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PETITIONER: THE BHOPAL SUGAR INDUSTRIES LTD.

       Vs.

RESPONDENT: THE INCOME-TAX OFFICER, BHOPAL

DATE OF JUDGMENT: 02/09/1960

BENCH: DAS, S.K. BENCH: DAS, S.K. HIDAYATULLAH, M. GUPTA, K.C. DAS SHAH, J.C. AYYANGAR, N. RAJAGOPALA

CITATION:  1961 AIR  182            1961 SCR  (1) 474  CITATOR INFO :  D          1961 SC 402  (10,14)  F          1984 SC 898  (12)

ACT: Directions by  superior Tribunals-If could be refused to  be carried out-Principles of administration of justice.

HEADNOTE: The  Income-tax  Appellate Tribunal in the exercise  of  its appellate  jurisdiction  gave  certain  directions  to   the respondent,  an Income-tax Officer, in connection  with  the ascertainment of the market value of sugarcane grown by  the appellant at their farm and used by them for the manufacture of  sugar.   The appellant asked the Income_tax  Officer  to give effect to the said order and directions of the Tribunal but  was informed that no relief could be given.   Thus  the Income-tax Officer failed to carry out the directions of the Tribunal. Held,  that the refusal to carry out the directions which  a superior  Tribunal  had given in exercise of  its  appellate powers  was  in effect a denial of justice and  was  further more destructive                             475 of  one  of the basic principles in  the  administration  of justice  based  as it is in this country on a  hierarchy  of courts;  and the result of such refusal would lead to  chaos in the administration  of justice.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 407 of 1956. Appeal from the judgment and order dated February 14,  1956, of  the  former Judicial Commissioner’s  Court,  Bhopal,  in Misc.  Civil Case No. 24 of 1955. Sanat P. Mehta and S. N. Andley, for the appellant. K.   N. Rajagopal Sastri and D. Gupta, for the respondent. 1960.  September 2. The Judgment of the Court was  delivered by

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S.   K. DAS J.-This is an appeal on a certificate under Art. 133 of the Constitution.  The short question for decision is whether the learned Judicial Commissioner of Bhopal  rightly dismissed a petition under Art. 226 of the Constitution made by   the  Bhopal  Sugar  Industries,  Limited,   hereinafter referred to as the appellant company, praying for the  issue of an appropriate order or direction in the nature of a writ of  mandamus  to  compel  the  Income-tax  Officer,  Bhopal, respondent herein, to carry-out certain directions given  by the  Income-tax  Appellate  Tribunal, Bombay,  to  the  said officer in an appeal preferred by the appellant company from an order of assessment made against it by the respondent. The  relevant  facts  are these.   The  appellant  company carries  on the business of manufacturing and selling  sugar in  various  grades and quantities.  It has its  factory  at Sehore  which  was formerly in the Bhopal State and  is  now situate in the State of Madhya Pradesh.  It purchased sugar- cane from local cultivators and also grew its own sugar-cane in  farms situate in that State, such sugar-cane being  used for  its manufacture of sugar.  During the year  of  account ending   on  September  30,  1950,  the  appellant   company purchased 7,72,217 maunds of sugar-cane from local 61 476 cultivators  at  various purchasing centers, 14  in  number, situate  at  a  distance of about 8 to  22  miles  from  its factory.  The price paid was Rs. 1-4-6 per maund, that being the  price fixed, by the then State of Bhopal.  The  average cost of transporting the sugar-cane from the various centers to the factory was stated to be Rs. 0-4-9 per maund.  During the  same period the appellant company grew its  own  sugar- cane  to the extent of 6,78,490 maunds and brought the  same along  with the cultivators’ sugar-cane to its  factory  for manufacturing  sugar.  For the sugar-cane grown on  its  own farms the appellant company claimed Rs. 1-13-0 per maund  as its  market value (including Rs. 0-4-9 as average  transport charges),  the total market value for 6,78,490  maunds  thus coming  to  Rs. 12,29,763.  The appellant  company  deducted from  the aforesaid, market value a sum of Rs.  9,77,772  as agricultural  expenses,  namely,  expenses  of   harvesting, loading,  etc., and claimed the balance of Rs.  2,51,991  as agricultural  income to be deducted from the computation  of its  total  income  for the assessment  year  1951-52.   The respondent   accepted   the  figure  of  Rs.   9,77,772   as agricultural  expenses  but  computed the  market  value  of 6,78,490  maunds  of  sugar-cane  grown  on  the   appellant company’s own farms at Rs. 9,33,000 at the rate of Rs. 1-6-0 per  maund; thus according to this computation there  was  a loss of Rs. 44,772 and the respondent held in his assessment order  that the appellant company was not entitled to  claim any  deduction  of agricultural income  for  the  assessment year. The  appellant  company  then  appealed  to  the   Appellate Assistant  Commissioner,  Jubbalpore,  who  determined   the market  value  of  the sugar-cane  grown  on  the  appellant company’s own farms at Rs. 10,07,132 at the rate of Rs. 1-7- 9 per maund.  This resulted in an agricultural income of Rs. 29,360,  which the Appellate Assistant Commissioner  allowed to  be deducted from the total income of the appellant  com- pany. Not  satisfied  with the order of  the  Appellate  Assistant Commissioner, the appellant company preferred                             477 an appeal to the Income-tax Appellate Tribunal, Bombay, and claimed that the market value of the sugar-cane grown on its

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farms  should  be Rs. 1-13-0 per maund and  not  Rs.  1-7-9. There  was  no  dispute  before  the  Tribunal  as  to   the agricultural  expenses, and the question which the  Tribunal had to decide related to the market value of 6,78,490 maunds of  sugar-cane grown on the appellant company’s  own  farms. After referring to r. 23 of the Income-tax Rules and certain other matters, the Tribunal said: " We are, therefore, inclined to think that ’market’  within the  meaning of rule 23 is not the centers but  the  factory where  the assessee company manufactures sugar.  This  being the position in order to find out the market value, we  have to  add  the  transport  charges from  the  centers  to  the factory.   We were told that the transport charges  amounted to  Rs.  0-4-9 per maund.  We have not been able  to  verify this  figure.   In our opinion,  therefore,  the  sugar-cane produced-by the assessee company in its own farms has to  be valued  at  Rs. 1-4-6 per maund plus the  average  transport charges per maund from the centers to the factory". The  Tribunal  then  gave the following  directions  to  the respondent : "  We  would, therefore, direct the  Income-tax  Officer  to ascertain  the average transport charges per maund from  the centers to the factory and to add to it the rate of Rs. 1-4- 6  per mand and on that basis work out the market  value  of the  sugar-cane  grown by the assessee company  in  its  own farms.  If the market value comes to more than Rs. 1-7-9 per maund  further relief to the necessary extent will be  given by the Income-tax Officer.  If, however, the market value is less than Rs. 1-7-9 the appeal must fail ". The Commissioner of Income-tax then applied to the  Tribunal for  a  reference  under s. 66(1)  of  the  Income-tax  Act, stating  that a question of law arose out of the  Tribunal’s order  in as much as the Tribunal was not justified, in  the opinion of the Department, to add average transport  charges to the price of 478 Rs.  1-4-6  per maund of sugar-cane grown by  the  appellant company.   This  application  woos,  however,  withdrawn  on August 4, 1954.  The order of the Tribunal thus became final and was binding on the parties. In the meantime, the appellant company moved the  respondent to  give  effect to the directions of the  Tribunal.   After some abortive correspondence between the respondent and  his higher officers on one side and the appellant company on the other,  the  respondent informed the  appellant  company  on March 24, 1955, that no relief could be given to it.  In his letter of that date the respondent said: "In  this connection your attention is invited to the  order of  the Tribunal to ascertain the cost of transportation  of the  sugar-cane  from the farms to the factory  which  could only  be considered in working out the market value  of  the agricultural produce.  As is evident from your account books you  are found to have debited a sum of Rs. 59,116 only  out of  the total transportation expenses to  your  agricultural produce account.  Naturally, therefore, only the expenses so incurred by you can be considered in working out the  market value  of  the  agricultural  sugar-cane.   By  adding   the transportation charges to the valuation of sugar-cane at Rs. 1/4/6  on 6,78,490 maunds of agricultural produce the  total cost  of  the agricultural produce would  be  Rs.  9,28,431. Against  this  by  the  order  of  the  Appellate  Assistant Commissioner  the  value of the farm cane was taken  at  Rs. 10,07,132  and thus the excess allowance of Rs.  78,701  has already  been allowed to you.  Thus as the market  value  of the  agricultural  produce does not in any case  exceed  Rs.

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1-7-9  as held by the Appellate Assistant  Commissioner  the result of the Tribunal’s order as per their finding given in para  8  of the order results in no relief  being  given  to you." It  is  worthy  of note here that  while  the  Tribunal  had directed  the respondent to ascertain the average  transport charges  from  the centers to the  factory,  the  respondent referred  to  the  cost of transportation  from  the  farms- to the factory.  Clearly enough, the respondent misread  the direction of the Tribunal and failed                             479 to  carry  it  out.  He proceeded on a basis  which  was  in contravention of the direction of the Tribunal. In  these  circumstances, the appellant  company  moved  the Judicial Commissioner, Bhopal, then exercising the powers of a  High  Court  for that area, for the issue of  a  writ  to compel  the respondent to carry out the directions given  by the  Tribunal.  The learned Judicial Commissioner  found  in express terms that the respondent had acted arbitrarily  and in clear violation of the directions given by the Tribunal ; in other words, he found that the respondent had disregarded the  order  of the Tribunal, failed to carry  out  his  duty according  to  law and had acted  illegally.   Having  found this,  the learned Judicial Commissioner went on to  examine the  correctness or otherwise of the order of  the  Tribunal and  found that the Tribunal went wrong in not treating  the centers  as  ’markets’ within the meaning of r.  23  of  the Income-tax  Rules.  He then came to the conclusion  that  in view  of the error committed by the Tribunal, there  was  no manifest injustice as a result of the order of the  respond- ent  ;  accordingly, he dismissed the  application  for  the issue of a writ made by the appellant company. We think that the learned Judicial Commissioner was  clearly in error in holding that no manifest injustice resulted from the  order  of the respondent conveyed in his  letter  dated March  24,  1955.  By that order  the  respondent  virtually refused  to  carry  out  the  directions  which  a  superior tribunal  had  given  to him in exercise  of  its  appellate powers  in  respect of an order of assessment made  by  him. Such  refusal  is  in effect a denial  of  justice,  and  is furthermore  destructive of one of the basic  principles  in the administration of justice based as it is in this country on a hierarchy of courts.  If a subordinate tribunal refuses to  carry out directions given to it by a superior  tribunal in the exercise of its appellate powers, the result will  be chaos  in the administration of justice and we  have  indeed found  it  very  difficult  to  appreciate  the  process  of reasoning  by which the learned Judicial Commissioner  while roundly condemning the respondent for refusing to carry  out the directions of the superior 480 tribunal, yet held that no manifest injustice resulted  from such refusal. It  must be remembered that the order of the Tribunal  dated April 22, 1954, was not under challenge before the  Judicial Commissioner.   That order had become final and  binding  on the parties, and the respondent could not question it in any way.  As a matter of fact the Commissioner of Income-tax had made  an application for a reference, which application  was subsequently  withdrawn.  The Judicial Commissioner was  not sitting in appeal over the Tribunal and we do not think that in the circumstances of this case it was open to him to  say that  the  order of the Tribunal was wrong  and,  therefore, there  was no injustice in disregarding that order.   As  we have  said earlier, such view is destructive of one  of  the

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basic principles of the administration of justice. In  fairness to him it must be stated that  learned  counsel for  the respondent did not attempt to support the  judgment of the Judicial Commissioner on the ground that no  manifest injustice  resulted  from the refusal of the  respondent  to carry  out  the  directions  of  a  superior  tribunal.   He conceded that even if the order of the Tribunal was wrong, a subordinate and inferior tribunal could not disregard it; he readily recognised the sanctity and importance of the  basic principle  that  a subordinate tribunal must carry  out  the directions of a superior tribunal.  He argued, however, that the  order  of  the  Tribunal  was  unintelligible  and  the respondent  did his best to understand it according  to  his light.   This argument advanced on behalf of the  respondent appears  to  us  to be somewhat disingenuous.   We  find  no difficulty  in understanding the order of the  Tribunal;  it directed the respondent " to ascertain the average transport charges per maund from the centers to the factory and add to it  the  rate of Rs. 1-4-6 per maund  of  sugar-cane".   The direction is clear and unambiguous.  The respondent  instead of ascertaining the average transport charges per maund from the  centers  to  the factory,  referred  to  the  transport charges  from the farms to the factory and on  that  footing disregarded the directions of the Tribunal ; for-’                             481 the  respondent  to  say thereafter that the  order  of  the Tribunal was not intelligible betrays a regrettable lack  of candour.  We must, therefore, reject the argument of learned counsel for the respondent. The   learned  Judicial  Commissioner  referred   to   three decisions in support of the proposition that a direction  or order in the nature of a writ of mandamus cannot be  claimed as  of right, nor need such a writ issue for every  omission or  irregularity; Bimal Chand v. Chairman, Jiagunj  Azimgunj Municipality  (1); Gram Panchayat, Vidul of Vidul  v.  Multi Purpose  Co-operative  Society  of  Vidul  (2)  and  Messrs. Senairam Doongarmall v. Commr. of Income Tax, Assam (3).  In the  view which we have expressed, namely, that by  the  im- pugned order the respondent failed to carry out a legal duty imposed  on him and such failure was destructive of a  basic principle  of  justice, a writ of mandamus should  issue  ex debito  justiciae to compel the respondent to carry out  the directions   given  to  him  by  the  Income-tax   Appellate Tribunal,  Bombay,  and it is unnecessary  to  consider  the decisions  referred to above except merely to state that  in none of them arose any question of condoning a refusal by an inferior tribunal to carry out the directions given to  that tribunal by a superior tribunal in the undoubted exercise of its  appellate powers, on the ground that the order  of  the superior tribunal was wrong. We  must,  therefore,  allow  this  appeal,  set  aside  the judgment  and  order  of  the  Judicial  Commissioner  dated February   14,  1956  and  issue  an  order  directing   the respondent to carry out the directions given by the  Income- tax  Appellate Tribunal, Bombay, in its judgment  and  order dated  April  22,  1954.   The  appellant  company  will  be entitled to its costs in the proceedings before the Judicial Commissioner and in this Court. Appeal allowed. (1) A.I.R. 1954 Cal 285. (2) A.I.R. 1954 Nag. 82. (3) A.I.R. 1955 Assam 201. 482

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