1992 (3) TMI 131 - AT - Income Tax

Summary

Issues Involved:
1. Genuineness of sub-contractor firms.
2. Legality of Assessing Officer's re-assessment under section 147.
3. Adherence to judicial discipline by the Commissioner of Income-tax (Appeals).
4. Binding nature of the Income-tax Appellate Tribunal's (ITAT) decisions on lower authorities.

Issue-wise Detailed Analysis:

1. Genuineness of Sub-contractor Firms:
The appellants claimed that they had subcontracted works to various sub-contractors on a royalty basis of 1% of the gross bills. The Assessing Officer rejected this claim, treating the sub-contractors as benamidars of the appellants to reduce the incidence of taxation. This conclusion was based on books of account, documents, and other materials seized from Sri A. Suryanarayana. However, the ITAT found that the sub-contractor firms were independent and had no connection with the appellant-firms. The Tribunal noted that the sub-contractors were assessed to income-tax independently, and their genuineness was accepted by the revenue authorities.

2. Legality of Assessing Officer's Re-assessment under Section 147:
For the assessment year 1982-83, the original assessment was completed under section 143(1). The Income-tax Officer later invoked section 147 for re-assessment, which was set aside by the Commissioner of Income-tax (Appeals). Similarly, for assessment year 1983-84 and subsequent years, the assessments were reopened under section 147 following a search and seizure operation. The ITAT found that the re-assessments were not justified as the evidence relied upon by the Assessing Officer did not substantiate the claim that the sub-contractors were benamidars.

3. Adherence to Judicial Discipline by the Commissioner of Income-tax (Appeals):
The CIT (Appeals) set aside the assessments and directed the Assessing Officer to redo the same de novo, without following the ITAT's earlier decisions in the appellants' own cases. The ITAT criticized this approach, emphasizing that judicial propriety demands that the order of the Tribunal should be respected and followed by lower authorities. The CIT (Appeals) had directed the Assessing Officer to "fill up the gaps" and "overcome" the Tribunal's decision, which the ITAT found to be against judicial discipline.

4. Binding Nature of the ITAT's Decisions on Lower Authorities:
The ITAT reiterated that its decisions are binding on lower authorities, including the CIT (Appeals). The Tribunal cited the Supreme Court's decision in Union of India v. Kamlakshi Finance Corpn. Ltd., which underscores that lower authorities must follow the orders of higher appellate authorities. The ITAT emphasized that the CIT (Appeals) should have adhered to its earlier decision, which had already settled the issue of the genuineness of the sub-contractor firms.

Conclusion:
The ITAT allowed the appeals, vacating the orders of the CIT (Appeals) and deleting the additions made by the Assessing Officer. The Tribunal reinforced the principle that lower authorities must follow the decisions of higher appellate authorities to maintain judicial discipline and finality in litigation. The ITAT's decision underscores the importance of adhering to established judicial hierarchy and respecting the binding nature of appellate decisions.