2006 (2) TMI 653 - HC - Income Tax

Summary

Issues Involved:
1. Can the appellant/assessee rely on previous Tribunal orders after conceding that the case could be decided on its merits independently?
2. Could the Tribunal disagree with a decision rendered earlier by a Co-ordinate Bench of the Tribunal in light of the concession made by the parties?
3. Was the ITAT correct in holding that the expansion of production capacity did not constitute setting up an industrial undertaking eligible for deductions under sections 80HH and 80-I of the Income-tax Act?

Detailed Analysis:

Issue 1: Reliance on Previous Tribunal Orders
The appellant/assessee argued that once the Tribunal had allowed their appeal for the assessment year 1991-92 based on the CIT(A)'s order for the assessment year 1992-93, the Tribunal had effectively given its approval to the CIT(A)'s decision for 1992-93. The appellant/assessee contended that a wrong concession made by their representative on a question of law was not binding, citing Supreme Court cases such as *Central Council for Research in Ayurveda & Siddha v. Dr. K. Santhakumari* and *Union of India v. G.K. Vaidyanathan*. The Tribunal, however, had acted on the concession made by the parties to decide the appeal on merits independently. The court concluded that a concession made by the parties could not give authority to a Coordinate Bench to differ with an earlier Bench's view, thus answering this issue in favor of the appellant/assessee.

Issue 2: Tribunal's Disagreement with Earlier Decision
The court emphasized that judicial discipline and certainty must be maintained, and a Coordinate Bench cannot disagree with an earlier Bench's decision merely based on a concession made by the parties. The court cited several Supreme Court decisions, including *Sub-Inspector Rooplal v. Lt. Governor*, to support the principle that a Coordinate Bench must follow an earlier decision or refer the matter to a larger Bench if there is disagreement. The court concluded that the Tribunal could not have disagreed with the earlier decision of a Coordinate Bench, thus answering this issue in favor of the appellant/assessee.

Issue 3: Expansion of Production Capacity and Eligibility for Deductions
Given the answers to the first two issues, the court deemed it unnecessary to address this issue at this stage. The court suggested that if a Coordinate Bench disagrees with an earlier decision, it should refer the matter to a larger Bench. Consequently, the court set aside the impugned order and directed that a larger Bench of the Tribunal decide the appellant's eligibility for deductions under sections 80HH and 80-I on merits.

Separate Judgment by T. S. Thakur, J.:
Justice Thakur dissented, emphasizing that each assessment year is a separate unit, and the principles of res judicata do not apply to income-tax matters. He argued that the assessee could legitimately give up the plea of consistency and invite a fresh consideration of its claim. He concluded that the assessee could not find fault with the Tribunal's order after having made a solemn statement to examine the matter independently. Justice Thakur answered question No. 1 in the negative, indicating that the assessee could not rely on the previous Tribunal orders after conceding to an independent decision on merits.

In summary, the majority judgment favored the appellant/assessee on the first two issues, setting aside the Tribunal's impugned order and directing a larger Bench to decide the matter on merits. Justice Thakur dissented, emphasizing the assessee's ability to give up the plea of consistency and inviting a fresh consideration of the claim.