C.K. Gangadharan & Anr. v. Commissioner of Income Tax, Cochin

1. By order dated 13.3.2008, a reference was made to larger Bench and that is how these cases are before us. The order, of reference, inter-alia, reads as follows: “ xxx xxx xxx In view of the aforesaid position, we are of the opinion that matter requires consideration by a larger Bench to the extent whether revenue can be precluded from defending itself by relying upon the contrary decision. We make it clear that we are not doubting the correctness of the view taken by this Court in the cases of Union of India v. Kaumudini Narayan Dalal (2001)10 SCC 231, CIT v. Narendra Doshi (2004) 2 SCC 801 and CIT v. Shivsagar Estate (2004) 9 SCC 420 to the effect that if the revenue has not challenged the correctness of the law laid down by the High Court and accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assesses, without just cause. Registry is directed to place the papers before the Hon’ble Chief Justice of India for appropriate orders.”

2. In terms of the reference what is required to be decided is whether revenue can be precluded from defending itself by relying upon the contrary decisions. It is to be noted that various High Courts have taken contrary views. While some of the courts have decided in favour of the assessee, other High Courts have decided in favour of the revenue.

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

4. In Bharat Sanchar Nigam Ltd. and Anr. v. Union of India and Ors. (2006 (3) SCC 1), it was noted as follows:

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.

22. 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.”

5. In State of Maharashtra v. Digambar (1995 (4) SCC 683), the position was highlighted by this Court as follows:

6. In Government of W.B. v. Tarun K. Roy and Ors. (2004 (1) SCC 347) reference was made to the judgment in Digambar case (supra) and State of Bihar and Ors. v. Ramdeo Yadav and Ors. (1996 (3) SCC 493). It was noted as follows: