M/s. Cargo Handling Private Workers Pool vs. DCIT (ITAT Vizag)

Tribunal’s order is binding and failure to follow it is ‘Contempt of Court’

Though the Tribunal in the assessee’s own case held that exemption u/s 11 was available and the facts were identical, the CIT (A), for a subsequent year, declined to follow it inter alia on the ground that the DR had not advanced arguments before the Tribunal in a ‘comprehensive and effective manner’. The assessee filed an appeal demanding exemplary costs u/s 254(2B). HELD by the Tribunal after a comprehensive review of the law on the subject:

It is well settled that the Tribunal is exercising judicial functions and has all powers of a Court. The proceeding before the Tribunal are deemed to be judicial proceedings. It appears to be the impression/ misunderstanding of some tax officials that the orders of the ITAT interpreting the law cannot be binding as it is a fact finding authority. However, this is not correct because the decision of a higher authority in the judicial hierarchy is binding on all the lower authorities below the line. Hence, the AO & CIT (A) are bound by the decision rendered by the jurisdictional Tribunal. Refusal to follow the order of the ITAT would render that authority guilty of committing contempt of Tribunal for which the concerned authority is liable to be proceeded against. If the decision of the Tribunal is found to be unacceptable to the authorities below, the right course to follow is to carry the matter in appeal to the High Court and to seek suspension of the operation of the order of the Tribunal. A person occupying the chair of CIT (A) is expected to be aware of judicial discipline and the binding nature of the Tribunal’s order. To avoid harassment to the assessee and unpleasant circumstances, the CBDT should take appropriate steps to enlighten all officials to ensure that judicial discipline is maintained. Costs u/s 254(2B) can be granted only if frivolous appeals are filed and not in a case like this. However, the assessee is free to take proper steps for initiating contempt proceeding against the CIT(A) (Ajay Gandhi Vs. B.Singh 265 ITR 451 (SC), ITAT Vs. V.K.Agarwal 235 ITR 175 (SC) & Agarwal Warehousing and Leasing 257 ITR 235 (MP) followed)