S. Ganesh, Mumbai vs Department Of Income Tax

The ACIT 11(2), Shri S Ganesh, Room No.479, 4th Floor, 10, 2nd Floor, Fairfield, Aayakar Bhavan, Vs. J B Malani Road, M.K. Road, Churchgate, Mumbai - 400 020 Mumbai- 400 020 PAN : AAGPS5047M (अपीलाथ /Appellant) ( यथ /Respondent)

सन ु वाई क तार ख / घोषणा क तार ख / Date of Hearing :09.01.2015. Date of Pronouncement : 04.02.2015

Appellant By : Shri Akhilendra Yadav Respondent By : Shri Niraj Punmiya

ORDER

Per Sanjay Garg, Judicial Member

The present appeal has been preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)], dated 30.12.2010 for A.Y. 2006-07. The only ground raised in this appeal reads as under:

"On the facts and in the circumstances of the case and in law, the Learned CIT(A)-3, Mumbai erred in deleting the addition of Rs.14,67,118/- on account of disallowance u/s. 14A in respect of exempt income. The addition was consequential to CIT(A)'s direction contained in order dated 23.11.2009."

2 2. The learned DR vide letter 21.11.2014 has submitted as under:

"The impugned case was fixed for hearing before Hon'ble Member of 'J' Bench on 19.11.2014. This case was heard on that date. The Hon'ble Members are requested to have the case de-heard/re-heard in view of the following circumstances:

1. In the assessment order u/s 143(3) dated 31.12.2008, A.O. made a disallowance of Rs.50,000/- u/s 14A

2. The Ld. CIT(A) vide order dated 23.11.2009 directed the A.O. to work out disallowance u/s. 14A r.w.r.8D

3. Appeal effect given by A.O. on 31.12.2009 disallowing Rs.15,17,118/- as per rule 8D (excess disallowance Rs.14,67,118/-). The assessee went in appeal before CIT(A) against the order giving effect to CIT(A)'s order

4. The CIT(A) passed another order against order giving effect to her earlier order on 30.12.2010 in which she directed the AO to follow the ITAT order dated 08.12.2010 while giving effect to her order.

5. Department went in appeal to the ITAT against the order of Ld. CIT(A) dated 30.12.2010. The appeal (ITA 1987.Mum/2011) was filed on 10.03.2011

6. ITAT in order dated 08.12.2010 confirmed the disallowance u/s. 14A to Rs.50000/- (as had been originally done by the AO). It did not make any comment on the enhancement made due to direction given by Ld. CIT(A) for making disallowance as per Rule 8D. It dismissed the ground.

7. The Department had gone in appeal to the Hon'ble Bombay High Court against the order of ITAT. However, the Department did not take up this issue in the appeal filed before the Hon'ble Bombay High Court.

The department has filed the appeal against CIT(A)'s order dated 30.12.2010 and it is learnt that the impugned order was not placed in the paper book before the Hon'ble Bench. The copy of the same is enclosed herewith.

In view of the above facts and circumstances, it is most humbly prayed that appeal may kindly be de-heard/re-heard."

(empahasis supplied by us)

3. A perusal of above 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 3

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.

4. In the case in hand, the AO failed to give effect to the order of the Tribunal. Being aggrieved, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) directed the AO to give effect to the order of the Tribunal which has attained finality. Shockingly, the AO, instead of complying the order of the Ld. CIT(A) directing him to give effect to the order of the Tribunal, proceeded to file the appeal against the said direction. More shockingly, the concerned Commissioner of Income Tax-11 (Admin) Mumbai, not only authorized but directed vide his letter dated 9.3.2011 to the AO to file appeal against the said directions of the Ld. CIT(A) vide which he [CIT(A)] had directed the AO to comply with the decision/ order of the Tribunal dated 8.12.2010. The Ld. AR, before us, could not advance any argument on the point as to how the present appeal was maintainable or on what grounds the department was justified in not complying the orders of the Tribunal or what is the basis for the present appeal. It is also not a case of omission, inadvertence or negligence, but the department consciously after getting necessary approvals from higher/concerned officers, has come in appeal before us agitating the directions of the Ld. CIT(A) to comply the order of this Tribunal, without assigning any reasons as to why it should not be complied. The order of the lower judicial authority merges with that of the appellate authorities and the 4

lower authority is bound to give effect to the order of the higher/appellate authority unless it has been set aside or modified, as the case may be, by the higher/highest court to that appellate authority. The act of disregard and disobedience of the orders of the higher judicial authorities in hierarchy amounts to the gross abuse of process of law and is an act which tends to lower down the authority of the higher courts. The Hon'ble Bombay High Court in a very recent case "CIT vs. Sairang Developers and Promoters Pvt. Ltd." in ITA No.2603 of 2011 decided on 28.04.14 has strongly discouraged the attitude of the authorities in filing the appeals without application of mind resulting in the pendency of the frivolous appeals before the Hon'ble High Court. The Hon'ble High Court has strongly disapproved the irresponsible attitude of the officers in not applying their mind while approving for the filing of the appeals, which benefits no one and rather defeats larger public interest. The Hon'ble High Court taking strong note of such an act has imposed cost of Rs.50,000/- upon the Revenue. In another case "CIT vs. M/s. Kishan Ratilal Choksey Share & Securities Pvt. Ltd." in ITA No.1001 of 2011 decided on 17th April, 2014 the Hon'ble High Court strongly discouraged the attitude of the Revenue for filing appeals on the issues which have already been settled and decided in the appeals pertaining to prior assessment years in the case of the very assessee. The Hon'ble Supreme Court in the case of "UOI and Others vs. Kamalakshi Finance Corporation" AIR 1992 SC 711 has categorically held that the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities.

5. Faced with somewhat similar circumstances in the case of "ACIT vs. Veena Developers" ITA Nos. 5820, 5821 & 5822/Mum/2012 date of decision 13-08-2014, this Tribunal had summoned the concerned AO as well as the concerned CIT-Administration who accorded permission to file the 5

appeal to explain their position as to why appropriate course of action be not taken against them including awarding of exemplary costs against them and also why a reference should not be sent to the Hon'ble High Court against them under the contempt of court's Act. The said officials vide their letters submitted that there was no intention to disrespect or disobey the orders of higher judicial authorities and further that the decision/approval for filing the appeal was made on the basis of suggestions, directions and recommendations of other concerned officials for the purpose of protecting the interest of the Revenue. The Tribunal considering the submissions of the said officials felt that it would not be proper to proceed further against those officials as it was not only their decision, but it was the overall opinion of the team of officials to act in the above stated manner and also in view of their submission that there was no intention to disobey and disrespect the orders of their higher judicial authorities. However it was directed by the Tribunal that the officers, in their zeal to protect the interest of the department should not go to the extent of committing judicial indiscipline. A copy of the said order in the case of "Veena Developers"

(supra) was directed to be sent to the Chairman of the CBDT so that the necessary instructions may be issued to the Income Tax officers/Commissioners in this regard and in future due care be taken, not to disrespect or disobey the orders of the higher judicial authorities and also not to file frivolous appeals.

6. The present case is also an example of the fact that there is a lack of proper knowledge/guidance to the revenue officials about the judicial hierarchy, the need to maintain judicial discipline and proper conduct in this respect. This Tribunal is not of penal jurisdiction to call upon the concerned officials time and again and seek their explanation, especially, when we feel that there is overall lack of knowledge and guidance in this respect. Hence, we direct the registry to send the copy of this order also to the Chairman CBDT so 6

that necessary action is taken for providing training/guidance in this respect to the revenue officials.

7. In the result, subject to our above observations, the appeal of the Revenue is hereby dismissed.

Order pronounced in the open court on 04.02.2015.

आदे श क घोषणा खल ु े यायालय म दनांकः 04.02.2015 को क गई ।

Sd/- Sd/-

(राजे / Rajendra) (संजय गग / Sanjay Garg) लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER

ु ई/Mumbai; मंब दनांक/Dated 04.02.2015

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ /The Appellant. 2. यथ / The Respondent. 3. आयकर आयु त(अपील) / The CIT(A), Mumbai. 4. आयकर आयु त / CIT 5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, 'J' Bench, ITAT, Mumbai

ु ार/ BY ORDER, आदे शानस

स या पत त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar)

आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai