Bhopal Sugar Industries Ltd. v. the Income-Tax Officer, Bhopal

Judgment

4i4 8UPRE:\fE COURT REPORTS [ 1961] i96o direction is given under s. 8(2), there is not.bing in that provision which prevents rectification of that ordn. By sub-s. (4) of s. 8 of the ln\'cstiga.tion Act, the findi11gH recorded by the Commission in cases or points Thr Cnmmi"''"" referred t-0 theri1 are macle final in all aRsessment or 0/ /llcowHo·., reassessment proceedings. The Act has, by sub-s. (2) of "1-'"".'· Jrnvaus. 8 remored.the bar of limitation which arose by CO>t·Corh•• & 2 f I I T 1 I c00 , 1., nangalvi(' ~. 5 o t le ncorue ~~ ct. twas con1petcnt ticre- 0 fore to the Income I ax Officer to reopen the assess. """" 1. ment proceedings not w ithslll.nding any lapse of time and the prev ions order of assessment did not opPrate as a bar to such reassessment. The High Court was therefore in our judgment right in recording its answers on the three questions submitted by the Commissioner of Income Tax. In that view, the appPal fails and is dismissed with costs. Appeal dismissed.

THE BHOPAL SUGAI{ INDUSTRIE8 LTD. THE J'.'iCOME-TAX. OFFICEH, BHOPAL (8. K. DAS, j\f. HIDAYATULLAH, K. c. DAS GUPTA, J. c. SHAil ANO N. RAJAOOPALA AYYANOAR, J.J.) [)irrcfion.< by superior Tribtmals-If could be refused lo be carried 011t-J>ri11ci'plrs (if adn1inistrafion of justice. The Income-tax Appellate Tribunal in the exercise of its appellate jurisdiction gave certain directions to the respo1•dent. an Income-tax Officer, in connection \\'ith the ascertainment of the market value of sugarcane grown by the appellant at their farm and use<l by them for the manufacture of sugar. Th~ appellant asked the Income-tax Officer to give effect to the said order and directions of the Tribunal but was informed that no relief coul<l be given. Thus the Income-tax Officer failed to carry out the directions of the Tribunal.

Held, that the refusal to carry out the directions which a superior Tribunal had given in exercise of its appellate powers was in effect a denial of justice and was furthermore destructive of one of the basic principles in the administration of justice r960 based as it is in this country on a hierarchy of courts ; and the result of such refusal would lead to chaos in the administration The Bhopal Sugar of justice. Indil<stries Ltd. CIVIL APPELLATE JURISDICTION: Civil Appeal The 1n:~me-tax No. 407 of 1956. Officer. Bhopal Appeal from the judgment and order dated February 14, 1956, of the former Judicial Commissioner's Court, Bhopal, in Misc. Civil Case No. 24'of 1955. Sanat P. Mehta and S. N. Andley, for the appellant. K. N. Rajagopa.l Sastri and D. Gupta, for the respondent. 1960. September 2. The Judgment of the Court was delivered by . S. K. DAS J.-This is an appeal on a certificate s. K. Das J. under Art. 133 of the Constitution.

The short question for decision is. whether the learned Judicial Commissioner of Bhopal rightly dismissed a petition under Art. 226 of the Constitution made by the Bhopal Sugar Industries, Limited, hereinafter refered to as the appellant company, praying for the issue of an appropriate order or direction in the nature of a writ of mandamus to compel the Income-tax Officer, Bhopal, respondent herein, to carry out certain directions given by the Income-tax Appellate Tribunal, Bombay, to the said officer in an appeal preferred by the appellant company from an order of assessment ma.de against it by the respondent. The relevant facts are these. The appellant company -carries on the business of manufacturing and selling sugar in various grades and quantities. It has its factory at Sehore which was formerly in the Bhopal State and is now situate in the State of Madhya Pradesh.

It purchased sugar-cane from local cultivators and also grew its own sugar-cane in farms situate in that State, such sugar-cane being used for its manufacture of sugar. During the year of account ending on Sept9mber 30, 1950, the appellant company purchased 7, 72,217 ma.unds of sugar-cane from local 61 47G Sl:PRE:IIE COVRT REPORTS [1961] '9"° cu!Livators at various purchasing c•,ntrcs, 14 in num- TI RI·-·-, 0 ber, situate at a distance of about 8 t-0 22 miles from oe oopa ·'" ga1 . r Th 1,,d"'"'" Ltd. its 1actory. e price pat was Rs. 1-4·6 per maund, that being the price fixed by the then Sta.to of Bhopal. Thr Inco•nr-ta• The average cost of transporting the sugar-cane from Oflim. "'"P"' the various centres to the factory was stated to be Rs. 0.4.9 per maund. During the same period the S. r.·. V«' } appellant company grew its own sugar-cane to thn extent of 6,78,490 maunds and brought the same along with the cuh ivators' sugar.cane to its factory for manufacturing sugar.

For the sugar-c:rne grown on it.s own farms the appellant company claimed Hs. 1-13-0 per maund as its market value (including Hs. 0-4-9 as average transport charges}, the total market value for 6, 78,490 mauncls thus coming to Rs. 12,29,763. The appellant company deducted from the aforesaid market value a sum of Rs. 9,77,772 as agricultural expenHes, namely, expenses of harvesting, loading, etc., and rlaimed the balance of Rs. 2,51,991 as agricultural income to be deducted from the computation of its total income for the assessment year 1951-52. The respondent accepted the figure of Rs. 9,77,772 as agricultural expenses but computed the market value of 6,78,490 maunds of sugar-cane grown on tho appellant company's own farms at Rs. 9,33,000 at the rato of Rs. J .6.0 per ma1111d ; thus according to this computation there was a loss of !ls.

44,772 and the respondent held in his assessment order that the appellant company was not entitled to claim a.ny clcduction of agricultural income for the assessment year. The appellant company then appealed to the Appellate Assistant Commissioner, Jubbalpore, who deter-. mined the market value of the sngar-cane grown on the appellant company's own farms at Rs. 10,07,132 at the rate of Rs. J.7.9 per maund. This resulted in an agricultural income of Rs. 29,360, which tho Appellate Assistant Commissioner allowed to be deducted from the total income of the appellant company. Not satisfied with the order of the A ppella.te Assistant Commissioner, the appellant company preferred an appeal to the Income.tax Appellate Tribunal, Iy6o Bombay, and claimed that the market value of the ·sugar-cane grown on its farms should be Rs. 1-13-0 ThreaBho,pal 8L'i'aC"'. n 11s ries per maund and not Rs. 1-7. 9.

There was no dispute before the Tribunal as to the agricultural expenses, The Iiicome-fax and the question which the Tribunal had to decide related to the market value of 6,78,490 maunds of sugar-cane grown on the appellant company's own farms: After referring to r. 23 of the Income-tax Rules and certain other matters, the Tribunal said: "We are, therefore, inclined to think that 'market' within the meaning of rule 23 is not the centres bu~ the factory where the assessee company manufactures sugar. This being the position in order to find out the market value, we have to add the transport charges from the centres to the factory. We were told that the transport charges amounted to Rs. 0-4-9 per maund. We have not been able to verify this figure .. In our opinion, therefore,. the sugar-cane produced by the assessee company in its own farms has to be valued at Rs. 1·4-6 per maund plus the average transport charges per marind from the centres to the factory".

The Tribunal then gave the following directions to the respondent: " We would, therefore, direct the Income-tax Officer to ascertain the average transport charges per maund from the centres to the factory and to add to it the rate of Rs. 1-4-6 per mand and on that basis work out tbe market value of the sugar-cane grown by the assessee company in its own farms. If the market value comes to more than Rs, 1-7-9 per maund further relief to the necessary extent will be given by the Income-tax Officer. If, however, the market value is less than Rs. 1-7-9 the appeal must fail ". The Commissioner of Income-tax then applied to the Tribunal for a reference under s. 66(1) of the Income-tax Act, stating that a question of law arose out of the Tribunal's order in as much as the Tribunal was not justified, in the opinion of the Depart-· mel!t, to add average transport charges to the price of Officer, Bhopal S. I(. Da.1 ]. 4i8 SCPRE:\IE COCRT HEPORTS [1961] r96o Rs. 1-4-6 per mannd of sugar-cane grown by the appel- T• R !ant companv.

ThiA application was, however, withi'..c1 .. ';;;;:1, ·i_~~." drawn on A~gust 4, 1954. The order of the Tribunal thus became final and was binding on the parties. The 1 .. ccmc-1ox In the meantime, the appellant company moved Of,lm, mapai the respondnnt to give effect to the directions of the Tribunal. After some abortive correspondence bet. s. I< Dos fween the respondent and his higher officers on one side an<l the appellant comµany on the other, the respondent informed the appellant company on March 24, 1955, that no relief could be given to it. In his letter of that date the respondent said: "In this connection your attention is invited to the order of the Tribunal to ascertain the cost of transportation of the sugiir-cane from the farms to the factory which could only be considered in working out the market value of the agricultural produce. As is evident from your account books you are found to have debited a 8Um of Rs. 59,116 only out of the total transportation expenses to your agricultural produce account-.

Xaturally, therefore, only the expenses so incurred by you can be considered in working out the market value of the agricultural sugar-cane. By adding the transportation charges to the valuation of sugar-cane at Rs. 1/4/6 on 6,78,490 maunds of agricultnral produce the total ·cost of the agricultural produce would be Rs. 9,28,43 I. Against this by the order of the Appellate Assistant Commissioner the value of the farm cane wnR taken at Its. 10,07,132 and thus the excess allowance of Rs. 78,701 has already been allowed to you. Thus as the market value of the agricultural produce does not in any case exceed Rs. 1-7-9 as held by the Appellate Assistant Commissioner the result of the Tribunal's order as per their finding given in para 8 of the order results in no relief being given to you."

It is worthy of note h~re that while the Tribunal had directed the respondent to ascertain the average transport charges from the centres to the factory, the respondent referred to the cost of transportation from the f arm8 to the factory. Clearly enough, the respondent misread the direction of the Tribunal al.ld failed l S.C.R. SUPREi\IE COURT REPORTS to carry it out.. He proceeded on a basis which was 19 60 in contravention of the direction of the Tribunal. The Bhopal Sttga• In these circnmstances, the appellant company Industries Lti. moved the Judicial Commissioner, Bhopal, then exercising the powers of a High Court for that area, for the The Income-tax issue of a writ to compel the respondent to carry out Officer, Bhopal the directions given by the Tribunal. The learned S. [(. Das ).

Judicial Commissioner found in express terms t at the respondent had acted arbitrarily and in clear violation of the directions given by.the Tribunal; in other words, he foJJnd .that the respondent had disregarded the order of the Tribunal, failed to carry out hiA duty according ,to law and had acted illegally. Having found this, the learned Judicial Commissioner went on to examine the correctness or otherwise of the order of the Tribunal and found that the Tribunal went wrong in not treating the centres as ' markets' within the meaning of r. 23 of the Income-tax Rules. He then came to the conclusion that in view of the error committed by the Tribunal, there was no mani-' fest injustice as a result of the order of the respondent; accordingly, he dismissed the application for the issue of a writ made by the appellant company.

We think that the learned Judicial Commissioner was clearly in error in holdiug that no manifest injustice resulted from the order of the respondent conveyed in his letter dated.March 24, 1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as jt is in this country on a hierarchy of courts.

Ha subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly condemning the. respondent for refusing to carry out the directions of the superior St:PHEME COl;RT REPORTS (1961] w;,, tribunnl, yet hol<l ~hat no manifest. injustice resulted from such refusal. The Hhofnl Sugo' l 1,,.1,.,1, "' I.id. .t must e remem >ere t at t c order of the Trihunal <lated April 22, 195!, was not under challenge 'Inc I•""""-'"" before t.he Judicial CommiRsioncr. That order had o.u;m, llhepol become final and binding on the parties, and the re8- pondent could not. question it in any way. As a. mats. 1' ""' I t•·r of fact the Commissioner of Income. tax had ma.do 11.n application for a reference, which applic11.tion was subsequently withdrawn.

The Judicial Commissioner was not sitting in appeal oYer the Tribunal and we do not t.hink that in the circumstances of this case it waR open to him to sa.y that the order of the Tribunal was wrong and, therefore, there wn.s no injustice in disll>garding that order. As \\e have said earlier, such '' view is <lestructivc of one of the basic principles of the administration of justice. ln fairness to him it must be stated that learned counsel for the respondent did not attempt to support the judgment of the Judicial Commi;;sioner on the ground that no manifest injustice resulted from the refusal of the respondent to carry out tho directions of a superior tribunal. He conceded that. even if the order of tho Tribunal was wrong, a sub.Jrdinat.e and inferior tribunal could not disregard it; he readily recognised the sanctity and importance of the basic principle that a subordinate tribunal must carry out the directions of a superior tribunal.

Ho argued, howl'ver, that the order of the Tribuual was unintelligible and the respondent. did his best to 11:1dersta11d it according to his light. This argument advanced on behalf of the respondent appears to us to be somewhat disingenuouR. We find no difficulty in understanding the order of the Tribunal; it directed the respondent " to ascertain the aYnage transport charges per maund from the centres to the factory and add to it the rate of Rs. ].4.6 per maund of sugar-cane". The direction is clPar and una.mbignous. Tho respondent instead of ascertaining tho average transport charges per maund from the centres to the factory, referred to the transport charges from the farms to the factory and on that footing disregarded the directimis of the Tribunal; for the respondent to say thereafter that the order of the Tribunal was not intelligible betrays a regrettable lack · of candour.

We must, therefore, rei'ect the argument The Bhopal Sugar lndustr-ies Ltd. of learned counsel for the respondent. v .. The learned .Judicial Commissioner referred to three The Income-tax decisions in support of the proposition that a direction Officer; Bhopal or order in the nature of a writ of mandamus cannot be claimed as of right, nor need such a writ issue for 5 · K. Das J. every omission or irregularity; B;mal Chand v. Chairman, Jiagunj Azimgunj Municipality('); Gram Panchayat, Vidul of Vidul v. Multi Purpose Co-operative Society of Vidul (')and Messrs. Senairam Doongarmall v. Commr. of Income Tax, Assam (3).

In the view which we have expressed, namely, that by the impugned order the respondent failed to carry out a legal duty imposed on him and such failure was destructive of a basic principle of justice, a writ of mandamus should issue ex debito justiciae to compel the respondent to carry out the directions given to him by the Income-tax Appellate Tribunal, Bombay, and it is unnecessary to consider the decisions referred to above excepti' merely to state that in none of them arose any question of condoning a refusal by an inferior tribunal to carry out the directions given to that tribunal by a superior tribunal in the undoubted exercise of its appellate powers, on the ground that the order of the superior tribunal was wrong.

We must, therefore, allow this appeal, set aside the judgment and order of the Judicial Commissioner dated February 14, 1956 and issue an order dimcting the respondent to carry. out the directions given by the Income-tax Appellate Tribunal, Bombay, in its judgment and order daCed April 22, 1954. The appellant company will be entitled to its costs in the proceedings before the Judicial Commissioner and in this Court. Appeal allowed. (1) A.LR. 1954 Cal 285. (2) A.l.R. 1954 Nag. 82. (3) A.LU. 1955 Assam 201.