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Delhi High CourtIndian Cases

Taylor Instrument Co. (India) Ltd. vs Commissioner Of Income Tax on 17 November 1997

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Delhi High Court
Taylor Instrument Co. (India) Ltd. vs Commissioner Of Income Tax on 17 November, 1997
Equivalent citations: [1998]232ITR771(DELHI)
Author: R.C. Lahoti
Bench: J.B. Goel, R.C. Lahoti
JUDGMENT

R.C. Lahoti, J.

1. The following question has been referred at the instance of the assessee by the Tribunal for the opinion of the High Court under s. 256(1) of the IT Act, 1961 :

“Whether, on the facts and circumstances of the case, the Tribunal was justified in law in sustaining the penalty despite the provisions of s. 140A(3) having been held by the High Court of Madras to be ultra vires the Constitution ?”
2. For the asst. yr. 1974-75 proceedings for penalty under s. 140A(3) were initiated by the ITO against the assessee-company and ultimately a penalty of Rs. 1,55,800 was imposed. This penalty was imposed by the ITO for a default of the appellant in paying the tax of Rs. 6,23,222 on self-assessment basis. The ITO rejected the assessee’s plea that this payment of self-assessment tax had escaped the attention of the then officer-in-charge who was handling the income-tax matters of the company. He held that it was the responsibility of the assessee-company to pay the tax on self-assessment basis as fixed by the law and that ignorance of law or mistake on the part of its employee could not mitigate the severity of the default. He also referred to the fact that the assessee-company had taken the same plea in the earlier assessment year also. He, therefore, concluded that the assessee had deliberately committed the default in making the payment on self-assessment basis. He, therefore, imposed a penalty of Rs. 1,55,800.

3. The CIT(A), to whom the assessee appealed, confirmed the penalty rejecting the assessee’s contentions as he had done in the appeal against the similar penalty in the earlier year 1973-74.

4. On further appeal by the assessee, the Tribunal held the penalty to be exigible, but found that there were attenuating circumstances inasmuch as interest amounting to Rs. 1,45,021 was also levied against the assessee under ss. 215 and 216 of the IT Act. In the result, the Tribunal reduced the penalty from Rs. 1,55,800 to Rs. 25,000.

5. Before the Tribunal one of the contentions raised by the assessee is that the provisions of s. 140A(3) were ultra vires the Constitution having been so held by the High Court of Madras. The Departmental Representative objected to the plea being entertained by the Tribunal in view of the law laid down by the Supreme Court in the case of K. S. Venkataraman & Co. (P) Ltd. vs. State of Madras . However, the Tribunal has, in its order, noted the decision of the Bombay High Court in CIT vs. Smt. Godavari Devi Saraf taking the view that by taking notice of the decision of the High Court (namely, the Madras High Court), striking down the impugned provision as unconstitutional and by proceeding on that footing the Tribunal could not be said to have gone into the question of constitutionality of the said provision or to have transgressed the limits of its jurisdiction.

6. The assessee sought for a reference to the High Court stating the question of law in the following form :

“Whether the provisions of s. 140A(3) are ultra vires being beyond the legislative competence of Parliament and the said provisions infringe Art. 14 of the Constitution of India and it offends Art. 19(1)(f) of the Constitution of India.”
However, in the light of the view taken by the Tribunal, it has reframed the question as reproduced in para 1 above and made a reference to the High Court.

7. Having heard learned counsel for the parties, we are of the opinion that the question deserves to be answered in favour of the Revenue and against the assessee. During the course of hearing it was conceded at the Bar that the constitutionality of s. 140A(3) has not been adjudicated upon by the High Court of Delhi, nor the provision has at any time been adjudicated upon by the High Court of Delhi as ultra vires the Constitution. It was also not disputed that it is the ITO (Central Circle XIX), New Delhi, who exercises jurisdiction over the assessee; the High Court of Delhi would, therefore, be the jurisdictional High Court.

8. The territorial jurisdiction of the Tribunal extends over several States though each such State has its own High Court. There is unanimity of opinion amongst different High Courts that decisions of the High Court are binding on the subordinate Courts, authorities and Tribunal situated within its jurisdictional territory and its power of superintendence extends throughout the territory in relation to which it exercises jurisdiction. The binding authority of a High Court does not extend beyond its territorial jurisdiction. The decision of one High Court is not a binding precedent for another High Court or for Courts or Tribunals outside the territorial jurisdiction of the High Court to which they are subordinate. [See CIT vs. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom) : TC 68R.351, CIT vs. Ved Prakash (1989) 178 ITR 332 (P&H) : TC 8R.146, State of AP vs. CTO , CIT vs. Mohan Lal Kansal (1978) 114 ITR 583 (P&H) : TC 54R.666 and Raja Benoy Kumar Sahas Roy vs. CIT (1953) 24 ITR 70 (Cal) : TC 55R.737.

9. In the case of CIT vs. Thana Electricity Supply Ltd. (supra), the Division Bench of the Bombay High Court has held :

“A conjoint reading of ss. 257 and 260 of the IT Act, 1961, shows that the Act itself contemplates independent decisions of various High Courts on the question of law referred to them. It has visualised the possibility of conflict of opinion between different High Courts on the same question of law and has also made specific provision to take care of such a situation in suitable cases. In fact, in the light of the clear language of s. 260 of the Act, every High Court is required to give its own opinion on a particular question of law. It should not follow, as a matter of course, only with a view to achieve uniformity in the matter of interpretation, the decision of another High Court, if such decision is contrary to its own opinion. Such action will be contrary to the clear mandate of s. 260 of the Act. It will amount to abdication of its duty by the High Court to give ‘its decision’ on the point of law referred to it.”
10. In CIT vs. Ved Prakash (supra), a Division Bench of the Punjab & Haryana High Court has held :

“…. as the decision of a High Court is binding only upon the authorities, Tribunals and Courts functioning within its territorial jurisdiction, no Tribunal beyond such jurisdiction can treat or hold as constitutionally invalid any provision of the IT Act solely for the reason that the High Court of another State may have declared the said provision to be ultra vires. To grant such a power to the Tribunal or even to a High Court, in a reference under s. 256 of the IT Act, would again amount to conferring jurisdiction upon them to pronounce upon the constitutional validity of the provisions of the statute creating them, which would clearly be contrary to the well settled position in law…. unless and until the Supreme Court or the High Court of the State in question, under Art. 226 of the Constitution, declares a provision of the Act to be ultra vires, it must be taken to be constitutionally valid and treated as such.”
11. The above said view of the law has been followed by a Division Bench of this Court in a recent judgment in the case of Suresh Desai & Associates vs. CIT (IT case No. 153 of 1993 decided on 5th September, 1997) and also finds support from a Division Bench decision of this Court in Seth Banarsi Dass Gupta vs. CIT (1978) 113 ITR 817 (Del) : TC 8R.140. In short merely because the provisions of s. 140A(3) have been held to be ultra vires the Constitution by the High Court of Madras, the Tribunal deciding the case arising out of an assessment made by an IT authority situated within the jurisdiction of the Delhi High Court, could not have proceeded on the assumption that the said provision was ultra vires the Constitution. Doing so would be tantamount to the Tribunal declaring the provision to be ultra vires the Constitution for the purpose of assessments lying within the jurisdiction of the authorities situated within the territory of the Delhi High Court. This is precisely not permissible.

12. It is well settled that the Tribunal and the tax authorities being creatures of the IT Act, 1961, cannot pronounce upon the constitutional validity or vires of any provision of the Act. Therefore, such a question cannot arise out of the order of the Tribunal and cannot be made the subject-matter of a reference to the High Court and subsequent appeal to the Supreme Court [See K. S. Venkataraman & Co. (P) Ltd. vs. State of Madras , Beharilal Shyamsunder vs. STO and C. T. Senthilnathan Chettiar vs. State of Madras .

13. For the foregoing reasons, it is held that the Tribunal was justified in law in sustaining the penalty despite the provisions of s. 140A(3) having been held by the High Court of Madras to be ultra vires the Constitution. The question is answered in favour of the Revenue and against the assessee. No order as to costs.