Capital gains rate dispute under Section 50 and applicability of Section 112 tax rate administrative refusal overturned, remand to apply ITAT Special Bench ruling.

Dispute concerns whether capital gains computed under Section 50 must be taxed at rates applicable to long-term gains under Section 112; Commissioner declined to follow an ITAT Special Bench decision (SKF India) and reviewed conflicting precedents, prompting judicial intervention. The administrative refusal to apply the Special Bench's ratio was criticised as misdirection and contrary to binding precedent and judicial discipline; the impugned order under Section 264 was quashed and set aside, and the matter remanded for a fresh order directing the revenue authority to follow the Special Bench decision in determining the rate of tax on the capital gains.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the revisional authority, while deciding an application under Section 264 of the Income Tax Act, could refuse to follow a jurisdictional Special Bench decision of the Tribunal on the ground that the decision is "not acceptable" to the Revenue, is dissented from, or is under challenge before the High Court.

(ii) What relief and directions should follow where the revisional authority has ignored binding Tribunal precedent, including whether the matter should be remanded with a mandate to decide afresh by following the Tribunal decision, and whether the revisional authority can revisit condonation of delay already granted.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Refusal to follow jurisdictional Tribunal/Special Bench precedent by the revisional authority

Legal framework: The Court treated adherence to decisions of higher appellate authorities within the hierarchy as a requirement of judicial discipline in tax administration, and applied the principle that a binding precedent must be followed unless its operation is suspended by a competent court.

Interpretation and reasoning: The revisional authority gave reasons for not following the Special Bench decision, including that the Revenue had not accepted it and was contesting it before the High Court, that there were conflicting views and the Special Bench was not a "Full Bench", and that the Special Bench (in the authority's view) incorrectly interpreted the statute and required reconsideration. The Court held this approach to be a misdirection: it was not for the revisional authority to sit in judgment over the correctness of a binding Tribunal decision. The Court emphasized that permitting lower authorities to disregard binding decisions on personal views of incorrectness would cause chaos in tax administration and undermine judicial discipline. The Court also rejected the premise that pendency of an appeal or departmental non-acceptance provides a ground to disregard binding precedent, absent any suspension/stay of its operation.

Conclusions: The impugned revisional order was unsustainable because it refused to follow a binding jurisdictional Tribunal decision on grounds that were impermissible (departmental challenge/non-acceptance, dissent, or perceived incorrectness). The Court clarified that it was not deciding the substantive correctness of the Special Bench view on tax rate; it decided only that the decision had to be followed as binding precedent.

Issue (ii): Appropriate relief; remand directions; bar on revisiting condonation of delay

Interpretation and reasoning: Since the revisional order was vitiated by failure to maintain judicial discipline, the Court found it appropriate to quash it and remand the matter for a fresh decision on merits with a direction to follow the Special Bench decision. The Court further noted that condonation of delay had already been decided in favour of the assessee and was not challenged before the Court; therefore, the revisional authority was directed not to reopen that question on remand.

Conclusions: The Court quashed the impugned order and remanded the matter to the revisional authority to pass a fresh order on merits by following the Tribunal Special Bench decision, without revisiting condonation of delay, and within a stipulated time frame of 30 days from uploading of the order.

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