WOCKHARDT LTD, MUMBAI V. DCIT RG 10(1), MUMBAI

ITA 2633/MUM/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1195 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 13-11-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 144C; 192; 113

Judgement Text

ITA Nos.2633 & 2738 /Mum/2015 Assessment Year: 2009-10 Page 1 of 7 INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘J’ BENCH, MUMBAI [Coram: Pramod Kumar (Vice President)] and Sandeep S Karhail (Judicial Member)] ITA No.2633/Mum/2015 Assessment Year: 2009-10 Wockhardt Limited .......................... Appellant Wockhardt Towers, Bandra Kurla Complex, Bandra (E), Mumbai 400 051[PAN: AAACW2472M] Vs. Deputy Commissioner of Income Tax, Range 10(1) Mumbai ......................Respondent ITA No.2738/Mum/2015 Assessment Year: 2009-10 Deputy Commissioner of Income Tax- 14 (3)(1) Mumbai ......................Appellant Vs. Wockhardt Limited .................... Respondent Wockhardt Towers, Bandra Kurla Complex, Bandra (E), Mumbai 400 051[PAN: AAACW2472M] Appearances: Ronak Doshi along with Jinal Jain for the appellant VatsalaJha for the respondent Date of concluding the hearing : 13/07/2022 Date of pronouncement the order : 11/10/2022 ORDER Per Pramod Kumar, VP 1. These cross appeals filed by the parties, are directed against the order dated 9 th February 2015, passed by the learned CIT(A) in the matter of assessment under section 143(3) r.w.s. 147 of the Income Tax Act 1961, for the assessment year 2009-10. ITA Nos.2633 & 2738 /Mum/2015 Assessment Year: 2009-10 Page 2 of 7 2. When these cross appeals came up for hearing, learned counsel for the assessee moved a petition seeking admissions of the following additional ground of appeal:- On the facts and circumstances of the case and in law, the Assessing Officer erred in passing the final order under section 143(3) r.w.s. 147 of the Income Tax Act, beyond the time limit under section 153, and hence the said order is liable to be quashed. 3. Having heard the rival contentions on the petition seeking admission of this additional ground, and as it is purely a legal issue, we admit the additional ground of appeal. 4. Learned counsel’s contention is that section 144C was inserted vide Finance (No 2) Act 2009 which categorically provided that in the case of an eligible assessee, the AO “shall forward a draft of the proposed order of assessment if he proposes to make, on or after 1 st day of October 2009, any variation which is prejudicial to the interest of the assessee”. Our attention is then invited to Explanatory Notes (Circular 5/2010 dated 3 rd June 2010) which provided that “these amendments have been made applicable with effect from 1 st October 2009 and shall, accordingly, apply in relation to assessment year 2010-11 and subsequent assessment years” as also to Circular No 9/2013 dated which stated that “in the above extracted para 45.5 there has been an inadvertent error in stating that the applicability of the provisions of section 144C inserted vide Finance (No 2) Act 2009 that amendments will apply in relation to the assessment year 2010-11 and subsequent assessment years”. As learned counsel puts it, “The moot question in this additional ground is whether in the present case, the AO ought to have passed the final assessment order on or before 31 st March 2013 on the ground that for AY 2009-10, the provisions of section 144C were not applicable”. Our attention is then invited to Hon’ble Madras High Court’s judgment in the case of Vedanta Ltd vs ACIT [(2020) 422 ITR 262 (Mad)] which inter alia holds that “any amendments which comes into force after the first day of April of a financial year would not apply to an assessment for that year, even if assessment were to be finalized subsequent to the coming into force of the amendment”, and concluded that the provisions of section 144C could only apply prospectively i.e. from assessment year 2010-11 onwards. It is then pointed out that this decision in Vedanta Ltd’s case (supra) has been subsequently followed by several co-ordinate benches of this Tribunal our attention is then invited to Hon’ble Bombay High Court’s judgment in the case of BASF Ltd vs CIT [(2006) 280 ITR 136 (Bom)] wherein, following Hon’ble Andhra Pradesh High Court’s judgment in the case of N T Rama Rao [(1987) 163 ITR 453 (AP)], it has been held that circulars which are in force during the relevant assessment years are the circulars that have to be applied and the subsequent circulars either withdrawing or modifying the earlier circulars have no application. A reference is also made to Hon’ble Bombay High Court’s judgment in the case of Shakti Raj Film Distributers vs CIT [(1995) 213 ITR 20 (Bom)] in support of the same proposition. It is thus urged that in the light of Hon’ble Madras High Court’s judgment in the case of Vedanta Ltd (supra) and in the light of the applicable CBDT circulars, section 144C could not be pressed into service in the assessment year 2008-09, and, accordingly, not passing the impugned assessment order on or ITA Nos.2633 & 2738 /Mum/2015 Assessment Year: 2009-10 Page 3 of 7 before 31 st March 2013 has rendered the assessment order illegal. We are thus urged to quash the impugned assessment order. 5. Learned Departmental Representative vehemently opposed the submissions of the assessee. She submits that in the case of Zuari Cement Ltd vs ACIT [WP No. 5557 of 2012; judgment dated 21 st February 2013], it has been categorically held that the provisions section 144C would come into play in respect of proceedings after 1 st October 2009. It is also pointed out that SLP against the said decision has been dismissed by Hon’ble Supreme Court. Accordingly, the Vedanta Ltd decision (supra) is per incuriam. It was then submitted that the circular dated 19.11.2013, being clarificatory in nature had retrospective effect. Our attention is then drawn to the fact that at no stage, the assessee objected to the assessment order having been time-barred, and also to the practical difficulties resulting from the interpretation adopted in Vedanta’s case (supra). Learned Departmental Representative has made an exhaustive submission on other related issues as well, and also filed a detailed written submission, but, for the reasons we will set out in a short while, it is not really necessary to deal with all these aspects. 6. Learned counsel for the assessee submits that there appears to be contrary views, expressed by Hon’ble Andhra High Court in the case of Zuari Cements (supra) and by Hon’ble Madras High Court in the case of Vedanta Ltd (supra), and, submits that in the absence of anything directly from Hon’ble jurisdictional High Court, a view favourable to the assessee must be adopted. 7. In our considered view, it could perhaps be debatable as to in what manner and to what extent the decisions of Hon’ble non-jurisdictional High Courts bind the lower judicial forums outside of their jurisdiction, but given the peculiar nature of arguments before us, it is not even necessary to deal with that aspect of the matter because the entire case of the assessee rests on a single judge judgment of Hon’ble non-jurisdictional High Court in the case of Vedanta Ltd (supra). Clearly, thus, the argument of the assessee proceeds on the assumption that even a non- jurisdictional High Court decision, in the absence of anything contrary to it by the Hon’ble jurisdictional High Court, binds the lower judicial forums. Let us accept this proposition for a while but then we, as indeed the parties before us, are oblivious to the fact that there is another decision of a non-jurisdictional High Court, in the case of Zuari Cements Ltd (supra), which holds exactly contrary to what has been held in Vedanta Ltd’s case (supra). What is a critical factor, however, is the fact that the decision in the case of Zuari Cements Ltd (supra) is by a division bench. In Zuari Cement Ltd (supra), a Division Bench of the Hon’ble non-jurisdictional High Court has categorically observed that “the contention of the revenue that circular no.5/2010 of CBDT has clarified that the provisions of section 144C shall not apply for the assessment year 2008-09 and would apply only from the assessment year 2010-11 and later years is untenable in as much as the language of sub-section (7) of section 144C referring to ITA Nos.2633 & 2738 /Mum/2015 Assessment Year: 2009-10 Page 4 of 7 the cutoff date of 1.10.2009 indicated an intention of the legislature to make it applicable, if there is a proposal by the Assessing Officer to make a variation in the income or loss returned by the assessee which is prejudicial to the assessee, after 1.4.2009. Therefore this particular provision introduced by Finance (No 2) Act 2009 will apply if the above condition is satisfied.....”. The interpretation adopted in the Board Circular has thus been held to be unsustainable in law. There are thus conflicting decisions of Hon’ble non-jurisdictional High Courts. The question that we must, therefore, address is as to which of these decisions should be followed by us. Shri Ronak Doshi, the learned counsel of the assessee, suggests that in the event of the conflicting decisions of Hon’ble non-jurisdictional High Courts, a view favourable to the assessee must be adopted. Smt Vatsala Jha, on the other hand, submits that since the Vedanta Ltd decision of the Hon’ble Madras High Court ignored the earlier decision of the Hon’ble Andhra Pradesh High Court in Zuari Cement’s case, Hon’ble Madras High Court’s decision is per incuriam and thus only fit to be ignored. 8. As for Mr Doshi’s plea about a favourable view being adopted in case of conflicting decisions of the Hon’ble non-jurisdictional High Court, it would be too simplistic an approach to accepting it as an unqualified theory of universal application, without understanding the rationale of this approach. The normal principle is that in the hierarchical judicial system that we have, the better wisdom of the Court below has to yield to the higher wisdom of the Court above. While decisions of Hon’ble non-jurisdictional High Courts, strictly speaking, do not bind us, they are given utmost respect and consideration. As observed by Hon'ble Supreme Court in the case of ACCE vs. Dunlop India Ltd. (1985) 154 ITR 172 (SC) , where the Hon'ble Court has itself quoted from the decision of the House of Lords that "We desire to add and as was said in Cassell & Co. Ltd. vs. Broome (1972) AC 1027 (HL) , we hope it will never be necessary for us to say so again that "In the hierarchical system of Courts" which exists in our country, "It is necessary for each lower tier", including the High Court, "to accept loyally the decision of the higher tiers". "It is inevitable in the hierarchical system of Courts that there are decisions of the Supreme appellate Tribunal which do not attract the unanimous approval of all members of the judiciary... But the judicial system only works if someone is allowed to have the last word, and that last word, once spoken, is loyally accepted. "...The better wisdom of the Court below must yield to the higher wisdom of the Court above; that is the strength of the hierarchical judicial system."Therefore, once an authority higher than this Tribunal has expressed an opinion on that issue, we generally adopt and follow the same, even though, strictly speaking, these decision do not bind us. Such a High Court being a non- jurisdictional High Court, also does not very materially alter the position as laid down by Hon’ble Bombay High Court in the matter of CIT v. Godavari Devi Saraf [(1978) 113 ITR 589 (Bom.)], even though that principle is subject to certain exceptions as elaborated in several subsequent decisions including in the case of Bank of India Vs ACIT [(2021) 125 taxmann.com 155 (Mum)].While dealing with judicial precedents from non-jurisdictional High Courts, we may usefully take of observations of Hon'ble jurisdictional High Court in the case ITA Nos.2633 & 2738 /Mum/2015 Assessment Year: 2009-10 Page 5 of 7 of CIT v. Thana Electricity Co. Ltd. [1994] 206 ITR 727 (Bom.)], to the effect "The decision of one High Court is neither binding precedent for another High Court nor for the courts or the Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories over which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court, it may, at best, have only persuasive effect". The decisions of Hon'ble non- jurisdictional High Courts are thus placed at a level certainly below the Hon'ble jurisdictional High Court, and it's a conscious call that is required to be taken for the question of whether, on the facts of a particular situation, the non-jurisdictional High Court is required to be followed. To a forum like us, following a jurisdictional High Court decision is a compulsion of law and sacrosanct, but following a non-jurisdictional High Court is a call of judicial propriety. Be that as it may, as far as possible, the decisions from the non-jurisdictional High Court, in the absence of anything contrary to it by the Hon’ble jurisdictional High Court, are followed in letter and spirit. The difficulty, however, arises when there are conflicting views of the Hon’ble non-jurisdictional High Courts. It will be wholly inappropriate to choose the views of one of the High Courts based on our perceptions about the reasonableness of the respective viewpoints as such an exercise will de facto amount to sitting in judgment over the views of the High Courts - something diametrically opposed to the very basic principles of the hierarchical judicial system. We must, with our highest respect for such Hon’ble High Courts, adopt an objective criterion for deciding as to which of the Hon’ble High Courts should be followed by us. It is the quest of this objective criterion that the coordinate benches usually resort to the view in favour of the assessee, as is evident from the following observations in a co-ordinate bench decision, in the case of Tej International Pvt Ltd Vs DCIT [(2000) 69 TTJ 650 (Del)]: 8. We find guidance from the judgment of Hon’ble Supreme Court in the matter of CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177 : (1972) 88 ITR 192 (SC) . Hon’ble Supreme Court has laid down a principle that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted". This principle has been consistently followed by the various authorities as also by the Hon’ble Supreme Court itself. In another Supreme Court judgment, Petron Engg. Construction (P) Ltd. &Anr. vs. CBDT &Ors. (1989) 175 ITR 523 (SC) : (1988) 75 CTR (SC) 20 , it has been reiterated that the above principle of law is well established and there is no doubt about that. Hon’ble Supreme Court had, however, some occasions to deviate from this general principle of interpretation of taxing statute which can be construed as exceptions to this general rule. It has been held that the rule of resolving ambiguities in favour of tax-payer does not apply to deductions, exemptions and exceptions which are allowable only when plainly authorised. This exception, laid down in Littman vs. Barron 1952(2) AIR 393 and followed by apex Court in Mangalore Chemicals & Fertilizers Ltd. vs. Dy. Commr. of CT (1992) Suppl. (1) SCC 21 and Novopan India Ltd. vs. CCE & C 1994 (73) ELT 769 (SC), has been summed up in the words of Lord Lohen, "in case of ambiguity, a taxing statute should be construed in favour of a tax-payer does not apply to a provision giving tax-payer relief in certain cases ITA Nos.2633 & 2738 /Mum/2015 Assessment Year: 2009-10 Page 6 of 7 from a section clearly imposing liability". This exception, in the present case, has no application. The rule of resolving ambiguity in favour of the assessee does not also apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. vs. Dadabhoy’s New Chirmiry Ponri Hill Colliery Co. Ltd. AIR 1972 (SC) 614. Therefore, what follows is that in the peculiar circumstances of the case and looking to the nature of the provisions with which we are presently concerned, the view expressed by the Hon’ble Karnataka High Court in the case of Kwality Biscuits Ltd. (supra), which is in favour of assessee, deserves to be followed by us. 9. In the present case, however, we have much simpler and much more objective criteria readily available, which is the strength of the bench of the Hon’ble non-jurisdictional High Court which have rendered the judgment. There is one decision of the division bench consisting of two Hon’ble judges, and there is another decision of a single judge bench consisting of only one Hon’ble judge. The plurality in the decision-making process makes the decisions of benches with a larger number of Hon’ble judges being placed on a higher pedestal than the decisions of the of the benches with a lesser number of Hon’ble judges. Explaining this principle, Hon'ble Gujarat High Court, in the case of CIT Vs VallabhdasVithaldas [(2015) 56 taxmann.com 300 (Guj)] has observed that “the law of precedent heavily relies on the collective decision-making process where multiple legal minds are simultaneously applied assisted by legal research and presentation of legal arguments. When such materials and legal contentions are processed by several judges, the decision that is rendered even if not unanimous has the advantage of input from larger number of legally trained minds”. As observed by a Full Bench of Hon’ble AP High Court in the case of CIT Vs B R Constructions [(1994) 202 ITR 222 (AP-FC)], “The principles applicable to Courts in India were laid down by Subba Rao, J. (as he then was) in Dr. K.C. Nambiar v. State of Madras AIR 1953 Mad. 351, which were approved by a Full Bench of our High Court in M. Subbarayudu v. State AIR 1955 Andhra 87... A single Judge is bound by a decision of a Division Bench exercising appellate jurisdiction. If there is a conflict of Bench decisions, he should refer the case to a Bench of two Judges who may refer it to a Full Bench. A single Judge cannot differ from a Divisional Bench unless a Full Bench or the Supreme Court overruled that decision specifically or laid down a different law on the same point”. Of course, as we have already noticed in our discussions earlier, so far as Hon’ble High Courts are concerned, the decisions of one of the Hon’ble High Court do not bind the other High Court, and all the Hon’ble High Courts being in the same tier of judicial hierarchy, it is not the call of judicial discipline either that one High Court follows the other High Court. What is undisputed, however, is the fact that a full bench decision is to be placed at a level higher than a division bench decision and that a division bench decision from the same forum, is to be placed at a level above the single judge bench decision forum. There cannot be two opinions on this aspect of the matter, and that is a universally accepted judicial practice, whereas the principle of following the view in favour of the assessee, as we have seen in our analysis earlier, is subject to several riders. Therefore, so far as choice ITA Nos.2633 & 2738 /Mum/2015 Assessment Year: 2009-10 Page 7 of 7 between a division bench decision of a non-jurisdictional High Court and a single judge bench of a non-jurisdictional High Court is concerned, it is clear that a simple objective criterion of choice will require the division bench decision to be preferred over the single judge bench decision. Therefore, even though the decision of the Hon’ble Madras High Court, in Vedanta Ltd’s case (supra), cannot be said to per incuriam, for the simple reason that a Hon’ble High Court judgment does not constitute a binding precedent for any other Hon’ble High Court other than the Hon’ble High rendering such a judgment, the judgment of Hon’ble Andhra Pradesh High Court in the case of Zuari Cements Ltd (supra), being a division bench decision of Hon’ble non- jurisdictional High Court, is required to be followed even if it is contrary to a single bench judgment of another High Court in the case of Vedanta Ltd (supra). The impugned assessment order thus cannot be said to be barred by limitation. We uphold the impugned assessment order on this count, and decline to interfere in the matter on this jurisdictional ground. As we are deciding this issue on this short ground alone, all other contentions on merits remain open. 10. The additional ground of appeal is dismissed. As no arguments were advanced by the parties on the remaining grounds of appeal, we deem it fit and proper to direct the Registry to fix the matter for hearing on the other grounds of appeal taken by the parties. As one of us (i.e. the Vice President) is retiring, on superannuation, next month, it will come up before the regular bench. Let the matter come up for hearing on 14 th November 2022, and issue notices for the same. Ordered, accordingly. 11. In the result, the appeal of the assessee is dismissed to the extent indicated above. Pronounced in the open court today on the 11 th day of October, 2022. Sd/- Sd/- Sandeep S Karhail Pramod Kumar (Judicial Member) (Vice President) Mumbai, dated the 11 th day of October, 2022 Copies to: (1) The Appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order Assistant Registrar/Sr. PS Income Tax Appellate Tribunal Mumbai benches, Mumbai