2002 (7) TMI 86 - HC - Income Tax

s.254 orders are final and binding; CIT(A) must follow; President can form special panel under s.255(3); s.143(2) valid post-refund

HC held the Tribunal, constituted under s.252, issues final, binding orders on subordinate revenue authorities under s.254; the Commissioner of Income-tax ... Tribunal's authority over lower authoritie's decisions - Binding nature of Tribunal's decisions on lower authorities - notice under section 143(2) could be issued even after grant of refund under section 143(1)(a)(ii) - HELD THAT:- The Tribunal is created under section 252 of the Income-tax Act, consisting of as many judicial and accountant members as may be appointed by the Central Government. One such judicial member of the Tribunal is normally appointed as the President thereof. Any assessee aggrieved by the orders passed by the authorities as enumerated under clauses (a) to (c) of sub-section (1) of section 253 may appeal to the Tribunal. The Tribunal has power to pass such orders on such an appeal as it thinks fit. Sub-section (4) of section 254 attaches finality to the orders of the Tribunal subject to the provisions of section 256 (or section 260A). Needless to say the orders passed by the Tribunal are binding on all the Revenue authorities functioning under the jurisdiction of the Tribunal. Obviously, the Commissioner of Income-tax (Appeals) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. Even where he may have some reservations about the correctness of the decision of the Tribunal, he had to follow the order. He could and should have left it to the Department to take the matter in further appeal to the Tribunal and get the mistake, if any, rectified. The requisite provision is contained in sub-section (3) of section 255 where the President of the Tribunal is authorised to constitute a Special Bench of three or more members. In the instant case also the learned Members of the Indore Bench of the Tribunal instead of reviewing their own earlier judgment, ought to have referred the matter to the larger Bench. Issues:1. Tribunal's authority over lower authorities' decisions2. Review of Tribunal's own decision3. Interpretation of Income-tax Act provisions4. Binding nature of Tribunal's decisions on lower authorities5. Judicial propriety and disciplineIssue 1: Tribunal's authority over lower authorities' decisionsThe case involved a dispute where the Tribunal had held that its decisions were binding on lower authorities. However, the Commissioner of Income-tax (Appeals) refused to follow the Tribunal's order, leading to a challenge by the assessee. The Tribunal dismissed the appeal, upholding the Commissioner's decision. The High Court emphasized that revenue officers must adhere to higher appellate authorities' orders to maintain judicial discipline. The Commissioner erred in not following the Tribunal's decision, even if he had reservations, as rectification could be pursued through further appeal.Issue 2: Review of Tribunal's own decisionThe Tribunal, in this case, reviewed its own earlier judgment in the Arihant case, where it had held that no notice under section 143(2) could be issued after a refund under section 143(1)(a)(ii). The Tribunal overruled its own decision, which the High Court found improper. Citing legal precedents, the High Court highlighted that a larger Bench should review decisions, as seen in the case of Pradip Chandra Parija v. Pramod Chandra Patnaik. The Gujarat High Court's guidelines in Sayaji Iron and Engineering Co. v. CIT were referenced, emphasizing the need for a larger Bench to reconsider conflicting decisions.Issue 3: Interpretation of Income-tax Act provisionsThe matter revolved around the interpretation of provisions under the Income-tax Act, specifically regarding the issuance of notices under section 143(2) after a refund under section 143(1)(a)(ii). The Tribunal's decision on this issue was challenged by the assessee, leading to the reference to the High Court. The High Court's analysis focused on the correct application and interpretation of the relevant provisions, emphasizing the need for consistency and adherence to legal principles.Issue 4: Binding nature of Tribunal's decisions on lower authoritiesThe High Court reiterated the binding nature of Tribunal decisions on lower authorities, emphasizing the importance of following higher appellate authorities' orders to avoid undue harassment to assessees and ensure the proper administration of tax laws. The case highlighted the necessity for judicial discipline and adherence to established legal principles to maintain consistency and fairness in tax assessments.Issue 5: Judicial propriety and disciplineThe High Court addressed the broader issue of judicial propriety and discipline in the context of the Tribunal's decision-making process. Emphasizing the need for adherence to legal precedents and guidelines, the High Court underscored the importance of maintaining consistency and procedural correctness in judicial decisions. The case highlighted the significance of following established legal procedures and principles to uphold the integrity and effectiveness of the judicial system.