The judgment of the court was delivered by
S. K. DAS, J.--- This is an appeal on a certificate under
article 133 of the Constitution. The short question for decision is whether the
learned Judicial Commissioner of Bhopal rightly dismissed a petition under
article 226 of the Constitution made by the Bhopal Sugar Industries Limited,
hereinafter referred 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 made
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 sugarcane from
local cultivators and also grew its own sugarcane in farms situate in that
State, such sugarcane being used for its manufacture of sugar. During the year
of account ending on September 30, 1950, the appellant company purchased
7,72,217 maunds of sugarcane from local cultivators at various purchasing
centres, 14 in number, situate at a distance of about 8 to 22 Miles from its
factory. The price paid was Rs. 1-4-6 per maund, that being the price fixed by
the then State of Bhopal. The average cost of transporting the sugarcane from
the various centres to the factory was stated to be Rs. 0-4-9 per maund. During
the same period the appellant company grew its own sugarcane to the extent of
6,78,490 maunds and brought the same along with the cultivators' sugarcane to
its factory for manufacturing sugar. For the sugarcane grown on its own farms
the appellant company claimed Rs. 1-13-0 per maund as its market value
(including Rs. 0-4-9 as average transport charges), the total market value for
6,78,490 maunds 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 expenses,
namely, expenses of harvesting, loading, etc., and claimed 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 sugarcane grown on the appellant company's own farms at Rs. 9,33,000
at the rate, of Rs. 1-6-0 per maund ; thus according to this computation there
was a loss of Rs. 44,772 and the respondent held in his assessment order that
the appellant company was not entitled to claim any deduction of agricultural
income for the assessment year.
The appellant company then appealed to the Appellate
Assistant Commissioner, Jubbalpore, who determined the market value of the
sugarcane grown on the appellant company's own farms at Rs. 10,07,132 at the
rate of Rs. 1-7-9 per maund. This resulted in an agricultural income of Rs.
29,360, which the Appellate Assistant Commissioner allowed to be deducted from
the total income of the appellant company.
Not satisfied with the order of the Appellate Assistant
Commissioner, the appellant company preferred an appeal to the Income-tax
Appellate Tribunal, Bombay, and claimed that the market value of the sugarcane
grown on its farms should be Rs. 1-13-0 per maund and not Rs. 1-7-9. There was
no dispute before the Tribunal as to the agricultural expenses, and the question
which the Tribunal had to decide related to the market value of 6,78,490 maunds
of sugarcane grown on the appellant company's own farms. After referring to rule
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 but 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 sugarcane 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 maund 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 maund and on that basis work
out the market value of the sugarcane 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 section 66(1) of the Income-tax Act, stating that
a question of law arose out of the Tribunal's order inasmuch as the Tribunal was
not justified, in the opinion of the Department, to add average transport
charges to the price of Rs. 1-4-6 per maund of sugarcane grown by the appellant
company. This application was, however, withdrawn on August 4, 1954. The order
of the Tribunal thus became final and was binding on the parties.
In the meantime, the appellant company moved the
respondent to give effect to the directions of the Tribunal. After some abortive
correspondence between the respondent and his higher officers on one side and
the appellant, company 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 sugarcane
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 sum of Rs. 59,116 only out of the total
transportation expenses to your agricultural produce account. Naturally,
therefore, only the expenses so incurred by you can be considered in working out
the market value of the agricultural sugarcane. By adding the transportation
charges to the valuation of sugarcane at Rs. 1-4-6 on 6,78,490 maunds of
agricultural produce the total cost of the agricultural produce would be Rs.
9,28,431. Against this by the order of the Appellate Assistant Commissioner the
value of the farm cane was taken at Rs. 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 paragraph 8 of the order results in no relief being given to
you."
It is worthy of note here 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 farms to the factory. Clearly enough, the respondent misread the
direction of the Tribunal and failed to carry it out. He proceeded on a basis
which was in contravention of the direction of the Tribunal.
In these circumstances, the appellant company moved the
Judicial Commissioner, Bhopal, then exercising the powers of a High Court for
that area, for the issue of a writ to compel the respondent to carry out the
directions given by the Tribunal. The learned Judicial Commissioner found in
express terms that the respondent had acted arbitrarily and in clear violation
of the directions given by the Tribunal ; in other words, he found that the
respondent had disregarded the order of the Tribunal, failed to carry out his
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 rule 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 manifest 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 holding 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 further more destructive of one of the basic principles in the
administration of justice based as it is in this country on a hierarchy of
courts. If a 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 tribunal, yet held that no manifest injustice
resulted from such refusal.
It must be remembered that the order of the Tribunal dated
April 22, 1954, was not under challenge before the Judicial Commissioner. That
order had become final and binding on the parties, and the respondent could not
question it in any way. As a matter of fact the Commissioner of Income-tax had
made an application for a reference, which application was subsequently
withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal
and we do not think that, in the circumstances of this case, it was open to him
to say that the order of the Tribunal was wrong and, therefore, there was no
injustice in disregarding that order. As we have said earlier, such a view is
destructive of one of the basic principles of the administration of justice.
In fairness to him it must be stated that learned counsel
for the respondent did not attempt to support the judgment of the Judicial
Commissioner on the ground that no manifest injustice resulted from the refusal
of the respondent to carry out the directions of a superior tribunal. He
conceded that even if the order of the tribunal was wrong, a subordinate 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. He argued, however, that the order of the
Tribunal was unintelligible and the respondent did his best to understand it
according to his light. This argument advanced on behalf of the respondent
appears to us to be somewhat disingenuous. We find no difficulty in
understanding the order of the Tribunal ; it directed the respondent " to
ascertain the average transport charges per maund from the centres to the
factory and add to it the rate of Rs. 1-4-6 per maund of sugarcane ". The
direction is clear and unambiguous. The respondent instead of ascertaining the
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 directions 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, reject the argument of learned
counsel for the respondent.
The learned Judicial Commissioner referred to three
decisions in support of the proposition that a direction or order in the nature
of a writ of mandamus cannot be claimed as of right, nor need such a writ issue
for every omission or irregularity : Bimal Chand v. Chairman, Jiagunj Azimgunj
Municipality and Another ; Gram Panchayat, Vidul of Vidul v. Multi Purpose
Co-operative Society of Vidul & Another and Messrs. Senairam Doongarmall v.
Commissioner of Income-tax, Assam. 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 justitiae 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 except
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 directing the respondent to carry out the directions given by the
Income-tax Appellate Tribunal, Bombay, in its judgment and order dated 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.
