REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2092 OF 2006

Commissioner of Income Tax ....Appellant

Central, Kanpur

Versus

J.K. Charitable Trust ....Respondent

Kamal Tower, Kanpur

With

CIVIL APPEAL NO. 1698 OF 2008

With

CIVIL APPEAL NO. 1699 OF 2008

With

CIVIL APPEAL NO. 2423 OF 2006

With

CIVIL APPEAL NO. 682 OF 2007

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J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1.Challenge in these appeals in each case is to the order passed by a

Division Bench of the Allahabad High Court answering the reference made

by the Income Tax Appellate Tribunal, Allahabad Bench (in short the

‘ITAT’) under Section 256(1) of the Income Tax Act, 1961 (in short the

‘Act’) in favour of the assessee and against the revenue. For answering the

references in favour of the assessee the High Court relied upon its judgment

for two previous assessment years i.e. 1972-73 and 1973-74 in the

assessee’s case which is reported in Commissioner of Income Tax v. J.K.

Charitable Trust (1992 (196) IIR 31). The present dispute relates to several

assessment years, i.e. 1972-73 (in respect of an assessment re done under

Section 147(1) of the Act) and assessment years 1975-76 to 1982-83.

2.Learned counsel for the revenue appellant submitted that each

assessment year is a separate assessment unit and the factual scenario has to

be seen. Dispute relates to the question whether the respondent, assessee’s

trust was hit by the provisions of Section 13(1)(c) and 13(2)(a)(f) & (h) of

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the Act and therefore cannot be given the benefit of exemption provided

under Section 11 of the Act.

3.Learned counsel for the assessee submitted that for several years no

appeal has been filed even though the factual position is the same i.e. for

the assessment years 1983-84 upto assessment year 2007-08. Even no

appeal was filed against the decision reported in [1992(196) ITR 31]

(supra). It is also pointed out that several other High Courts have taken a

similar view and no appeal was preferred by the revenue against any of the

judgments of the different High Courts. Reference is made to the decisions

reported in CIT, Bombay City VII v. Trustees of the Jadi Trust [(1982) 133

ITR 494], CIT v. Hindusthan Charity Trust [(1983) 139 ITR 913], CIT v.

Sarladevi Sarabhai Trust No.2 [1988 (172) ITR 698] and CIT v. Nirmala

Bakubhai Foundation [1996 (226) ITR 394]. The first two judgments have

been rendered by the Bombay and Calcutta High Court respectively while

the other two decisions are of the Gujarat High Court.

4.Learned counsel for the revenue submitted that even though appeal

has not been preferred in respect of some assessment years, that does not

create a bar for the revenue filing an appeal for other assessment years.

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Reliance is placed on a decision of this Court in C.K. Gagadharan & Anr. v.

Commissioner of Income Tax [(2008)304 ITR 61 (SC)].

5.The factual scenario is undisputed that for a large number of

assessment years no appeal has been filed.

6.The basic question therefore is whether the revenue can be precluded

from filing an appeal even though in respect of some other years involving

identical dispute no appeal is filed.

7.For deciding the issue a few decisions of this Court need to be noted.

8.In Bharat Sanchar Nigam Ltd. v. Union of India (2006 (3) SCC 1) it

was noted as follows:

“The decisions cited have uniformly held that res

judicata does not apply in matters pertaining to tax for

different assessment years because res judicata applies to

debar courts from entertaining issues on the same cause

of action whereas the cause of action for each assessment

year is distinct. The courts will generally adopt an earlier

pronouncement of the law or a conclusion of fact unless

there is a new ground urged or a material change in the

factual position. The reason why the courts have held

parties to the opinion expressed in a decision in one

assessment year to the same opinion in a subsequent year

is not because of any principle of res judicata but

because of the theory of precedent or the precedential

value of the earlier pronouncement. Where facts and law

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in a subsequent assessment year are the same, no

authority whether quasi-judicial or judicial can generally

be permitted to take a different view. This mandate is

subject only to the usual gateways of distinguishing the

earlier decision or where the earlier decision is per

incuriam. However, these are fetters only on a coordinate

Bench which, failing the possibility of availing of either

of these gateways, may yet differ with the view

expressed and refer the matter to a Bench of superior

strength or in some cases to a Bench of superior

jurisdiction.

A decision can be set aside in the same lis on a prayer

for review or an application for recall or under Article 32

in the peculiar circumstances mentioned in Hurra v.

Hurra (2002 (4) SCC 388). As we have said, overruling

of a decision takes place in a subsequent lis where the

precedential value of the decision is called in question.

No one can dispute that in our judicial system it is open

to a court of superior jurisdiction or strength before

which a decision of a Bench of lower strength is cited as

an authority, to overrule it. This overruling would not

operate to upset the binding nature of the decision on the

parties to an earlier lis in that lis, for whom the principle

of res judicata would continue to operate. But in tax

cases relating to a subsequent year involving the same

issue as an earlier year, the court can differ from the

view expressed if the case is distinguishable or per

incuriam. The decision in State of U.P. v. Union of India

(2003(3) SCC 239) related to the year 1988. Admittedly,

the present dispute relates to a subsequent period. Here a

coordinate Bench has referred the matter to a larger

Bench. This Bench being of superior strength, we can, if

we so find, declare that the earlier decision does not

represent the law. None of the decisions cited by the

State of U.P. are authorities for the proposition that we

cannot, in the circumstances of this case, do so. This

preliminary objection of the State of U.P. is therefore

rejected.”

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9.In State of Maharashtra v. Digambar (1995(4) SCC 683) the position

was highlighted by this court as follows:

“We are unable to appreciate the objection raised

against the prosecution of this appeal by the appellant or

other SLPs filed in similar matters. Sometimes, as it was

stated on behalf of the State, the State Government may

not choose to file appeals against certain judgments of

the High Court rendered in writ petitions when they are

considered as stray cases and not worthwhile invoking

the discretionary jurisdiction of this Court under Article

136 of the Constitution, for seeking redressal therefor. At

other times, it is also possible for the State, not to file

appeals before this Court in some matters on account of

improper advice or negligence or improper conduct of

officers concerned. It is further possible, that even where

SLPs are filed by the State against judgments of the High

Court, such SLPs may not be entertained by this Court in

exercise of its discretionary jurisdiction under Article

136 of the Constitution either because they are

considered as individual cases or because they are

considered as cases not involving stakes which may

adversely affect the interest of the State. Therefore, the

circumstance of the non-filing of the appeals by the State

in some similar matters or the rejection of some SLPs in

limine by this Court in some other similar matters by

itself, in our view, cannot be held as a bar against the

State in filing an SLP or SLPs in other similar matters

where it is considered on behalf of the State that non-

filing of such SLP or SLPs and pursuing them is likely to

seriously jeopardise the interest of the State or public

interest.”

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10.In Government of West Bengal v. Tarun K. Roy [2004(1)SCC 347]

reference was made to the judgments in Digambar’s case (supra) and State

of Bihar v. Ramdeo Yadav (1996(3) SCC 493). It was noted as follows:

“28. In the aforementioned situation, the Division

Bench of the Calcutta High Court manifestly erred in

refusing to consider the contentions of the appellants on

their own merit, particularly, when the question as

regards difference in the grant of scale of pay on the

ground of different educational qualification stands

concluded by a judgment of this Court in State of West

Bengal v. Debdas Kumar {(1991) Supp(1) SCC 138]. If

the judgment of Debdas Kumar’s case (supra) is to be

followed, a finding of fact was required to be arrived at

that they are similarly situated to the case of Debdas

Kumar (supra) which in turn would mean that they are

also holders of diploma in Engineering. They admittedly

being not, the contention of the appellants could not be

rejected. Non-filing of an appeal, in any event, would not

be a ground for refusing to consider a matter on its own

merits. (See State of Maharashtra v. Digambar (1995) 4

SCC 683)

29. In State of Bihar v. Ramdeo Yadav (1996) 3 SCC

493) wherein this Court noticed Debdas Kumar’s case

(supra) by holding: (SCC p. 494, para 4)

“4. Shri B.B. Singh, the learned counsel for

the appellants, contended that though an appeal

against the earlier order of the High Court has

not been filed, since larger public interest is

involved in the interpretation given by the High

Court following its earlier judgment, the matter

requires consideration by this Court. We find

force in this contention. In the similar

circumstances, this Court in Digambar’s case

(supra) and in Debdas Kumar’s case (supra) had

held that though an appeal was not filed against

an earlier order, when public interest is involved

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in interpretation of law, the Court is entitled to

go into the question.”

11.In Ramdeo’s case (supra) reference was made to Debdas Kumar’s

case (supra) wherein it was observed at paragraph 5 as follows:

“It is then contended that Section 3(2) and (3) make

distinction between the employees covered by those

provisions and the employees of the aided schools taken

over under Section 3(2). Until the taking over by

operation of Section 3(4) recommendation is complete,

they do not become the employees of the Government

under Section 4 of the Act. The Government in exercise

of the power under Section 8 constituted a committee

and directed to enquire and recommend the feasibility to

take over the schools. On the recommendation made by

them, the Government have taken decision on 13-1-1981

by which date the respondents were not duly appointed

as the employees of the taken over institution. Therefore,

the High Court cannot issue a mandamus directing the

Government to act in violation of law.”

12.In Commissioner of Central Excise v. Hira Cement (2006(2)SCC

439) at paragraph 24 the position was reiterated.

13.In Chief Secretary to Government of Andhra Pradesh v. V.J.

Cornelius [(1981) 2 SCC 347] it was observed that equity is not a relevant

factor for the purpose of interpretation.

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14.It will be relevant to note that in Karamchari Union v. Union of India

[(2000)243 ITR 143 (SC) ] and Union of India v. Kaumudini Narayan Dalal

[(2001) 249 ITR 219] this Court observed that without a just cause the

Revenue cannot file the appeal in one case while deciding not to file an

appeal in another case. This position was also noted in CIT v. Shivsagar

Estate [(2004)9 SCC 420].

15.In C.K. Gangadharan’s case (supra) this Court held that where

different High Courts have taken different views and some of the High

Courts have decided in favour of the revenue, same is a just cause for the

revenue to prefer an appeal.

16.If the assessee takes the stand that the Revenue acted mala fide in not

preferring appeal in one case and filing the appeal in other case, it has to

establish malafides. As a matter of fact, as rightly contended by the learned

counsel for the revenue, there may be certain cases where because of the

small amount of revenue involved, no appeal is filed. Policy decisions have

been taken not to prefer appeal where the revenue involved is below a

certain amount. Similarly, where the effect of the decision is revenue

neutral there may not be any need for preferring the appeal. All these

certainly provide the foundation for making a departure.

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17.In C.K. Gangadharan’s case (supra) it was held that merely because in

some cases revenue has not preferred an appeal that does not operate as a

bar for the revenue to prefer an appeal in another case where there is just

cause for doing so or it is in public interest to do so or for a pronouncement

by the higher court when divergent views are expressed by the different

High Courts. In this case, it is accepted by the learned counsel for the

appellant-revenue that the fact situation in all the assessment years is same.

According to him, if the fact situation changes then the revenue can

certainly prefer an appeal notwithstanding the fact that for some years no

appeal was preferred. This question is of academic interest in the present

appeals as undisputedly the fact situation is the same.

18.The appeals are without merit and are accordingly dismissed. No

costs.

……..................................J.

(Dr. ARIJIT PASAYAT)

……..................................J.

(C.K. THAKKER)

….......................................J.

(LOKESHWAR SINGH PANTA)

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New Delhi;

November 7, 2008

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