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Income Tax Appellate Tribunal, “SMC” “A’’BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against the order of CIT(A), National Faceless Appeal Centre (NFAC), New Delhi dated 22.11.2021. The assessee has raised following grounds of appeal:- 1. “The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
The learned Commissioner of Income tax [Appeals] / National Faceless Appeal Centre [NFAC for short] is not justified in holding that the M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 2 of 9 appellant was not entitled to deduction u/s 80P of the Act on account of filing the return of income beyond the time specified u/s 139[1] of the Act, by virtue of the provisions of section 80AC of the Act, under the facts and in the circumstances of the appellant's case.
3. The learned Commissioner of Income-tax [Appeals]/National Faceless Appeal Centre [NFAC for short] ought to have appreciated that the appellant had made an application u/s. 119[2][b] of the Act before the learned Pr.CIT, Goa for condonation of the delay in filing the return of income for the year under appeal and the learned Pr. CIT vide order u/s 119[2][b] of the Act, dated 24/05/2021 had since condoned the delay in filing the return of income and therefore, there was remained no transgression of the provisions of Sec. 80AC of the Act in order to deny the legitimate claim of deduction u/s 80P of the Act under the facts and in the circumstances of the appellant's case.
The learned Commissioner of Income-tax [Appeals]/National Faceless Appeal Centre [NFAC for short] is not justified in holding that the condonation of delay in filing the return of income by the Pr.CIT, Goa u/s 119[2][b] of the Act will not help the appellant overcome the provisions of section 80AC of the Act, under the facts and in the circumstances of the appellant's case.
For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
2 The brief facts of the case are that the assessee Shirlalu Milk Producers Co-operative Society Limited is a Primary Milk producers Cooperative Society duly registered under the Karnataka Cooperative Societies Act, 1959 and is engaged in the business procuring milk from its members small and marginal farmers engaged in dairy farming, sale of cattle feed, micro nutrients etc., providing artificial insemination facility for development of high breed and cross breed cattle, etc. Though the assessee was formed in the year 2003, it had never filed its return of income with the firm belief, though not tenable under the law, that since its income is eligible for deduction u/s 80P of the Income-tax Act,1961 ['the Act' for M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 3 of 9 short], there is no obligation to file the return. Realising that the filing of return of income is mandatory to claim deduction u/s 80P of the Act, the assessee, for the first time since its inception, filed its return of income for the assessment year 2018-19 on 19.3.2019 declaring a total income of Rs.9,240 after claiming deduction of Rs.9,14,254 u/s 80P(2)(b) of the Act. The income tax return filed by the assessee was processed by the CPC, Bangalore on 9.8.2019. While processing the return, the CPC declined the deduction claimed by the assessee u/s 80P(2)(b) amounting to Rs.9,14,254 for the reason that the assessee has not filed the return within the due date. A demand for Rs.3,69,420 has been raised towards tax interest. The assessee filed a request for condonation of delay in filing the return of income for the AY 2018-19 before the CIT on 13.10.2019 which is still pending to be disposed off. The assessee filed a rectification return u/s 154 of the Act on 9.11.2019 for reconsidering the disallowance of deduction claimed u/s 80P(2)(b). The rectification return filed by the assessee was processed on 5.12.2019 but without giving the benefit of deduction u/s 80P(2)(d) of the Act. Aggrieved by the denial of deduction u/s 80P(2)(b) of the Act, the assessee has preferred this appeal.
Assessee went before CIT(A), NFAC. Whereas the NFAC observed that the claim of assessee with regard to the deduction u/s 80P(2)(a)(i) of the Act is denied on the reason that the assessee has not filed its return of income within prescribed time. Further, the deduction claimed by assessee u/s 80P(2)(b) of the Act also no longer valid since the Principal CIT, Goa has no power to condone the delay and the filing of return within time allowed is a statutory requirement. Accordingly, he rejected the deduction claimed by assessee u/s M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 4 of 9 80P(2)(a)(i) and 80P(2)(b) of the Act. Against this assessee is in appeal before us.
4. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. Admittedly, in this case, return of assessee has been filed for the assessment year 2018-19 belatedly which is on 19.3.2019, which is beyond the normal due date of 31.3.2018, which is as per section 139(1) of the Act and also beyond the extended time which was allowed up to 31.10.2018 for the relevant assessment year. According to the Ld. CIT(A), the amended provisions of section 80AC of the Act which are applicable for assessment year 2018-19 and onwards, the assessee is not eligible to claim exemption u/s 80P of the Act. However, there is no dispute that Principal CIT Goa vide order dated 7.2.2021 issued order u/s 119(2)(b) of the Act on 19.2.2021 condoning the delay of filing the return of income so as to facilitate the assessee to claim deduction u/s 80P of the Act. However, Ld. CIT(A) was not ready to accept order of condonation of filing of return of income by Principal CIT, Goa vide his order dated 7.2.2021 and observed that filing of return is a statutory provision so as to claim deduction u/s 80P of the Act. He should file the return of income for the assessment year 2018-19 on or before 31.10.2018. In our opinion, the CIT(A) NFAC is a lower authority as compared to Principal CIT Goa and he cannot sit in judgement over the order of the Principal CIT. A decision made by higher forum is binding and the lower authority cannot overturn it. In the present case, CIT(A) is a lower authority as compared to Principal CIT, Goa and he is bound by the decision of the Principal CIT and he cannot say that the Principal CIT has no power to condone the delay in filing the return of income. If it
M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 5 of 9 is in discrepancy or lapse on the part of Principal CIT in condoning the delay, the department have every option to get it cancelled by following due process of law. Without cancellation of order of the condonation passed by the Principal CIT, Goa, the CIT(A) outrightly cannot reject it so as to deny the benefit of deduction u/s 80P of the Act to the assessee. At this stage, it is appropriate to refer few judgements.
4.1 Justice Manchanda AIR 2004 SC 1625:- A decision made by a higher court is binding and the lower court cannot over turn it. The court not to overturn its own precedent unless there is a strong reason to do so.
4.2 In Union of India v. Raghubir Singh, AIR 1989 SC 1933, the Supreme Court held that the binding precedent is necessary to be followed in order to maintain consistency in judicial decision and enable an organic development of the law. It also provides an assurance to an individual as to the consequence of transactions forming part of his daily affairs.
4.3 In Mamleshwar Prasad v. Kanahaiya Lal, AIR 1975 SC 907, the Supreme Court held as under:-- "Certainty of the law, consistency of rulings and comity of Courts - all flowering from the same principle - converge to the conclusion that a decision once rendered must later bind like cases. We do not intend to detract from the rule that, in exceptional instances where by obvious inadvertence or oversight a judgment fails to notice a plain statutory provision or obligatory authority running counter to the reasoning and result reached, it may not have the sway of binding precedents. It should be a glaring case, an obtrusive omission."
The benefit of this doctrine is to provide certainty, stability, predictability and uniformity. It increases the probability of judges arriving a correct decision, on the assumption that collective wisdom
M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 6 of 9 is always better than that of an individual. It also preserve the institutional legitimacy and "adjudicative integrity". It is flexible in nature, as there are ways to avoid precedents. It provides equality in treatment and thus prevents bias, prejudice and arbitrariness and avoids inconsistent / divergent decisions. It prevents uncertainty and ambiguity in law [Union of India v. Raghubir Singh, (1989) 2 SCC 754; and Justice R V Raveendran : "Precedents - Boon or Bane", (2015) 8 SCC 1 (J)].
4.4 The courts have to nurture, strengthen, perpetuate and proliferate certainty of law and not deracinate its clarity (Vide: State of U.P. v. Ajay Kumar Sharma, (2016) 15 SCC 289)......................................."
4.5. From the above it is clear that the decision of the High Court are binding on the courts/ tribunal situated within the territorial jurisdiction of the High Court.
4.6. Binding nature of jurisdictional High Court decision on the tribunal working under it umbrella , traces its origin Article 227 of the Constitution, which provides the supervision and control of all the tribunal/ auction other authority situated within the jurisdiction of the High Court. The Hon'ble Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs AIR 1962 SC 1893 observes - " We therefore, hold that the law declared by the highest court in the state is binding on authorities or Tribunals under its superintendence and they cannot ignore it."
4.7. The Apex Court reiterated the aforestated position once again in Baradakanta Mishra v. Bhimsen Dixit AIR 1972 SC 2466 where it stated that it would be anomalous to suggest that a Tribunal over which a High Court has superintendence can ignore the law declared by it and if a Tribunal can do so, all the subordinate courts can
M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 7 of 9 equally do so, for there is no specific provision as in respect of Supreme Court, making the law declared by the High Court binding on subordinate Courts. The court further observed that it is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should confirm to the law laid down by it.
4.8. Hon’ble High Court of Allahabad High Court in K. N. Agarwal v. CIT [1991] 189 ITR 769 laid emphasis of following the Jurisdictional high Court in the Following manner and held as under "Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing officer and since he acts in a quasi judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore merely on the ground that the Tribunal's order is the subject matter of revision in the High Court or the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation".
4.9. Similarly A.P. High Court in State of A.P. v. CTO (1988) 169 ITR 564, held as under :-
If any authority or the Tribunal refuses to follow any decision of the High Court on the above grounds, it would be clearly guilty of committing contempt of the High Court and is liable to be proceeded against.
4.10. The Supreme Court in the case of Union of India v. Kamlakshi Finance Corpn. Ltd. AIR 1992 SC 711; deliberately emphasized on the following "It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders
M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 8 of 9 of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not 'acceptable' to the Department--in itself an objectionable phrase--and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws."
4.11. The Hon'ble Calcutta High Court in Voest Alpine Ind. GmbH v. ITO &Ors. (246 ITR 745, 749 Cal.) held that it is well settled principle of law that the junior incumbent is supposed to obey and carry out the order and / or observations 'made by the superior authority, be it judicial forum or a quasi-judicial forum or even in any administration field.
4.12. In CIT v. Ralson Industries Ltd. (288 ITR 322 SC) the Hon'ble Supreme Court observed that when an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline.”
5. In view of the above discussions, the Ld. CIT(A) cannot review the decision of Pr. CIT with regard to condonation of delay in filing the return of income. Accordingly, we direct the Ld. CIT(A) to examine the issue of allowability of deduction u/s 80P(2)(a)(i)/80P(2)(b) of the Act in accordance with law.
M/s. Shirlal Milk Producers Co-operative Society Ltd., Dakshina Kannada Page 9 of 9 6. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 12th May, 2022