Holding

Non‑filing of an appeal in some cases does not bar the Revenue from filing an appeal in another case where just cause, public interest, or a need for a higher‑court pronouncement exists.

Summary

The Supreme Court was asked to consider whether the Revenue Department could be barred from filing an appeal in a tax matter merely because it had not appealed in other similar cases. The Court examined a series of conflicting High Court decisions and earlier Supreme Court judgments on the principles of res judicata, precedent and the discretion of the Revenue to appeal. It held that non‑filing of an appeal in some cases does not automatically preclude the Revenue from appealing in another case where there is a just cause, public interest, or a need for a higher‑court pronouncement. The Court also observed that if the assessee alleges mala‑fide conduct by the Revenue, the burden lies on the Revenue to prove otherwise, noting policy reasons such as small revenue amounts or revenue‑neutral outcomes. Consequently, the reference was answered and the matter was remitted to the appropriate bench for disposal of the pending appeals.

Issues considered

Whether the Revenue is barred from preferring an appeal in a tax case because it did not appeal in other similar cases.
Whether the Revenue can be precluded from defending itself by relying on contrary decisions of other courts.
Whether the assessee must establish mala‑fide intent of the Revenue when alleging selective appeal filing.

Subjects

Income TaxRevenue AppealRes JudicataPublic InterestJust CausePrecedentHigher Court PronouncementTax ProcedureDiscretionary Jurisdiction

Judgment

[2008) ·11 S.C.R. 52

--J..
A C.K. GANGADHARAN & ANR.
V.
COMMISSIONER OF INCOME TAX, COCHIN
(Civil Appeal Nos. 5210-5216 of 2002)
JULY 21, 2008
B
[DR. ARIJIT PASAYAT, P. SATHASIVAM AND AFTAB
ALAM, JJ]

Appeal:
c Tax laws - Non-filing of appeal by Revenue in some
cases - HELO: Would not operate as a bar for 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 pronounce-
ment by higher Court when divergent views are expressed by
D Tribunals or High Courts -- Practice and Procedure.
_.._
There being diverse views of superior Courts on the
question whether Revenue can be precluded from·defend-
ing itself by relying upon the contrary decisions, the ref-
E
erence was made to the larger Bench.
Answering the reference, the Court
HELD: 1.1 Merely because in some cases the Rev-
enue has not preferred appeal, that does not operate as a
bar for the Revenue to prefer an appeal in another case
F
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 Tribu~
nals or the High Courts. [para 13] [60-D,E]

G Bharat Sanchar Nigam Ltd. and Anr v. Union of India
and Ors. 2006 (3) SCC 1 ; State of Maharashtra v. Digambar
1995 (4) SCC 683; Gove.-nmer:t of WB. v. Tarun K. Roy and
•
Ors. 2004 (1) SCC 347; State of Bihar and Ors. v. Ramdec )....

Yadav and Ors. 1996(3) 3CC 493; Karam Chan v L!nicn ,_-;f
H 52
C.K. GANGADHARAN & ANR. v. COMMISSIONER 53
OF INCOME TAX, COCHIN

India and Ors. 2000 (243) ITR 143 and Union of India v. A
Kaumudini Narayan Dalal and Anr. 2001 (249) ITR; and Com-
missioner of Income Tax v. Shivsagar Estate 2004 (9) SCC
420 - relied on.

State of WB. v. Debdas Kumar 1991 Suppl. (1) SCC B
138; Commissioner of Central Excise, Raipur v. Hira Cement
2006 (2) SCC 439; Chief Secretary to Government ofAndhra
Pradesh and Anr. v. VJ. Cornelius and Ors. 1981 (2) SCC
347; Berger Paints India Ltd. V Commissioner of Income Tax,
Caluctta 2004 (12) SCC 42; Union of India and Ors. v.
Kaumudini Narayan Dalal and Anr. 2001 (10) SCC 231 ;·and C
Himalatha Gargya v. Commissioner of Income T_ax, A. P and
Anr_ 2003 (9) SCC 510 - referred to.
1.2 If the assessee takes the stand that the Revenue
acted ma/a fide in not preferring appeal in one case and o
filing the appeal in other case, it has to establish ma/a
fides. As a matter of fact, there may be certain cases where
because of the small amount of revenue involved, no ap-
peal is filed. Policy decisions have been taken not to pre-
fer appeal where the revenue involved is below a certain E
amount. Similarly, where the effect of decision is revenue
neutral there may not be any need. for preferring the ap-
peal. All these certainly provide the foundation for mak-
ing a departure. [para 12] (60-B,C,D]
Case law reference: F
2006 (3) sec 1 relied on [para 4]
1995 (4) sec 683 relied on [para 5]
2004 (1) sec 347 relied on [para 6]
G
1996(3) sec 493 relied on [para 6]
1991 Suppl. (1) sec 138 referred to [para 7]
2006 (2) sec 439 relied on [para 8]
1"981 (2) sec 347 relied on [para 9]
54 SUPREME COURT REPORTS . [2008] 11 S.C.R.

A 2000 (24.3) ITR 14~ . relied on [para 10]
2001 (249) ITR relied on [para. 10]
2004 (9) sec 420 relied on [para 10]
· 2004 .(12) sec 42 . referred to [para 11]
B - t ••

2001 (10) sec 231 referred to [para 11].
. 2003 (9) sec s1 o referred to [para 11]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
C 5210-5216 of 2002 ·
Fr~m the final Judgment and Order dated 2.11.2001 of
the High Court of Kerala· in ITA Nos. 8, 20, 21, 22 of 2000 & 31,
42 & 49 of 2001 ··

o Prite~.h Kap_ur, Vivek Gupta,. Alka Sha;rrna . and
.S~bram.o.niu!Tl Pr~sad· for the Appellant. · ·. ·
. ' ~ ,

v. Shekhar, Ranbir Ch3ndra and B.V Balaram Das for
th'e R~spondent.
, : ...

E The Judgment .of. the Court was delivered
'
by
Dr. ARIJIT PASAYAT, J; 1. By order dated 13.3.2008, a
reference was made to larger Bench and that· is how these cases
are·before us. The orqer, of reference, inter-alia, reads as fol-
lows:
F 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 ravenue can be precluded from defending
G itself by relying upon the contrary·dedsion:
· · We make it clear that we are not doi.Jbtingthe :correctness
of the. vie.w taken by this Court in the cases of Union of
India v. Kaumudini Narayan· Dalal (2001)10 SCC 23·1,
-CIT V; Narehdra Doshi (2004) ·2 SCC SQ·l and CIT v.
H Shivsagar Estate (2004) 9 SCC 420 to the effect that if
C.K. GANGADHARAN & ANR. v. COMMISSIONER 55
OF INCOME TAX, COCHIN [DR. ARIJIT PASAYAT, J.]

the revenue has not challenged the correctness of the law A
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
B.
Chief Justice of India for appropriate orders."
2. In terms of the reference what is required to be decided
is whether revenue can be precluded from defending itself by
relying upon the contrary decisions. It is to be noted that various C
High Courts have taken contrary views. While some of the courts
have decided in favour of the assessee, other High Courts have
decided in favour of the revenue.
3. For deciding the issue few decisions of this Court need
to be noted. D
4. In Bharat Sanchar Nigam Ltd. and Anr v. Union of In-
dia and Ors. (2006 (3) S.CC 1), it was noted as follows:
"20. The decisions cited have uniformly held that res
judicata does not apply in matters pertaining to tax for E
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 F
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 res G
judicata but because of the theory of precedent or the
precedential value :)f 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 H
56 . SUPREME COURT REPORTS [2008] 11 S.C.R.

A man:late 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
B view expressed and refer the matter to a bench of superior
strength or in some cases to a bench of superior
jurisdiction.

22. A decision can be set aside in the same lis on a
prayer for review or an application for recall or Under ArtiGle
c 32 in the peculiar circumstances mentioned in Hurra .v.
Hurra (2002 (4) sec 388). As we have said overruling of
a decision takes place in a subsequent lis where th.e
precedential value of the decision is called in qu.estio11.
No one can dispute that in our judicial system it is open to
D 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 deci.sion on the parties
to an earlier lis in that lis, for whom the principle of res
E 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
F 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
G decisions cited by the State of U.P. are authorities. for the
proposition that we cannot, in t:-:e circumstances of this
case, do so. This pre!iminar; objectioh of the State of U.P.
is therefore rejected."

5. In State of Maharashtra ·1. uiganbar (1995 (4) SCC
H 683), the position-was highlighted by this Court as follows:
C.K. GANGADHARAN & ANR. v. COMMISSIONER 57
OF INCOME TAX, COCHIN [DR. ARIJIT PASAYAT, J.]

"16. We are unable to appreciate that objection raised A.
against the prosecution of this appeal by the appellant or
other S.L.Ps filed in similar matters. Sometimes, as it
was stated on behalf of the State, the State Government
may not choose to file appeals against certain judgments
of the High Court rendered in Writ petitions when they are B
considered as stray cases and not worthwhile invoking
the discretionary jurisdiction of this Court under Article
136 of the Constitution, for seeking redressal therefore.
At other times, it is also possible for the State, not to file
appeals before this Court in some matters on account of c
improper advice or negligence or improper conduct of
officers concerned. It is further possible, that even where
S.L.Ps are filed by the State against judgments of High
Court, such S.L.Ps may not be entertained by this Court
in exercise of its discretionary jurisdiction under Article p
136 of the Constitution either because th::y are considered
as individual cases or because they are considered as
cases not involving stakes which may adversely affect the
interest of the State. Therefore, the circumstance of the
non-filing of the appeals by the State in some similar E
matters or the rejection of some S.L..Ps in limine by this
Court in some other similar matters by itself, in our view,
cannot be held as a bar against the State in filing an S.L.P.
or S.L.Ps in other similar matters where it is considered
on behalf of the State that non-filing of such S.L.P. or S.L.Ps F
and pursuing them is likely to seriously jeopardise the
interest of the State or public interest."

6. In Government of WB. v. Tarun K. Roy and Ors. (2004
(1) SCC 347) reference was made to the judgment in Oigambar
case (supra) and State of Bihar and Ors. v. Ramdeo Yadav G
and Ors. (1996 (3) SCC 493). It was noted as follows:
"28. In the aforementioned situation, the Division Bench of
the Calcutta High Court manifestly erred in refusing to
consider the contentions of the appellant on their own merit,
particularly. when the question as regard difference in the H
58 . SUPREME COURT REPORTS [2008] 11 S.C.R.

A grant of scale of pay on the ground of different educational
a
qualification stands concluded by Judgment of this Court
in Debdas Kumar (1991 Supp (1) ·sec 138), (supra). If
the judgment of Oebdas Kumar (supra) is to.be followed
& finding of fact was required to be arrived at that they are
B similarly situated to the case of Debdas Kumar (supra)
which in turn would mean. that they are also' holders of
diploma in engineering .. They admittedly_belng not, the
contention of the appellants could.not -be. rejected. Non-
filing of an appeal, i.n any event, woultj: not be a ground for
c refusing to consider a matter on its ownmerits. (See State
of Maharashtra v. Oigambar 1995 (4) . SCC 683)°.
,. ... '

29. In State of Bihar and Ors. v. Ramdeo.Yadav and Ors.
(1996 (3) SCC 493) wherein this Court noticed Debdas· Kumar
(supra) holding: ·
D
"Shri B.B. Singh, the learned counsel for the appellant
contended that though an appeal .against the earlier order
of the High Court has not been filed, since larger public
interest is involved in the interpretation given by the High
Court following its earlier Judgment, the matter requires
E
consideration by this Court. We find force in this contention.
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

F
138), had held that though anappeal 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. "
.
7. In Ramdeo_'scase (supra) referencEl was made to State
G of WB. v. Oebdas Kumar(1991 Suppl. (1) seq 138), wherein
it was ob.served at para 5 as follo.ws:
"5. It is then contended that Section 3(2) and (3) make
distinction between the employees covered by those
provisions and the employees of the aided schools taken
H over under Section 3(2). Until the taking over by operation
C.K. GANGADHARAN & ANR. v. COMMISSIONER 59
...... OF INCOME TAX, COCHIN [DR. ARIJIT PASAYAT, J.]

of S~ction 3(4) recpmmendation is coryiplete, they do not A'
~

become the employees of the Government under Section
4 of the Act. The Government in exercise of the PC?Wer
under Section 8 constituted a committee and directed to
enquire and recommend the feasibility to take over the
·schools. On the recommendation made by them, the B
· Government have taken decision on January 13, 1981 by
which date the respondents were not duly appointed as
the employees of the taken over institution. Therefore, the
High Court cannot issue a mandamus directing the
· Government to act in violation of law." c
8 .. In Commissioner of 9entr~I FXCi~e, Raipur v. Hira Ce-
ment (2006 (2) sec 439) at para 24 the position was reiter-
ated.
9. In Chief Secretary to Government of Andhra Pradesh 0
and Anr..v. VJ. Cornelius and _Ors. (1981 (2) SCC 347) it was
observed .that equity is not relevant factor for the purp.ose of
interpretation.
10. 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. E
Kaumudini Narayan Dalal andAnr. (2001 (249) ITR), this Court
observed that without a just cause revenue cannot file t~e ap-
peal in one case while. deciding not to file appeal in another
_.....' case. This position was also noted in Commissioner of lncC?me
' ~
Tax v. Shivsagar Estate (2004 (9) SCC 420). F
11. 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
(12) SCC 42). The decision in Union of India and Ors. v.
Kaumudini Narayan Dalal and Anr. (2001 (10) SCC 231) was G
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 H
60 SUPREME COURT REPORTS [2008] 11 S.C.R.
.....
A prefer an appeal. This Court took the view that having not as- ~
'>
sailed the correctness of the order in one case, it would nor-
mally hot be permissible to do so in another case on the logic
thatthe revenue cannot pick and choose. There is also another
aspect which is the certainty in law.
B
12. If the assessee takes the stand that the revenue acted
mala fide in not preferring appeal in one case and filing the
appeal in other case, it has to establish mala fides. As,a matter
of fact, as rightly contended by the learned counsel for the rev~
enue, there may be certain cases where because of the small
c amount of revenue involved, no appeal is filed. Policy decisions
have been taken not to prefer appeal where the revenue in-
valved is below a certain amount. Similarly, where'the effe~t of
decision is revenue neutral there may not be any need for pre-
ferring the appeal. All these certainly provide the foundation for
0 making a departure.
13. In answering the reference, we hold that merely be··
cause 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
E
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.
14. The matter shall be placed before the concerned Bench
for disposal of the appeals.
j,...
R.P. Reference answered

.........