2015 (2) TMI 536 - AT - Income Tax

Disallowance u/s 14A in respect of exempt income - CIT(A) deleted the addition also confirmed by ITAT - Held that - A perusal of stated bundle of facts relating to this case reveals that the issue relating to disallowance u/s 14A of the Income Tax Act has already been settled with the decision of this Tribunal vide order dated 8.12.2010. The Deptt. did not raise this issue in its appeal before the Hon ble High Court. This issue thus has become final. When an issue is finally settled by the Higher/appellate authority judicial authorities and the findings have become final, the Assessing Officer (hereinafter referred to as the AO) has to mandatorily give effect to the order of the appellate authority by the decision of which, the issue has been finally settled. The refusal or failure to comply the order of the higher/appellate authority by the lower authority amounts to contempt of court which may invite penal action under the Contempt of courts Act as well under the other relevant provisions of Code of Criminal Procedure. Apart from which such a conduct shows the unwillingness of the lower rank officer to comply the directions of his superiors which may invite departmental action. - Decided against revenue.

Issues:
Appeal against order of CIT(A) for A.Y. 2006-07 - Deletion of addition on account of disallowance u/s. 14A - Failure of AO to comply with Tribunal's order - Department's appeal against CIT(A)'s direction to comply with Tribunal's order - Contempt of court - Judicial discipline - Dismissal of Revenue's appeal.

Analysis:

1. Appeal against CIT(A) Order:
The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2006-07. The sole ground raised was the deletion of an addition of Rs. 14,67,118 on account of disallowance under section 14A concerning exempt income.

2. Failure to Comply with Tribunal's Order:
The issue of disallowance under section 14A was settled by the ITAT's decision dated 8.12.2010. The AO failed to give effect to this order, prompting the assessee to appeal before the CIT(A). The CIT(A) directed the AO to comply with the Tribunal's order, which had attained finality. However, the AO instead filed an appeal against this direction, leading to the present situation.

3. Contempt of Court and Judicial Discipline:
The Tribunal emphasized the importance of complying with orders of higher/appellate authorities once a matter has been settled. Failure to do so amounts to contempt of court and shows disregard for judicial discipline. The Tribunal cited relevant case laws and highlighted the need for judicial discipline and respect for higher judicial authorities' decisions.

4. Dismissal of Revenue's Appeal:
The Tribunal dismissed the Revenue's appeal, noting the lack of justification for not complying with the Tribunal's order. The Tribunal highlighted the responsibility of lower authorities to adhere to higher/appellate authorities' decisions unless modified or set aside by a higher court. The Tribunal's decision aimed to uphold judicial discipline and discourage frivolous appeals.

5. Guidance for Revenue Officials:
The Tribunal observed a lack of proper knowledge and guidance among revenue officials regarding judicial hierarchy and discipline. It directed the registry to send a copy of the order to the Chairman of CBDT for necessary action to provide training and guidance to revenue officials in maintaining judicial discipline.

6. Conclusion:
The Tribunal's decision in this case underscores the importance of respecting and complying with orders of higher judicial authorities, upholding judicial discipline, and discouraging frivolous appeals. The dismissal of the Revenue's appeal serves as a reminder of the obligation of lower authorities to follow higher/appellate authorities' decisions unless modified by a higher court.

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