S. 253: Filing appeals in disregard & wilful disobedience to the law laid down constitutes gross abuse of power and deserves to be punished for contempt of court and by award of exemplary costs. Action not pursued in view of written apology of concerned officials

In AY 2004-05, the AO disallowed the assessee’s claim for deduction u/s 80-IB(10). The CIT(A), Tribunal and High Court allowed the assessee’s claim. Thereafter, pursuant to a search, the AO passed an order u/s 153A for AY 2004-05 in which he again disallowed the assessee’s claim for deduction u/s 80-IB(10). The AO noted that in the assessee’s own case for the same AY, the Bombay High Court had already decided the issue in favour of the assessee but he still made the disallowance on the ground that the matter was sub-judice before the Supreme Court. On appeal, the CIT(A) allowed the assessee’s claim. On appeal by the department to the Tribunal HELD by the Tribunal dismissing the appeal:

(i) This case is one of gross misuse of powers by the lower authorities. The AO in complete disregard and disobedience to the orders of the Tribunal as well as of the Hon’ble High Court again confirmed the disallowance while framing assessment u/s 153A without any incriminating material being found during the search. The act of negating the orders of the higher authorities in the very same case and thereby disallowing the claim of the assessee in the s. 153A proceedings without any new evidence or incriminating material being found amounts to the gross abuse of process of law in complete disregard and disobedience to the orders of the higher authorities and is an act which tends to lower down the authority of the higher courts. We may observe that if at all the issue will be decided by the Hon’ble Supreme Court in favour of the Revenue, then the orders of the lower authorities in that event would automatically merge in the order of the Supreme Court and implemented accordingly. However, the mere filing of appeal before the Hon’ble Supreme Court gives no authority to the AO to negate, disobey and disrespect to the orders of the higher authorities in the very same case. We may further notice that even after the decision of the CIT(A) in favour of assessee, the concerned CIT-Admin has given approval for filing the second round of appeal in the same case ignoring and in complete disregard and disobedience to the orders of the Tribunal as well as of the High Court vide which the issue in dispute has already been settled;

(ii) The Bombay High Court in CIT vs. Sairang Developers and Promoters 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 High Court. The High Court has strongly disapproved the irresponsible attitude of the officers in not applying their mind while approving for the filing of appeals, which benefits no one and rather defeats larger public interest. The High Court taking strong note of such an act has imposed cost of Rs.50,000/- upon the Revenue. In CIT vs. Kishan Ratilal Choksey Share & Securities the 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 High Court observed that it was a gross abuse of process of law and imposed Rs.1,00,000/- as cost. However, later on the assurance of the ld. counsel of the Revenue that hereafter the judicial orders and directions would be abided by in all matters and appropriate averments will be made to the effect that the order of the Tribunal for prior assessment years in the case of very assessee have been challenged or decided and the outcome of the decision thereof also will also be indicated. The High Court upon the such assurance of the ld. counsel of the Revenue re-called the direction to pay cost of Rs.1,00,000;

(iii) The Supreme Court in UOI 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. The Supreme Court has further held that the mere fact that the order of the appellate authority is not “acceptable” to the department-in itself is an objectionable phrase and is not a ground for not following the same unless its operation has been suspended by a competent court. Since the present is a case not only of a gross abuse of process of law but also a case of willful disobedience and disregard of the orders of the higher authorities as well as of the acts which tends to lower down the authority of the higher court, hence we direct the concerned AO as well as the concerned CIT-Administration who accorded permission to file the present appeal to appear in person and 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 High Court against them under the contempt of court’s Act. Thereafter, the concerned officials appeared and submitted their written apologies. The said officials vide their letters have submitted that there was no intention to disrespect or disobey the orders of higher judicial authorities and further that the additions/ approval for filing the appeal were made on the basis of suggestions, directions and recommendations of other concerned officials for the purpose of protecting the interest of the Revenue and to maintain the consistency in the stand of the Revenue and keep the issue alive. In view of the submissions made by the above named officials, we feel that it will not be proper to proceed further against them 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.