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Applicability of Non Jurisdictional High Court’s Decision: ITAT Mumbai

Applicability of Non Jurisdictional High Court’s Decision: ITAT Mumbai

The Income Tax Appellate Tribunal of Mumbai has recently passed an order in the case of Wockhardt Vs DCIT dated 11th  October 2022 regarding the cross-appeals filed by the parties against the order dated 09.02.15 passed by the CIT(A) u/s 143(3) r/w 147 of the ITA 1961 for AY 2009-10. The major issue, in this case, was regarding the manner and extent to which the decisions of Hon’ble non-jurisdictional High Courts bind the lower judicial forums outside of their jurisdiction in the event of conflicting decisions by non-jurisdictional High Courts.

The article discusses the facts, issues, and contentions of both the parties and the final judgement of this case.

Facts of the Case

The cross appeals filed by the parties against the order dated 09.02.15 passed by the CIT(A) u/s 143(3) r/w 147 of the ITA 1961 for AY 2009-10.

During the hearing of the cross-appeals, the Ld Counsel for the assessee moved a petition requesting for the admission of one more ground of appeal that the AO had erred in passing the order dated 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 must be quashed. The said ground was admitted by the tribunal due to it being a completely legal issue.

Issue Raised in the Case

What is the manner and to which extent the decisions of Hon’ble non-jurisdictional High Courts bind the lower judicial forums outside of their jurisdiction?

Assessee Contentions

The first contention of the counsel of the assessee was regarding the insertion of sec 144C, wherein it was stated that the section was inserted vide Finance Act of 2009[1], which stated that in case an eligible assessee if the AO proposes any variations in the assessment order which is prejudicial to the interest of the assessee, on or after 1st October 2009 he must forward a draft of the assessment’s proposed order to the assessee. Further discussion was regarding the Explanatory Notes as provided vide Circular 5/2010 dated 3rd June 2010) wherein it was clearly mentioned that the amendments would apply wef 1st October 2009 and would be applicable for the AY 20110-11 and subsequent years as also to Circular No 9/2013 dated which stated that “in the above-extracted para 45.5 there has been an unintended error in providing that the applicability of the provisions of sec- 144C inserted vide Finance (No 2) Act 2009 that amendments will apply in relation to the assessment year 2010-11 and subsequent assessment years”.

The Ld. Counsel contended that the question for trial is whether the AO ought to have passed the final assessment order on or prior to 31st March 2013 on the ground that for AY 2009-10, the provisions of section 144C weren’t applicable.

The Ld. counsel also referred to a judgement of the Madras High Court where it was held that any amendment enforced after 1st April of any financial year wouldn’t be applicable for the assessment of that year even if the final assessment was done after the enforcement of the relevant amendment concluding that the provisions of section 144C could only apply prospectively, i.e. from the assessment year 2010-11 onwards.

It was further pointed out that the judgement of the case discussed above was considered as precedent for numerous co-ordinate benches of this Tribunal. Subsequently, the attention of the tribunal was invited towards the Hon’ble Bombay High Court’s judgment in the case of BASF Ltd vs CIT [(2006) 280 ITR 136 (Bom)] wherein, following the Hon’ble Andhra Pradesh High Court’s judgment in the case of N T Rama Rao [(1987) 163 ITR 453 (AP)] wherein it was held that only the circulars which are in force during the relevant assessment yr should be applied for that yr and any circular providing for the withdrawal or modification of the earlier circulars shall be applicable

Finally, it was urged by the counsel of the assessee that the tribunal must consider the judgement of Hon’ble Madras High Court in the case of Vedanta Ltd as well as the applicable CBDT circulars, section 144C couldn’t be pressed into service in the assessment year 2008-09, and, accordingly, the non-passing the impugned assessment order on or before 31st March 2013 has rendered the assessment order illegal therefore the said order must be quashed.

Department’s Contention

The contentions of the assessee’s counsel were vehemently opposed by the Department’s representative. The Department’s Counsel cited the case Zuari Cement Ltd vs ACIT [WP No. 5557 of 2012; judgment dated 21st February 2013] and submitted that it was clearly held in that case that sec 144C would be applicable from 1st October 2009 and an SLP against such decision has been dismissed and the Vedanta judgement cited by assessee counsel was per incurium, It was further submitted that the circular dated 19th November 2013 was clarificatory in nature and had retrospective effect.

Another fact that was pointed out by the Department’s representative that there were no objections raised by the assessee regarding the assessment order being barred at any stage of the proceeding, along with the practical difficulties faced from the interpretation adopted in Vedanta’s case.

In reply to the contentions of the department’s counsel, the Ld counsel for the assessee  stated that contrary views had  been expressed in both judgements cited by both the counsels, and in the absence of any judgement directly from the jurisdictional High Court, the view favourable to the assessee, must be adopted.


After considering the contentions of both the parties, the court observed that the manner and extent of the applicability of the precedents of the non jurisdictional high court was indeed a debatable aspect however the same was not the actual issue raised before the Tribunal in the present case by the assessee therefore , discussing on such issue of applicability was not necessary as the entire case of the assessee was dependent on the single judge judgment of Hon’ble non-jurisdictional High Court in the case of Vedanta Ltd wherein the argument of the assessee was  based on the fact that even the judgement of a non jurisdictional court binds the lower judicial forums due to the absence of any contrary judgement in this regard by the present forum.  If such argument of the assessee was to be accepted the same can be applicable to the precedent cited by the Department which was complete contrary to the precedent cited by the assessee as the present tribunal along with both the parties were oblivious about any contrary judgement pronounced by the tribunal in respect of the precedent cited by the court.

However, it was considered essential to acknowledge that the judgement cited by the Department had categorically observed that the argument of the revenue regarding the circular no.5/2010 of CBDT clarifying that the provisions of section 144C won’t apply for the assessment year 2008-09 as the same would be done only from the assessment year 2010-11. Later years are untenable in as much as the language of sub-section (7) of section 144C referring to the cutoff date of 1.10.2009 indicated an intention of the legislature to make it applicable if there was 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.

Therefore the dilemma of the tribunal was in respect of whose contention must be accepted by the tribunal. The counsel for the assessee argued that the assessee’s contention must be favoured in the event of conflicting decisions of both the non-jurisdictional High Courts. On the other side, the counsel for the Department submitted that the order of the tribunal must be in favour of the department due to the ignorance of the Madras High Court’s judgement (cited by the assessee) regarding the Andhra High Court’s judgment (cited by Department’s Counsel) making such a case to be per incuriam and hence only fit to be ignored by the tribunal.

Upon the above discussion, the tribunal observed that producing an order in favour of the assessee merely on the grounds of conflicting decisions of the Hon’ble non jurisdictional High Courts would be too simplistic an approach gor accepting it as an unqualified theory of universal application without understanding the rationale of this approach.

The tribunal further observed that according to the normal principle of the hierarchical judicial as exists in the country, the lower courts usually yield to the decision of the higher courts, i.e. the courts higher in the hierarchy; however, it must be strictly clear that the order of the non-jurisdictional court does not bind the tribunal they are provided with the utmost respect by the forum.

Moving forward, the tribunal also cited one of the judgements of the Supreme Court, where the Court itself quoted a judgement of the House of Lords and observed that in the hierarchical judicial system of India, the lower courts, as well as the high courts, must accept the loyalty of the higher tier Court “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 where an authority higher than the tribunal has expressed an opinion, the same must be generally adopted and followed by such a tribunal. The adherence to a precedent of a jurisdiction Court is a compulsion under the law for a forum such as ITAT Mumbai. Still, adherence to the judgement of a non-jurisdictional court is discretionary.

To a forum like this, 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.  Therefore 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. However, difficulty arises in the event of conflicting views of the Hon’ble non-jurisdictional High Courts and choosing the view of one High Court based on the perceptions about the reasonableness of the respective viewpoints as the same will de facto amount to sitting in judgment over the views of the High Courts would be wholly inappropriate as the same has been categorically opposed to the very basic principles of the hierarchical judicial system. The court gave the highest respect for such Hon’ble High Courts and adopted an objective criterion for deciding as to which of the Hon’ble High Courts should be followed by the tribunal.

The criteria devised by the tribunal for deciding about the decision of which court must be adopted by the tribunal chose to rely on the strength of the bench. In furtherance of the same, the tribunal relied on the judgement cited by the Department as the same was pronounced by a divisional bench instead of the judgment provided by the assessee that was decided by a single bench.

Therefore, even though the decision of the Hon’ble Madras High Court, in Vedanta Ltd’s case can’t be considered per incuriam, simply due to the reason that a Hon’ble High Court judgment does not constituted 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 as cited by the department being a division bench decision of Hon’ble non-jurisdictional High Court, must be followed even if it is contrary to a single bench judgment of another High Court, i.e. the one provided by the assessee.

Consequently, the tribunal upheld the impugned assessment and declined to interfere in the matter on jurisdictional grounds. All other contentions on merits remained open as the issue was decided on such short ground alone followed by the dismissal of the additional ground of appeal due to the absence of any arguments being advanced by the parties on the remaining grounds of appeal, the tribunal directed the Registry to fix the matter for hearing on the other grounds of appeal taken by the parties.


The judgement of the present case is indeed momentous and deserves to be appreciated as the Hon’ble tribunal has quite meticulously dealt with every aspect of the case, especially the aspect of reliance on the judgements of a non-jurisdictional High Court which by virtue of judicial hierarchy considered to be at a higher level than that of the tribunal and taking the strength of the bench as the ultimate decisive criteria was an exceptionally wise decision of the Tribunal.

Read Our Article: How to File an Income Tax Appeal with ITAT?

Shubhangi Jain

Shubhangi has completed her B. A.LLB (H) with specialization in Business Laws from Amity University. She is particularly interested in legal research and writing and wishes to utilize her knowledge to create informative legal content. She has prior experience in corporate and criminal litigation and has great drafting skills. She has also published various research papers in reputed journals.

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