TaxTMI 
TaxTMI 
1985 (3) TMI 89
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....of cl. (b) of s. 35B(1) 6. Rent 4,000 Sub-cls. (i) to (iv) of cl. (b) of s. 35B(1) 7. Stationery 5,151 Sub-cls. (i) to (iv) of cl. (b) of s. 35B(1) 8. Commission to SAIL 33,915 Not specified 9. Postage & telegrams 1,084 Not specified 10. Commission to promotion council 3,000 Not specified 11. Advertisement 1,326 Sub-cl. (i) of cl. (b) of s. 35B(1)" . Total 8,54,338 . 2. For facility of reference, we may quote relevant extract from the order of the ITO dt. 21st Nov., 1978 showing the manner in which he dealt with the issue of weight deduction, ultimately, allowing a deduction amounting to Rs. 2,84,779: "The assessee-firm derives income from export of bamboos, imli and timber to Pakistan. The entire sales are that of export for which regular details have been filed. Books of account were also produced and examined. the loss returns at Rs. 1,01,243 is due to the weighted deduction claimed under s. 35B of the IT Act, 1961. This weighted deduction has been claimed in respect of the following expenses incurred in connection with and for promotion of export sales: . . Rs. (i) Freight 7,12....
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.... 35B in respect of any of the expenses booked under the various heads of accounts mentioned at serial Nos. 4 to 11 (both included) of the statement given in para 1 of his order and the amount of weighted deduction admissible, if any, in respect thereof, according to law, on examination of the details and the evidence furnished by the assessee and on obtaining such further information and/or making such further enquiries as may be considered by him to be necessary for this purpose and without allowing any weighted deduction under s. 35B in respect of the expenditure on freight, clearing and inspection charges. 4. It will be worthwhile to analysis briefly the error found by and the approach of the CIT in giving the directions to withdraw the weighted deduction in respect of items at serial Nos. 1 to 3 and to examine the assessee's claim afresh in respect of item Nos. 3, 4 to 11 in regard to items at serial Nos. 1 to 3 even though the ITO in his order has not referred to his relying on some orders of the Tribunal, but the CIT has referred to that aspect in para 1 (ii) of his order and this he has done by taking note of copies of orders of the Tribunal filed before the ITO. He has o....
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....t with this issue further in paras 9 to 12 of his order. In para 9, he has dealt with the contention put forward on behalf of the assessee that full details of the expenses at serial Nos. 4 to 11 had been furnished to the ITO in the course of assessment proceedings before him and that the ITO had accepted the assessee's claim for the weighted deduction having regard to the details furnished. The CIT held the claim of the assessee to be misconceived and not substantiated by the facts on records. He pointed out the following important facts: "The details of these various expenses, as were furnished by the assessee to the ITO in the course of the assessment proceedings, wee only such as showed the dates on which the expenses were incurred and/or the persons to whom the payment for these expenses were made. The assessee had not furnished any details in respect of any of these expenses so as to show that these expenses had been incurred on any of the activities mentioned in the various of cl. (b) of sub-s. (1) of s. 35B. There is also nothing in the assessment records to show that the ITO had required the assessee to furnish such details." 6. He further observed that he had inform....
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....fore it could be held by the CIT that the order of the ITO was erroneous. It was also submitted that correction on a question of law was beyond the purview of the CIT's jurisdiction under s. 263. Shri Sharma also stated that an order may be prejudicial to the Revenue but it may not be erroneous. He for his propositions relied on several decisions of the Tribunal including one of the Amritsar Bench of the Tribunal in the case of Jolly Engineers & Contractors (P.) Ltd. vs. ITO (1982) 2 ITD 92 (Asr.). 8. On behalf of the Revenue, Shri Berjinder Singh submitted that the order of the larger Bench of the Tribunal in the case of J.H. & Co.'s was available since June 1978 and the ITO had failed to notice the same and the purpose for which the larger Bench was created. It was explained that the larger Bench of the Tribunal was constituted with the specific purpose to resolve the conflicting views taken by different Benches of the Tribunal on the question of allowing of weighted deduction under s. 35B(1). I was contended that after the decision of the larger Bench of the Tribunal become available it was binding on the other Benches of the Tribunal and there was no question of different vi....
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....n support, attention was invited to the Kerala High Court decision in CIT vs. Kerala State Industrial Development Corporation Ltd. (1981) 21 CTR (Ker) 1 : (1981) 128 ITR 742 (Ker). Finally, it was contended that the ratio of the decision of the Calcutta High Court in Ganga Properties' case will not apply when what is involved is interpretation of law by a competent authority. It was submitted that an interpretation of law given by a competent authority holds always and it will not be applicable only from the date when the interpretation is pronounced or when the order is filed for information before the ITO. Further, it was submitted that it was futile to suggest on the basis of that authority that decisions of judicial authority must form part of the records before it can be said that the ITO acted erroneously. An ITO, it was submitted, has to take note of the law available on the point and this duty of his is not dependent on the assessee furnishing copies of decisions and where as here, the ITO ignores a relevant decision of the Tribunal an error prima facie results and the CIT could act to remedy the prejudice caused to the Revenue. It was also submitted that already the Madhya....
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....ribunal is a competent authority to pronounce on question of law arising under the Act, with which we are dealing now, and it functions in a judicial manner. Its decisions are to be followed by the lower authorities unless there are upset by a higher judicial authority. It follows the pattern of functioning of the High Courts inasmuch as the Benches normally of two members decide the appeal presented to it. According to a precedence followed by it, the President of the Tribunal can constitute a larger Bench to resolve the conflicting views of various Benches of the Tribunal on the same issue. The decisions of such larger Benches are binding on smaller Benches unless overruled by the High Courts or the Supreme Court or distinguishable on facts. Clearly, therefore, a decision of a larger Bench of the Tribunal has greater value as a precedent and it has to be preferred to the views expressed by the smaller Benches. Further, as stated earlier, on the smaller Benches the view of larger Bench the view of larger Bench is binding. In the context of the High Courts and the Supreme Court the pre-eminence of a decision of larger Bench vis-a-vis smaller Bench is well established and this matte....
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....he ITO had looked into the agreement regarding the transfer of the buses and had rejected the plea of the assessee that any part of the consideration was either for the route permits or for the goodwill. He had, therefore, proceeded to work out the profit under s. 41(2) in the case of the seller-company. Taking the same view in the case of assessee-company, he allowed the depreciation on the sale consideration for these buses. Now the CIT is of the view that the ITO should have anticipated the possible appeal by the assessee and a possible view which might be taken by any of the appellate authorities accepting the plea of the vendor-company. In the view of this possibility, he wants that the ITO should not have taken the written down value after excluding the consideration which had been paid in respect of either the route permits or the goodwill. According to him, this action could have been taken on a protective basis so that the position could be set right as and when the matter was finally decided in the case of the vendor-company. In the first place, we have to determine whether the order of the ITO was erroneous in the respect. The learned CIT appears to be of the view that w....
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....nue is depend on the decision of the appellate authorities or he judgment of the High Court or the Supreme Court is not a correct view and cannot upheld. We, therefore, agree with the learned counsel for the assessee that the assumption of jurisdiction by the CIT in the case was wrong and the order under s. 263 cannot be upheld." 13. Shri Sharma also invited attention to a decision of the Jaipur Bench of the Tribunal referred to an article by Shri N.M. Ranka in February 1983 issue of CTR at page 154. The decision itself was not made available to us but a reference exists in last sub-para of para 6 in the article. The facts stated therein were when an ITO takes a view, which is supported by any decision of a Tribunal or the High Court and simultaneously, there are decisions taking a contrary view. It was in those circumstances that the Tribunal held that the CIT could not act under s. 263. Now the facts in the assessee's case are quite different. This is a case where the ITO has failed to notice a decision of a larger Bench of the Tribunal. It is not a case where after considering decisions for and against the Revenue the ITO chose to prefer a decision against the Revenue. Agains....
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.... Sharma's views about the CIT having no jurisdiction when a question of law is involved is to be accepted, it will result in substantially shrinking the jurisdiction of the CIT, which will amount to rendering the provisions of s. 263 otiose to a large extent. An interpretation bringing about such a result cannot be favoured. 15. In view of the above discussion, we are inclined to hold that the CIT had the jurisdiction to act under s. 263. The CIT's decision to withdraw the weighted deduction under s. 35B in respect of items at serial Nos. 1 to 3 by following the view of the Special Bench of the Tribunal in the case of J.H. & Co. was not challenged on merits. The ld. Departmental Representaive, however, had referred to the Madhya Pradesh High Court decision in K.N. Oil Industries' case taking the same view and in that decision the Madhya Pradesh High Court had followed the view of the Madras High Court in CIT vs. Kasturi Palayacat Co. (1979) 120 ITR 827 (Mad). The plea of the assessee in respect of the ITO's action at serial Nos. 1 to 3 fails. 16. In respect of items at serial Nos. 4 to 11, it was the contention of the assessee's counsel that the CIT's finding was perverse abo....
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.... appeared along with his chartered accountant and produced account books. On that date, the ITO asked for 'evidence regarding claim under s. 35B'. The case was adjourned to 1st Nov., 1978. On 1st Nov., 1978, the assessee appeared again with the chartered accountant and filed a letter dt. 1st Nov., 1978 alongwith nine judgments of various Benches of the Tribunal. We have looked through the assessee's reply dt. 1st Nov., 1978. It merely reproduces provisions of s. 35B(1)(b) and refers to the legal position without indicating the specific facts about the nature of duties performed, etc., which would place the case of the assessee under cl. (b) of s. 35B(1). Generally, against the items of expenditure, it was stated that the expenditure was definitely for export promotion or incurred in connection with the export business and, hence, entitled to weighted deduction. This kind of information would not be sufficient to support the assessee's claim or weighted deduction. As per the statement of facts, there was another hearing on 4th Nov., 1978 and it is stated that other details and information required by the ITO were filed and the case was discussed. Thereafter the assessment was comple....
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.... properly. 20. In the result, the appeal of the assessee fails and is dismissed. U.S. DHUSIA, J.M. I have perused the finding of the ld. A.M. but I am not able to persuade myself that his finding that the CIT(A) had passed a valid order under s. 263(1), setting aside the assessment made for the asst. yr. 1978-79, can be accepted as correct finding in law. 22. The CIT(A) had found that the ITO made assessment which was not only erroneous, but was also prejudicial to the interests of the Revenue. The ITO had allowed weighted deduction of Rs. 2,84,779 on expenditure totalling at Rs. 8,54,338 incurred under various heads. These wee fully detailed in para 1 of the order of the ld. Accountant Member. These expenses incurred under various heads, amounting to Rs. 8,54,338 were broadly divided into two categories. The expenses described in serial Nos. 1 to 3 belonged to one category and those remaining from serial Nos. 4 to 11 belonged to the other. In allowing the claim for weighted deduction on the expenses included in the first category, the ITO had placed his reliance on the Tribunal decisions of different Benches while in considering the claim of the assessee for the expens....
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....ance charges and setting aside the assessment to be remade after causing an enquiry to be made regarding the claim for weighted deduction in respect of the expenses listed in the second category. 24. The ld. Accountant Member has upheld both the pleas of the CIT. His finding is given in para 10(5) as under: "In view of the above decisions, we are inclined to hold that the CIT had the jurisdiction to act under s. 260 of the IT Act." Similarly, he upheld the second plea in para 12(2) as under: "It follows from the above discussion that the CIT has acted under s. 263 by taking note of the prima facie position about the ITO failing to make the necessary and proper enquiries." 25. In my consideration, the first plea of the CIT has not issued out a proper consideration of judicial principles which govern the administration of justice and functioning of the Courts. Before I elaborate this aspects of the matter, it is necessary to stress that under s. 263(1) the CIT has to write a finding that he considers the order of the ITO to be erroneous, inasmuch as, it is prejudicial to the Revenue. Unless there is a finding recorded by the CIT that the order is erroneous, he cannot a....
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....e reasoning of the particular High Court has not appealed to it. It is on this basis that the reasoning of the particular High Court decision has not appealed to it, a different view is preferred. It is not on the basis of any error detected in the finding of the High Court that a different view is adopted by the Tribunal. If the Tribunal does not have a right to sit in judgment over the view adopted by a superior Court, like High Court, can this right be permitted to the CIT or the ITO, who are subordinate to the Tribunal. If the CIT desires to take a different view, he can do so on the ground that the reasoning of a particular decision has not appealed to him, but not on the ground of an error detected by him in the decision of the superior authority. But proceeding on that basis he would no be able to find the decision of the ITO based on the decision of the Tribunal as incorrect or erroneous under s. 263(1). The law has not invested him with competence to review a decision by a superior authority. There is one exception, however, to this rule. It is when the decision of a authority or the Court, to which the Tribunal is subordinate is available. On the basis of that decision no....
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.... Court. This has been the view of several Tribunals including the Amritsar Bench, which has taken this view in the past. 26. The Jaipur Bench, referred to in para 10(3) of the order of ld. Accountant Member, for this every reason held that the CIT could not pass an order under s. 263(1), setting aside the ITO's finding, which was based on an order, passed by a Tribunal, although the CIT had proceeded on the basis of a contrary decision of another bench. The Departmental Representaive had also referred to a decision of the Chandigarh Bench in the case of Roadmaster Industries of India (P) Ltd., where the Bench, aware of the decision of the Special Bench in the case of J.H. & Co., took a different view for the simple reason that the decision of the Special Bench far from being biding, could not claim any precedence over the decision of a Division Bench. The view that the decision of a Special Bench in binding or takes precedence over that of a Division Bench, does not find any support in law. In this connection, a reference is made to the decision of the Amritsar Bench in the case of Jolly Engineers & Contractors (P) Ltd. where the Bench had made a similar approach. The bench stru....
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....nd genuineness. What was left out then, which the ITO had not seen, was, according to the consideration of the CIT, the ITO had not indicated under which sub-clauses of s. 35B(1)(b), the claim for weighted deduction could be considered. If it is so, it is to be pointed out that the Special Bench decision, which he had certified to be laying down the correct principles in law in respect of the aforesaid cl. (b) of sub-s. (1) of s. 35B, has admitted claim for weighted deduction in respect of salary, bonus, stationery, rent, commission, postage and telegram, commission (subscription of Export Promotion Council) and advertisement, etc. It was also in the finding of the CIT that the business of the assessee was for export and that the entire turnover consisted only of export. Therefore, there could not be any doubt that the expenses were incurred wholly and exclusively for the business of the export. The only dispute that could arise was to be about the percentage of such expenditure which, following the principles laid down by the Special Bench, could be considered exclusively laid out for export and, accordingly, entitled for weighted deduction. The dispute or controversy could not be....
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....s background, I am not able to appreciate the finding that the ITO had failed to make any enquiry into the matter. 32. Judged in whatever way, it was not the case of the CIT that the ITO had not made any enquiry. It may be that the ITO had not caused any particular enquiry to be made which, in his view, was necessary to be looked into. But such an approach in the matter would not entitle to him hold that the assessment made by the ITO was erroneous because no enquiry was made. The ld. Accountant Member, in his order, had supported this finding of the CIT on the basis of the judicial pronouncements made by various High Courts. But, a perusal of these judgments would show that, in this case, the Courts justified the finding of the erroneous assessment by the ITO, because he had failed to make any enquiry at all but as I have brought out, it was not the case where the ITO had not failed to make any enquiry. I have already stressed that consideration by the CIT has to proceed on the basis which is judicially maintainable and is not subjective or arbitrary. Looked at in this background, the assumption of the jurisdiction under s. 263(1) by the CIT to upset the finding of the ITO has ....
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....not allowable. Even though the ITO's attention was drawn to the several decisions of the Tribunal, which allowed weighted deduction in respect of these items, following which the ITO made the allowance, the Special Bench that was subsequently constituted having taken a different view, it was the opinion of the CIT that in the light of the Special Bench decision, the earlier decisions followed by the ITO, even though they are again the orders of the Tribunal, had vitiated the assessment and resulted in causing prejudice to the interests of the Revenue. Insofar as serial Nos. 4 to 7 are concerned, the view of the CIT was that the assessee did not prove how this expenditure was relatable to the export even though the assessee has furnished the details before the ITO, on the scrutiny of which the ITO said that the he came to that conclusion. The view of the CIT was that the ITO accepted claim of the assessee for the weighted deduction in respect of these expenses without examining and determining whether these expenses had been incurred wholly and exclusively on any of the activities mentioned in the various sub-clauses of cl. (b) of sub-s. (1) of s. 35B. With regard to serial Nos. 8 t....
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.... correct interpretation of the aforesaid sub-cl. (iii) of cl. (b) of sub-s. (1) of s. 35B and did not, therefore, represent the correct position in law. The attention of the CIT was also drawn to the decision of the Bombay High Court in the case of CIT vs. Eldee Wire Ropes Ltd. 1978 CTR (Bom) 296 : (1978) 115 ITR 485 (Bom) where the view taken by the Special Bench in the Case of J.H. & Co. was not favourably viewed by the Bombay High Court and there was even a mild criticism. The CIT held that the Bombay High Court decision in the case of Eldee Wire Ropes Ltd. did not in any way detract from the validity of the view expressed by the Special Bench of the Tribunal. In regard to other expenses, the attention of the CIT was drawn to the various details filed before the ITO while making the assessment and also various decisions of the Tribunal allowing the claims of the assessee in respect of those items. The CIT was not satisfied with this explanation. He still maintained that been if the details were furnished, those details did not have the effect of showing which of the activities mentioned in the various sub-clauses of cl. (b) of sub-s. (1) of s. 35B were carried on by the assessee....
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....s the principles enunciated by a properly constituted authority under the Act. The Tribunal having been constituted as the highest authority under the Act entrusted with the duty of interpreting the law with a binding force except as provided in s. 256 of the Act, the ITO commits no error if he follows the order of the Tribunal on a question of law even though there is a contrary view expressed by another Bench of the Tribunal. The Special Bench decision of the Tribunal was not available at the time when the ITO passed the assessment order and in any case he was not aware of it and such being the case, the view taken by the Special Bench, which happened to be contrary to the views expressed by the other Benches could not be said to have laid down the law in a conclusive manner so as to hold that the ITO committed an error. The ld. Accountant Member could not agree with the contentions put forward on behalf of the assessee. He supported the order of the CIT in every respect. He held that the ITO should have known about the Special Bench decision of the Tribunal in J.H. & Co.'s and should have followed that in preference to the views expressed by other Benches of the Tribunal whose o....
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....sion Bench. Once the Special Bench decision has not got the effect of a superior authority to the Division Bench in law, that could not be considered as of a binding nature. The CIT, thus, in his opinion committed an error in thinking that the order passed by the ITO was not in conformity with the law. In this connection he relied upon a decision of the Amritsar Bench in the case of Jolly Enginers & Contractors (P.) Ltd. where the Bench had cancelled an order passed by the CIT under s. 263 on the ground that the material relied upon to hold the finding of the ITO as erroneous was in a fluid state as it was not authority. The CIT was not authorised to proceed on his considerations made upon his subjective approach. He also made a reference to a decision of the Calcutta High Court in the case of Russell Properties (P.) Ltd. where the Calcutta High Court held in similar circumstances that the CIT had no jurisdiction to revise an order of the ITO which was based upon a decision of the Tribunal. He was also unable to agree with the learned Accountant Member's view that in regard to serial Nos. 4 to 11, it could be said that no enquiry was made by the ITO while allowing the claim even th....
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.... appearing for the assessee, contended that if an ITO follows an order of a Division Bench of the Tribunal, he does not commit any error in law even if it eventually turns out to be against a view expressed by another Division Bench or for that matter a larger Bench. The Act does not recognise the theory as mentioned by the CIT or as was supposed by him that a Special Bench of the Tribunal is competent or authorised to overrule a Division Bench decision. The Act envisages constitution of a Special Bench consisting of three more Members, one of whom shall necessarily be a Judicial Member and one an Accountant Member for the disposal of any case only to decide complex cases. It does not mean that the President is empowered under the Act [s. 255(3)] that a Special Bench is constituted in such a way as to authorise it to overrule a Division Bench view. The constitution of Special Benches is a method devised for the purpose of resolving complicated issues of law and facts. Since several Division Benches in the country located at different stations are apt to take different views at any point of time and the expression of such divergent views is likely to cause difficulty in deciding mat....
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....e was not aware of the existence of the Special Bench decision. That has been conceded by the CIT. Wen the ITO is not aware of the Special Bench decision, he cannot be found fault with from not following that order of which he was not aware. The learned Accountant Member as well as the CIT were unanimous on the issue that the ITO was no aware of the Special Bench case even though the Special Bench decision was delivered much earlier to the date of passing his order. Shri Sharma further submitted that s. 263 empowers the CIT to examine the record that was before the ITO to find out whether any error was committed by him or not. The record referred to in s. 263 is the record available at the time when he made the assessment. Anything coming subsequently into the records or the could form part of the record, could not be looked into by the CIT for the purpose of s. 263. In this context he relied upon the decisions of the Calcutta High Court in the case of Ganga Properties and Russell Properties (P.) Ltd. and of the Supreme Court in the case of Ganga Saran & Sons (P.) Ltd.. He also submitted that the effect of the Special Bench decision, on which so much reliance was placed by the CIT,....
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....to have caused prejudice to the interests of the Revenue and not the order passed by the ITO. Lastly, he submitted that the CIT was persuaded or motivated more by the objections made by the Revenue audit party than by his own individual objective judgments. A proceeding under s. 263 cannot lie if the CIT is to give effect to the views expressed by the audit party. He should convince himself that there was a prejudice to the interests of the Revenue by an error committed by the ITO and that satisfaction must be his own satisfaction and not the satisfaction of someone else. In a way it can be said that the CIT has even surrendered his judgment to the Revenue audit party. Thus proceeded, the argument of the learned counsel for the assessee, Shri Sharma, supported in full measure the view taken by the learned Judicial Member. He stressed for the acceptance of the view of the learned Judicial Member and to hold that the CIT had erroneously entered upon the jurisdiction which is not available to him under s. 263 on the facts of this case. 40. The learned Departmental Representaive, Shri Kapila, aided by his colleague, Shri Hardayal Singh, in the first instance, submitted that the orde....
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....sment of income has taken place. Here there is a clear mistake of law committed by the ITO in allowing weighted deduction in respect of serial Nos. 1 to 3, which was not clearly allowable under the Act. This mistake of law committed by the ITO rendered the order passed by him erroneous which caused prejudice to the interests of the Revenue. He further pointed out that if an assessment could be reopened on the basis of findings given by an Asstt. CIT in an appeal, then a view expressed by the Special Bench of the Tribunal, which is certainly superior to that of an Asstt. CIT, can be considered as information as to mistake of law and should be held to be god enough to reopen an assessment under s. 147. If the assessment could thus be reopened, there should be no objection for a CIT to interfere to invoke s. 263. With a view to support his contentions, the sum and substance of which I have mentioned above, he placed reliance upon the decisions of the Delhi High Court in the case of Handicrafts & Exports Corpn. of India vs. CIT (1982) 29 CTR (Del) 185 : (1983) 140 ITR 532 (Del), the Madras High Court in Kasturi Palayacat Co.'s case and the Madhya Pradesh High Court in K.N. Oil Industri....
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....TR 323 (SC), the Karnataka High Court in Thalibai F. Jain's case and the Gujarat High Court in Mukur Corpn.'s case. If the CIT is held to be wrong in assuming jurisdiction in respect of serial Nos. 1 to 3, the same cannot be applied in respect of serial Nos. 4 to 11. That is how the learned Departmental Representaive in a forceful plea in support of the CIT's order rounded up his arguments. In addition he adopted various reasons given by the ld. Accountant Member in his order. 41. These are in main the submissions made before me on the consideration of which I am now to pronounce which of the two views is correct. if I say that the CIT is right in assuming jurisdiction, I would be holding by implication that an ITO if he follows a decision of the Tribunal and makes assessment, he would be committing an error causing prejudice to the interests of the Revenue all because superior authority like the CIT either does not agree with view expressed by the Tribunal or another Branch of the Tribunal comes to take a different view. Insofar as the orders of the Tribunal are concerned, the Act clearly provided in s. 254(4) of the Act that save as provided in s. 256, order passed by the Trib....
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....ench is to overrule a Division Bench case. The constitution of Special Benches has assumed greater significance of late not because it is intended to overrule a Division Bench view but because it is considered necessary to secure uniformity in the views expressed by various Benches of the Tribunal located in various stations in the country. Uniformity of views in tax administration is so essential and to be striven for, the importance and significance of which need not be over-emphasised. The divergence of views will promote litigation. The divergence of view will promote litigation. The reduction of conflict in views will reduce litigation in the working and administration of the Tribunal as judicial body. The more the conflict the more the faith is shaken. The less the conflict the more the faith. It is with a view to secure this objective that the constitution of Special Benches is resorted to by the President and a unilateral convention is developed amongst the Members of the Tribunal of give respect to the Special Bench views and not to differ from it unless substantial ground exist like non-consideration of a decision of the High Court having a direct bearing on the subject o....
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....er of the Tribunal. This is a common practice we come across not only in other cases but sometimes in the assessee's own case, which is that real source for the proliferation of the income-tax litigation. Even in respect of the High Courts, sometimes we find the ITO's mentioning that since an appeal has been filed to the Supreme Court, he would not follow the judgment of the High Court. I do not know how far is the ITO justified in saying so but I would not like to comment upon it now since that is not germane for the present purpose except to say that when the ITO thus feels free not to follow an order of the Tribunal, he cannot be expected to follow an order passed by the Special Bench of the Tribunal more so when it was not brought to his notice. 42. Having settled the controversy with regard to the binding nature of the Special bench order. I will address myself to the question whether the ITO commits an error when he follows a Division Bench view. Since the order of the Tribunal is entitled to the followed and its views are entitled to be respected and implemented even though a reference application has been filed and the finality of the order of the Tribunal is diluted sti....
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....appellate authority, the subordinate authority is bound to follow that decision. Having laid down this principle of binding nature of the decision of a higher appellate authority to the subordinate authority, the Calcutta High Court held that if the ITO followed the decision of the Tribunal, he cannot be said to have committed an error and such an order could not be revised. In this case the Calcutta High Court reviewed the entire case law on the subject starting from CIT vs. Amritlal Bhogilal & Co. (1953) 23 ITR 420 (Bom) and considered several decisions of the Supreme Court including Smt. Tara Devi Aggarwal's case on which great reliance was placed by the Departmental Representaive, Shri Kapila, before us. Referring in this context as to the effect of the finality of the orders of the Tribunal reference was made to the observations made by the Supreme Court in CIT vs. Amritlal Bhogilal & Co. (1985) 34 ITR 130 at p. 140 (SC). The Supreme Court held in that case that mere pendency of an appeal does not have the effect of suspending the operation of the order under appeal and despite the fact that the pendency of an appeal may put the order in jeopardy, yet until the appeal is final....
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....cial Bench order of the Tribunal. The coming into existence of the Special Bench order subsequent to the assessment cannot form part of the record. This is also a point in favour of the assessee's contention that the CIT did not properly assume the jurisdiction under s. 263. There are several orders passed by the Tribunal by various Benches that were produced at the time of making the assessment basing upon which he allowed the assessee's claim, may be erroneously. I would not at this stage pronounce upon the merits of the matter. All I would now concentrate upon is whether at the time the ITO was making the assessment, was he guided by the orders of the Tribunal which he is bound to follow or he was acting on his own. If he was following the orders of the Tribunal, which he did in this case, he was not committing an error so as to vest in the CIT the necessary jurisdiction to exercise his revisional powers under s. 263. Once I arrive at this conclusion, I need not go into the merits at all. In this view of the matter I find it rather extremely difficult to agree with the arguments advanced by the ld. Departmental Representaive, Shri Kapila, though they are very attractive and seem....
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....y no enquiry was made, the ld. Judicial Member said that enquiry was made and it was adequate. In the paper book that was filed before me copious documents were presented, which showed that the ITO had accepted the claim of the assessee after making proper enquiry after calling for various details and even here he was supported by the various orders of the Tribunal. I do not want to burden this order with all those details of enquiries made by the ITO but suffice it to say that the record does show that enough evidence was called for by the ITO and the assessee produced several orders of the Tribunal in support of its various contentions and its was after considering those materials that the ITO allowed the claims. It is therefore, incorrect, in my opinion, to say that enquiry was not made. I am deliberately avoiding all the reference given in the paper book to the various letters filed by the assessee in response to the various enquiries made by the ITO only with a view to reduce the burden to this order, which is already burdened. The CIT is, therefore, in my opinion, not quite correct in saying that the assessee had not produced enough evidence to justify its claim and that the ....