 13, 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.”

8. In  Commissioner  of  Central  Excise,  Raipur v.  Hira

Cement (2006  (2)  SCC  439)  at  para  24  the  position  was

reiterated.

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9. In Chief Secretary to Government of Andhra Pradesh and

Anr. v.  V.J.  Cornelius  and  Ors. (1981  (2)  SCC 347)  it  was

observed that equity is not relevant factor for the purpose of

interpretation.

10. It will be relevant to note that in Karam Chari v. Union of

India  and Ors.  (2000 (243)  ITR 143)  and Union of  India  v.

Kaumudini  Narayan  Dalal  and  Anr.  (2001  (249)  ITR),  this

Court observed that without a just cause revenue cannot file

the  appeal  in  one  case  while  deciding  not  to  file  appeal  in

another case. This position was also noted in Commissioner of

Income Tax v. Shivsagar Estate (2004 (9) SCC 420).

11. The order of reference would go to show that same was

necessary  because  of  certain  observations  in  Berger  Paints

India Ltd. V. Commissioner of Income Tax, Caluctta (2004 (12)

SCC  42).   The  decision  in  Union  of  India  and  Ors. v.

Kaumudini Narayan Dalal and Anr. (2001 (10) SCC 231) was

explained  in  Himalatha  Gargya v.  Commissioner  of  Income

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Tax, A.P. and Anr. (2003 (9) SCC 510) at para 14.  It has been

stated in the said case that the fact that different High Courts

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

favour of the revenue constituted “just cause” for the revenue

to prefer an appeal. This Court took the view that having not

assailed  the  correctness  of  the  order  in  one  case,  it  would

normally not be permissible to do so in another case on the

logic that the revenue cannot pick and choose.  There is also

another aspect which is the certainty in law.   

12. 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  mala  fides.   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 decision is revenue neutral there may not be any

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need for preferring the appeal.  All these certainly provide the

foundation for making a departure.

13. In answering the reference, we hold that merely because

in some cases the revenue has not preferred 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 Tribunals or

the High Courts.   

14. The matter shall be placed before the concerned Bench

for disposal of the appeals.

………………………….J. (Dr. ARIJIT PASAYAT)

…………….……………J. (P. SATHASIVAM)

…………….……………J. (AFTAB ALAM)

New Delhi,

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July 21, 2008

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