TaxTMI 
TaxTMI 
01 Sep 2026 
UNION OF INDIA Versus KAMLAKSHI FINANCE CORPORATION LTD. - 1991 (9) TMI 72 - Supreme Court
Relevant judgment missed considerations:
The case before the CPC:
Full facts are not known on reading of the judgment of the High Court and the Supreme Court because this case involves order of CIT u.s. 264 that is revision on petition of assessee to claim certain benefits not allowed by CPC.
Return of income was filed in which while computing capital gains benefit of relaxation about fair market value being stamp duty valuation was not claimed / fully claimed.
However, subsequently assessee filed a petition u.s. 264 before Pr. CIT and sought relief by way of revision of intimation issued by CPC though it was as per return of income filed that is as per self-assessment made by assessee.
The case before the High Court:
Relevant portion with highlights added from order/ judgment of High Court with remarks added by author in brackets:
1. Petitioner is impugning an order dated 28th March 2023 passed by Respondent No. 3 rejecting Petitioner's application filed under Section 264 of the Income Tax Act, 1961 ("the Act"). Unquote {Remarks - the assessment year, date of filing of Return of Income are not mentioned.}
2. The reason, Respondent No. 3 has rejected the application on merit, can be found in paragraph no. 6.2 of the impugned order and it reads as under :
"6.2 Regarding the merits of the assessee's contentions. Firstly, the assessee has himself accepted that the tolerance limit of 5% between the declared sales consideration and the stamp duty valuation was inserted by the Finance Act, 2018 with effect from 01.04.2019. This was subsequently enhanced to 10% by the Finance Act, 2020 with effect from 01.04.2021. When the act itself lays down that these amendments would come into effect prospectively from 01.04.2019/01.04.2021, there is no question of holding that these amendments were retrospective in nature. The assessee has not produced any judgements of the High Court/Supreme Court holding that these amendments were to be applied retrospectively. The Hon'ble ITAT judgements relied upon by the assessee have not been accepted by the Department and are therefore of no help to the assessee."
3. The Apex Court in Union of India and Others v. Kamlakshi Finance Corporation Ltd., [1992 Supp(1) Supreme Court Cases 443. Gitalaxmi] has held that in disposing the quasijudicial issues before them, the Revenue Officers are bound by the decisions of Appellate Authorities. The order of Appellate Collector is binding on the Assistant Collectors working within his jurisdiction etc. The Apex Court in paragraph no. 6 has criticized the conduct of Revenue Authorities. Paragraph no. 6 reads as under :
"6. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws."
4. Therefore, Respondent No. 3 should have realized that the order of Income Tax Appellate Tribunal ("ITAT"), Pune was binding upon him and the principles of judicial discipline required that orders of the highest (sic. higher) Appellate Authorities should be followed unreservedly by the subordinate Authorities. The mere fact that the order is not acceptable to the department, in itself an objectionable phrase, can furnish no ground for not following it, unless its operation has been suspended by the Competent Court. If this healthy rule is not followed, the result would only be undue harassment to Assessees and chaos in administration of tax laws.
{Unquote -Remarks of author: In this case order of ITAT, Pune was an order of higher authority which was not followed by the CIT while passing order u.s. 264. The High Court relied on above referred judgment of the Supreme Court, which was also binding on the High Court as well as on the CIT. Although that judgment was in relation to Central Excise, but principal apply to income tax cases also. In fact honourable Supreme Court has also considered the principal and held that the order / judgment of High court and ITAT are binding and an adjustment even in intimation can be made accordingly for example see judgment in case Dy. Commissioner of Income Tax Versus M/s. Raghuvir Synthetics Ltd. -2017 (4) TMI 975 - Supreme Court
Furthermore the judgment in case of UNION OF INDIA Versus KAMLAKSHI FINANCE CORPORATION LTD was passed by three judges namely S. Ranganathan, V. Ramaswami and N.D. Ojha, JJ. Therefore, it was binding upon the Supreme Court while deciding the case of Om Siddhakala (supra.)}
5. In the circumstances, we hereby quash and set aside the order dated 28th March 2023 impugned in the petition and remand the matter to Respondent No. 3 for de-novo consideration. Respondent No. 3 shall follow the law as laid down by the ITAT. Before passing an order, Respondent No. 3 shall give a personal hearing to Petitioner, notice whereof shall be communicated atleast five working days in advance. After the personal hearing, if Assessee wishes to file written submissions, Assessee may do so within three working days of the personal hearing. The order to be passed shall be a reasoned order dealing with all submissions of Petitioner. The order shall be passed on or before 30th June 2024.
6. Petition disposed. No order as to costs.
Unquote- Remarks of author- The High Court followed judgment of the Supreme Court in case of UNION OF INDIA Versus KAMLAKSHI FINANCE CORPORATION LTD which was of larger bench of three judges.Though this related to Central Excise matter but principal of judicial discipline and binding precedence is common. Furthermore, if there is a binding ruling of Tribunal or High Court, then it is binding even in case of order by way of intimation u.s. 143.1 as held by the Supreme Court in case of Raghuvir Synthetics Ltd. Supra. As discussed by author in remarks}
Order of the Supreme Court with highlights added:
ORDER
1. Delay condoned. Leave granted.
2. The appeal is from an order in the Writ Petition, which remanded the matter to be considered afresh.
3. We heard learned Standing Counsel appearing for the Department and learned Counsel for the respondent. While learned Counsel for the Department submits that the demand raised was in accordance with the returns filed. Without filing a revised return, the demand was challenged under Section 264 of the Income Tax Act, 1961 ['the Act'], which when dismissed, the respondent-assessee had approached the High Court. The claim raised could not have been made especially, since there was no revision of returns filed by the assessee. The learned Counsel for the assessee on the other hand submits that the impugned order is a mere remand made and all contentions could be raised before the appropriate authority.
4. We are not convinced that the remand, in the facts and circumstances of the case, was permissible. Admittedly, on self-assessment, a return was filed by the assessee which was processed by the Centralised Processing Centre, Income Tax Department, Bengaluru and a notice was issued under Section 143(1) and a subsequent notice under Section 156, demanding the outstanding tax as coming out from the returns filed on self-assessment. The respondent filed a revision invoking Section 264 of the Act before the Principal Commissioner of Income Tax, who rejected the same on the ground that there was unexplained delay, the tolerance limits as coming out from Section 43CA were only prospective and that by side-wind the attempt is to revise the return, after the period had expired, by invoking Section 264.
5. The issue of tolerance limit was not raised in the self-assessment nor was the assessment revised within the time provided. The High Court, hence, fell in error, insofar as the remand made. The assessee having not claimed the same in the returns filed could have revised the return within the time provided under the Act. When that was not done, there is no question of revision under Section 264, which would be an attempt to revise the return under the garb of a revision.
6. Learned Counsel for the respondent-assessee submits that there has been re-assessment made after remand. Necessarily, if the remand order is set aside, the order passed on re-assessment will also have no effect, being a dependent order. We hence set aside the impugned judgment of the High Court and as a consequence any re-assessment made would not be applicable. The assessee would have to pay tax on the basis of the returns filed on which an intimation was issued and a demand raised.
7. The appeal is allowed to that extent clearly observing that we have not entered into the question of whether the tolerance limit would be retrospective or prospective.
8. Pending application(s), if any, shall also stand disposed of.
Unquote - observations of author:
With due respect, author feels that the case was not properly presented or argued by the counsels of assessee, who primarily focussed on remand order by High Court. They did not press the binding nature of the judgment of LB of SC in case of KAMLAKSHI FINANCE CORPORATION LTD relied by the High Court. They did not even refer other judgments including Raghuvir Synthetics Ltd (supra.), which was on issue of non debatable nature based on binding precedence in cotext of intimation u.s. 143.1.
The date of filing of ITR and subsequent development by way of amendment and order of Tribunal were not pressed to show that it was a subsequent development after filing of ITR.
The purpose and role of S.264 to allow relief u.s. 264 so as to ensure assessment as per law was also not pressed.
The role of seeking relief by way of revision u.s. 264 was perhaps advised by counsels to the assessee. Author feels that better option was to seek relief by way of an appeal before CIT(A). In such appeal, claim not made in ITR could also have been pressed.
Although it was stated that order of tribunal, Pune has not been challenged by Revenue, however, judgments of High Courts holding such amendments to be clarificatory, curative and hence retrospective were not referred. For example judgment in case reported as The Commissioner of Income Tax, Chennai. Versus Shri Vummudi Amarendran - 2020 (10) TMI 517 - MADRAS HIGH COURT
The Commissioner of Income Tax, Chennai. Versus Shri Vummudi Amarendran in which it was held that the amendment to provide relaxation up to 5% by amendment to Section 50C which was introduced with effect from 2017-18 prospectively was applicable retrospectively.
This was followed in R.C. Kannan, Smt. Kannan Manonmani Versus The Principal Commissioner of Income Tax-1, Coimbatore, The Assistant Commissioner of Income Tax, Non-Corporate Ward 1 (2), Coimbatore - 2024 (12) TMI 1350 - MADRAS HIGH COURT in context of S.264 and relief was allowed to assessee and in this case it was
HELD THAT: - Having found that the statutory referral to a Valuation Officer was available and not barred by the AR's earlier acceptance, the court held that the revisional authority's rejection of the revision petitions without directing the requisite valuation reference was unsustainable. The court set aside the impugned orders passed under Section 264 and remitted the matters to the Assessing Officer to redo the exercise under the proviso to sub-clause (vii)(c) to sub-section 2 to Section 56 read with Section 50C(2). The Assessing Officer was directed to pass a final order on merits expeditiously, preferably within six months.
With highest regards to their lordships, author also feel that it is likely a case of preferences adopted, whereby their lordships seemingly gave weightage to the duty of assessee to make a claim in return of income or revised return of income failing which claim cannot be made, before CIT and a claim before CIT will amount to revising ROI and limitation to file revised ROI applied.
The fact that even if income self -assessed was higher than what is taxable as per law and subject has been taxed more than the amount payable as per law could not be pressed by counsels and was unfortunately lost sight by their lordships.
The judgment of Supreme Court (LB) which was relied and followed by the High Court has not found any mention in the judgment of Supreme Court. This means that it is likely that their lordships might have inadvertently missed consideration of a precedent which was bonding on them also.
In such cases particularly by way of Writ Petition, when alternate remedy is not available public seek relief from Courts because other doors are closed and tax payer has suffered. Public can reasonably expect relief from Courts, which was rightly allowed by the High Court but was unfortunately challenged by the Revenue, ignoring circulars of CBDT and various rulings that relief should not be denied to assessee if he has missed to make a claim for it.
Therefore, the judgment of the Supreme Court needs a reconsideration.