Section 268A must be omitted otherwise the revenue will have restricted rights of appeal in some circumstances - Departmenal appeals a review in view of recent judgment dated 21.07.08

[DEV KUMAR KOTHARI]

Earlier article:

The article written by the author was hosted under title "New section 268A was not required to tackle departmental appeal on unchallenged/ accepted issues in view of Supreme Courts judgment in the case of B.J. AKKARA, COL. (RETD.) V. GOVERNMENT OF INDIA on 18.05.08. Obviously this article was before the recent judgment of the three members bench of the Supreme Court  dated 21.07.08   in the case of C.K. Gangadharan & Anr. Versus CIT  Cochin [2008 -TMI - 4694 - SUPREME COURT]. The present  article is therefore an update of the earlier article and provides an insight about new dimensions created by the recent judgment of the Supreme Court providing some other grounds besides 'just cause' namely "public interest" and "finality of legal position". As discussed in earlier article the 'just cause' as well as 'finality of legal position' can also be reasons for tax payers as well, in some circumstances the tax payer can also successfully plead 'public interest' to seek ruling in the favour of the taxpayer. Ground of public interest will generally be available to the revenue. However in case of private litigant this may not usually be available. The public interest can be pleaded by the taxpayer only by showing interest of larger portion of tax payers or the interest of its workers, or consumers, suppliers etc. For example in case of a sugar mill the sugar mill can contend 'public interest' if the interest of consumers of sugar or  interest of sugar cane farmers or its workers  is likely to be affected adversely if the tax burden is not examined properly by the judiciary. When a litigation is initiated by a trade association on behalf of  trade or industry, public interest can be established in an easy manner because in that case stake holders are larger and indirect beneficiaries of a relaxations in tax burden will also be more.

Recent judgment:

Recently in the context of provisions of the Income Tax Act, 1961 also the Supreme court (larger Bench of three judges on a reference) has in case of C.K. Gangadharan & Anr. Versus CIT  Cochin [2008 -TMI - 4694 - SUPREME COURT] held that an appeal can be filed in another year or in another case, even though revenue did not challenge judgment on similar issue at an earlier instance, if there was just cause for not filing an appeal.The para 13 of the judgment reads as follows:

13. In answering the reference, we hold that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts.

Thus the court has laid down three circumstances namely:

1. When there is just cause for filing appeal,

2. When it is in public interest to do so.

3. When a pronouncement from higher court is desirable when divergent views are taken by Tribunals or High Courts. In which an appeal before further higher forum can be filed on an issue which was decided against the revenue in any earlier order/ judgment and it was not challenged.

The Supreme Court has also not doubted the law laid down in earlier judgments in which it was held that when the revenue has accepted judgment in another case, on the same issue revenue cannot be permitted to agitate the issue as the precedence has attained finality.

The order of reference as appears in the preamble of the judgment of the larger bench reads as follows:

"xxx xxx xxx In view of the aforesaid position, we are of the opinion that matter requires consideration by a larger Bench to the extent whether revenue can be precluded from defending itself by relying upon the contrary decision. We make it clear that we are not doubting the correctness of the view taken by this Court in the cases of Union of India v. Kaumudini Narayan Dalal (2001)10 SCC 231, CIT v. Narendra Doshi (2004) 2 SCC 801 and CIT v. Shivsagar Estate (2004) 9 SCC 420 to the effect that if the revenue has not challenged the correctness of the law laid down by the High Court and accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assesses, without just cause. Registry is directed to place the papers before the Hon'ble Chief Justice of India for appropriate orders."

Thus it is seen that in earlier judgments as above referred by the Supreme Court  as well as in the case of Berger Paints, the supreme Court always  used the expression "without just cause". Therefore, non filing of an appeal for some just cause, will not prevent the revenue or the assessee to file appeal on similar issue in another year or in another case.

Supreme Court considered some of earlier judgments on similar issues, important excerpts with high lights are given below:: 

The case of  Bharat Sanchar Nigam Ltd. and Anr. v. Union of India and Ors. (2006 (3) SCC 1), in which it was noted as follows:

that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any

principle of resjudicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which,failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction.

A decision can be set aside in the same lis on a prayer for review or an application for recall or Under Article 32 in the peculiar circumstances mentioned in Hurra v. Hurra (2002 (4) SCC 388). As we have said overruling of a decision takes place in a subsequent lis where the precedential value of the decision is called in question. No one can dispute that in our judicial system it is open to a Court of superior jurisdiction or strength before which a decision of a Bench of lower strength is cited as an authority, to overrule it. This overruling would not operate to upset the binding nature of the decision on the parties to an earlier lis in that lis, for whom the principle of res judicata would continue to operate. But in tax cases relating to a subsequent year involving the same issue as an earlier year, the court can differ from the view expressed if the case is distinguishable or per incuriam.  The decision in State of U.P. v. Union of India (2003 (3) SCC 239) related to the year 1988. Admittedly, the present dispute relates to a subsequent period. Here a coordinate Bench has referred the matter to a Larger Bench. This Bench being of superior strength, we can, if we so find, declare that the earlier decision does not represent the law. None of the decisions cited by the State of U.P. are authorities for the proposition that we cannot, in the circumstances of this case, do so. This preliminary objection of the State of U.P. is therefore rejected."

5. In State of Maharashtra v. Digambar (1995 (4) SCC 683), the position was highlighted by this Court as follows:

"the contention of the appellants could not be rejected. Non-filing of an appeal, in any event, would not be a ground for refusing to consider a matter on its own merits. (See State of Maharashtra v. Digambar 1995 (4) SCC 683).

 In State of Bihar and Ors. v. Ramdeo Yadav and Ors. (1996 (3) SCC 493) wherein this Court noticed Debdas Kumar (supra) holding:

In the similar circumstances, this Court in State of Maharashtra v. Digambar, (1995) 4 SCC 633) and in State of West Bengal v. Debdas Kumar,(1991) Suppl. SCC 138), had held that though an appeal was not filed against an earlier order, when public interest is involved in interpretation of law, the Court is entitled to go into the question."

 In Chief Secretary to Government of Andhra Pradesh and Anr. v. V.J. Cornelius and Ors. (1981 (2) SCC 347) it was observed that equity is not relevant factor for the purpose of interpretation.  It will be relevant to note that in Karam Chari v. Union of India and Ors. (2000 (243) ITR 143) and Union of India v. Kaumudini Narayan Dalal and Anr. (2001 (249) ITR), this Court observed that without a just cause revenue cannot file the appeal in one case while deciding not to file appeal in another case. This position was also noted in Commissioner of Income Tax v. Shivsagar Estate (2004 (9) SCC 420).

 The order of reference would go to show that same was necessary because of certain observations in Berger Paints India Ltd. V. Commissioner of Income Tax, Caluctta (2004) 2 SCC 42). The decision in Union of India and Ors. v. Kaumudini Narayan Dalal and Anr. (2001 (10) SCC 231) was explained in Himalatha Gargya v. Commissioner of Income Tax, A.P. and Anr. (2003 (9) SCC 510) at para 14. It has been stated in the said case that the fact that different High Courts have taken different views and some of the

High Courts are in favour of the revenue constituted "just cause" for the revenue to prefer an appeal. This Court took the view that having not assailed the correctness of the order in one case, it would normally not be permissible to do so in another case on the logic that the revenue cannot pick and choose. There is also another aspect which is the certainty in law.

 In answering the reference, we hold that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts.

Is section 268A exhaustive:

It can be said that section 268A is exhaustive and it provides scope for filing appeal in another case or another year only when in earlier matter, which attained finality, the revenue did not file appeal due to lower revenue impact.

This is because a view can be taken that only in the circumstances stated in S. 268A, the revenue can prefer an appeal on similar matter and in no other circumstances. Therefore, in view of S.268A, the revenue may have restricted freedom to file appeal in such circumstances. In absence of S. 268A the freedom could be more extensive. Therefore, it seems that in a case where revenue has not preferred an appeal, though the amount of revenue involved was higher, then on similar issue revenue will not be entitled to prefer appeal in another case or another year on the grounds of just cause, or public interest or to seek final determination of law.

In view of discussion in earlier article and also the latest views expressed by the Supreme Court, the author again re-iterate that it was not necessary to insert new section 268A in the I.T.Act. By insertion of S. 268A, it appears that the freedom of the revenue to file an appeal on similar matter which has attained finality may be restricted. Therefore, S.268A must be omitted.