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2011 (7) TMI 726 - AT - Income TaxRegistration u/s 12A - Learned CIT(A), without appreciating the binding force of the jurisdictional Tribunal s order denied the exemption - Held that it is not clear whether or not the Learned CIT(A) is upholding the action of Assessing Officer in denying exemption to the assessee under section 11 of the Act vis- -vis the reasons given by the Assessing Officer for such denial, despite there being a decision of Jurisdictional Tribunal holding that the assessee is entitled to exemption under section 11 of the Act Whether the Learned CIT(A) can refuse to follow the orders of the jurisdictional ITAT - while it is the duty of the Learned CIT(A) to pass orders in terms of the earlier decision of the ITAT so long as the same is not suspended/reversed by Hon ble High Court - Decided in favor of the assessee by way of remand to CIT(A)
Issues Involved:
1. Whether the CIT(A) can refuse to follow the orders of the jurisdictional ITAT. 2. The binding nature of ITAT orders on tax authorities. 3. The applicability of costs under subsection (2B) of section 254 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Whether the CIT(A) can refuse to follow the orders of the jurisdictional ITAT: The primary contention raised by the assessee was that the CIT(A) failed to follow the binding order of the jurisdictional ITAT, which had previously decided in favor of the assessee regarding the exemption under section 11 of the Income Tax Act. The CIT(A) made observations questioning the correctness of the registration granted under section 12A and the charitable nature of the assessee's activities, despite the ITAT's ruling. The tribunal emphasized that the CIT(A) committed judicial impropriety by not adhering to the ITAT's decision, which is binding unless suspended or overturned by a higher court. 2. The binding nature of ITAT orders on tax authorities: The tribunal discussed the hierarchical nature of judicial decisions, asserting that orders from higher appellate authorities like the ITAT are binding on lower tax authorities. Citing various judicial rulings, including those from the Supreme Court and High Courts, the tribunal highlighted the necessity for judicial discipline and the duty of lower authorities to respect and follow appellate decisions. The tribunal underscored that non-compliance with ITAT orders could constitute contempt of court, leading to potential legal consequences for the offending authorities. 3. The applicability of costs under subsection (2B) of section 254 of the Income Tax Act, 1961: The assessee sought exemplary costs under subsection (2B) of section 254, arguing that the CIT(A)'s refusal to follow the ITAT's order forced them to file an appeal. The tribunal clarified that subsection (2B) was introduced to discourage frivolous appeals and did not apply to the present case. However, the tribunal noted that the assessee could initiate contempt proceedings against the CIT(A) for not adhering to the ITAT's binding decision. Conclusion: The tribunal set aside the CIT(A)'s order and remanded the case back to the CIT(A) for fresh adjudication, instructing the CIT(A) to follow the ITAT's earlier decision in the assessee's case. The tribunal also directed the CIT (Departmental Representative) to inform the Chief Commissioner and Central Board of Direct Taxes to ensure enforcement of judicial discipline among tax officials to prevent similar occurrences in the future. All appeals by the assessee were allowed for statistical purposes. Pronouncement: The judgment was pronounced in the open court on 19th July 2011, with all appeals of the assessee being treated as allowed for statistical purposes.
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