# THE BHOPAL SUGAI{ INDUSTRIE8 LTD v. THE J'.'iCOME-TAX. OFFICEH, BHOPAL

- **Citation:** [1961] 1 S.C.R. 474
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal The 1n:~me-tax No. 407 of 1956
- **Bench:** 8. K. Das, j\f. HIDAYATULLAH, K. c. DAS GUPTA, J. c. SHAil ANO N. RAJAOOPALA AYYANOAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-bhopal-sugai-industrie8-ltd-v-the-j-icome-tax-officeh-bhopal-2182
- **Pages:** 8

## Headnote

[)irrcfion.< by superior Tribtmals-If could be refused lo be
carried 011t-J>ri11ci'plrs (if adn1inistrafion of justice.
The Income-tax Appellate Tribunal in the exercise of its

## Text

4i4
8UPRE:\fE COURT REPORTS
[ 1961]
i96o
direction is given under s. 8(2), there is not.bing in that
provision which prevents rectification of that ordn.
~(;~, ~>~~
By sub-s. (4) of s. 8 of the ln\'cstiga.tion Act, the
"·
findi11gH recorded by the Commission in cases or points
Thr Cnmmi"''"" referred t-0 theri1 are macle final in all aRsessment or
0/ /llcowHo·., reassessment proceedings. The Act has, by sub-s. (2) of
"1-'"".'· Jrnvau- s. 8 remored.the bar of limitation which arose by
CO>t·Corh•• &
2
f I I
T
A
1
I
•
c00 , 1., nangalvi(' ~.
5 o t le ncorue
~~ ct. twas con1petcnt t- icre0
... _
fore to the Income I ax Officer to reopen the assess.
"""" 1.
ment proceedings not w ithslll.nding any lapse of time
and the prev ions order of assessment did not opPrate
as a bar to such reassessment.
The High Court was
therefore in our judgment right in recording its
answers on the three questions submitted by the Commissioner of Income Tax. In that view, the appPal
fails and is dismissed with costs.
Appeal dismissed.
THE BHOPAL SUGAI{ INDUSTRIE8 LTD.
v.
THE J'.'iCOME-TAX. OFFICEH, BHOPAL
(8. K. DAS, j\f. HIDAYATULLAH, K. c. DAS GUPTA,
J. c. SHAil ANO N. RAJAOOPALA AYYANOAR, J.J.)
[)irrcfion.< by superior Tribtmals-If could be refused lo be
carried 011t-J>ri11ci'plrs (if adn1inistrafion of justice.
The Income-tax Appellate Tribunal in the exercise of its
appellate jurisdiction gave certain directions to the respo1•dent.
an Income-tax Officer, in connection \\'ith the ascertainment of
the market value of sugarcane grown by the appellant at their
farm and use<l by them for the manufacture of sugar. Th~ appellant asked the Income-tax Officer to give effect to the said order
and directions of the Tribunal but was informed that no relief
coul<l be given. Thus the Income-tax Officer failed to carry out
the directions of the Tribunal.
Held, that the refusal to carry out the directions which a
superior Tribunal had given in exercise of its appellate powers
was in effect a denial of justice and was furthermore destructive
1 S.C.R. SUPREME COURT REPORTS
475
of one of the basic principles in the administration of justice
r960
based as it is in this country on a hierarchy of courts ; and the
result of such refusal would lead to chaos in the administration The Bhopal Sugar
of justice.
Indil<stries Ltd.
CIVIL
APPELLATE
JURISDICTION: Civil Appeal The 1n:~me-tax
No. 407 of 1956.
Officer. Bhopal
Appeal from the judgment and order dated February 14, 1956, of the former Judicial Commissioner's
Court, Bhopal, in Misc. Civil Case No. 24'of 1955.
Sanat P. Mehta and S. N. Andley, for the appellant.
K. N. Rajagopa.l Sastri and D. Gupta, for the
respondent.
1960. September 2.
The Judgment of the Court
was delivered by
. S. K. DAS J.-This is an appeal on a certificate
s. K. Das J.
under Art. 133 of the Constitution. The short question for decision is. whether the learned Judicial Commissioner of Bhopal rightly dismissed a petition under
Art. 226 of the Constitution made by the Bhopal
Sugar Industries, Limited, hereinafter refered 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
ma.de 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 sugar-cane from local
cultivators and also grew its own sugar-cane in farms
situate in that State, such sugar-cane being used for
its manufacture of sugar. During the year of account
ending on Sept9mber 30, 1950, the appellant company
purchased 7, 72,217 ma.unds of sugar-cane from local
61
47G
Sl:PRE:IIE COVRT REPORTS
[1961]
'9"°
cu!Livators at various purchasing c•,ntrcs, 14 in numTI
RI·-·-, 0
ber, situate at a distance of about 8 t-0 22 miles from
oe
oopa ·'" ga1 .
r
Th
.
"d
,
1,,d"'"'" Ltd. its 1actory.
e price pat was Rs. 1-4·6 per maund,
'"
that being the price fixed by the then Sta.to of Bhopal.
Thr Inco•nr-ta• The average cost of transporting the sugar-cane from
Oflim. "'"P"' the various centres to the factory was stated to be
Rs. 0.4.9 per maund.
During the same period the
S. r.·. V«' }
appellant company grew its own sugar-cane to thn
extent of 6,78,490 maunds and brought the same
along with the cuh ivators' sugar.cane to its factory
for manufacturing sugar.
For the sugar-c:rne grown
on it.s own farms the appellant company claimed
Hs. 1-13-0 per maund as its market value (including
Hs. 0-4-9 as average transport charges}, the total
market value for 6, 78,490 mauncls 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 expenHes, namely, expenses of harvesting,
loading, etc., and rlaimed 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 sugar-cane
grown on tho appellant company's own farms at
Rs. 9,33,000 at the rato of Rs. J .6.0 per ma1111d ; thus
according to this computation there was a loss of
!ls. 44,772 and the respondent held in his assessment
order that the appellant company was not entitled
to claim a.ny clcduction of agricultural income for the
assessment year.
The appellant company then appealed to the Appellate Assistant Commissioner, Jubbalpore, who deter-.
mined the market value of the sngar-cane grown on
the appellant company's own farms at Rs. 10,07,132
at the rate of Rs. J.7.9 per maund. This resulted in
an agricultural income of Rs. 29,360, which tho
Appellate Assistant Commissioner allowed to be
deducted from the total income of the appellant company.
Not satisfied with the order of the A ppella.te Assistant Commissioner, the appellant company preferred
1 S.C.R. SUPREME COURT REPORTS
477
an appeal to the Income.tax Appellate Tribunal,
Iy6o
Bombay, and claimed that the market value of the
·sugar-cane grown on its farms should be Rs. 1-13-0 ThreaBho,pal 8L'i'aC"'.
n 11s ries
, •
per maund and not Rs. 1-7. 9.
There was no dispute
v.
before the Tribunal as to the agricultural expenses, The Iiicome-fax
and the question which the Tribunal had to decide
related to the market value of 6,78,490 maunds of
sugar-cane grown on the appellant company's own
farms:
After referring to r. 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 bu~ 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 sugar-cane
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 marind 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 mand and on that basis
work out tbe market value of the sugar-cane 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 s. 66(1) of the
Income-tax Act, stating that a question of law arose
out of the Tribunal's order in as much as the Tribunal was not justified, in the opinion of the Depart-·
mel!t, to add average transport charges to the price of
Officer, Bhopal
S. I(. Da.1 ].
4i8
SCPRE:\IE COCRT HEPORTS
[1961]
r96o
Rs. 1-4-6 per mannd of sugar-cane grown by the appelT• R
<
!ant companv. ThiA application was, however, withi'..c1 .. ';;;;:1, ·i_~~." drawn on A~gust 4, 1954.
The order of the Tribunal
'"
thus became final and was binding on the parties.
The 1 .. ccmc-1ox
In the meantime, the appellant company moved
Of,lm, mapai the respondnnt to give effect to the directions of the
Tribunal. After some abortive correspondence bet.
s. I< Dos fween the respondent and his higher officers on one
side an<l the appellant comμany 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 sugiir-cane 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 8Um of Rs. 59,116 only out of the
total transportation expenses to your agricultural produce account-.
Xaturally, therefore, only the expenses
so incurred by you can be considered in working out
the market value of the agricultural sugar-cane. By
adding the transportation charges to the valuation of
sugar-cane at Rs. 1/4/6 on 6,78,490 maunds of agricultnral produce the total ·cost of the agricultural produce would be Rs. 9,28,43 I. Against this by the order
of the Appellate Assistant Commissioner the value of
the farm cane wnR taken at Its. 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 para 8 of the order results in no relief
being given to you."
It is worthy of note h~re 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 f arm8 to the factory.
Clearly enough, the respondent misread the direction of the Tribunal al.ld failed
l S.C.R. SUPREi\IE COURT REPORTS
479
to carry it out..
He proceeded on a basis which was
19
60
in contravention of the direction of the Tribunal.
The Bhopal Sttga•
In these circnmstances, the appellant company Industries Lti.
moved the Judicial Commissioner, Bhopal, then exerv.
cising the powers of a High Court for that area, for the The Income-tax
issue of a writ to compel the respondent to carry out
Officer, Bhopal
the directions given by the Tribunal. The learned
h
S. [(. Das ).
Judicial Commissioner found in express terms t at
the respondent had acted arbitrarily and in clear violation of the directions given by.the Tribunal; in other
words, he foJJnd .that the respondent had disregarded
the order of the Tribunal, failed to carry out hiA 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 r. 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 mani-'
fest 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 holdiug 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 furthermore destructive of one of the basic principles in the administration
of justice based as jt is in this country on a hierarchy
of courts. Ha 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
480
St:PHEME COl;RT REPORTS
(1961]
w;,,
tribunnl, yet hol<l ~hat no manifest. injustice resulted
---
from such refusal.
The Hhofnl Sugo'
[
b
l
d h
h
,
1,,.1,.,1, "' I.id.
.t must e remem >ere
t at t c order of the Tri-
'
hunal <lated April 22, 195!, was not under challenge
'Inc I•""""-'"" before t.he Judicial CommiRsioncr. That order had
'
o.u;m, llhepol become final and binding on the parties, and the re8pondent could not. question it in any way.
As a. mats. 1' ""' I
t•·r of fact the Commissioner of Income. tax had ma.do
11.n application for a reference, which applic11.tion was
subsequently withdrawn. The Judicial Commissioner
was not sitting in appeal oYer the Tribunal and we do
not t.hink that in the circumstances of this case it waR
open to him to sa.y that the order of the Tribunal was
wrong and, therefore, there wn.s no injustice in disll>garding that order.
As \\e have said earlier, such
'' view is <lestructivc of one of the basic principles of
the administration of justice.
ln fairness to him it must be stated that learned
counsel for the respondent did not attempt to support
the judgment of the Judicial Commi;;sioner on the
ground that no manifest injustice resulted from the
refusal of the respondent to carry out tho directions of
a superior tribunal. He conceded that. even if the
order of tho Tribunal was wrong, a sub.Jrdinat.e 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. Ho argued, howl'ver, that the order of the Tribuual was unintelligible
and the respondent. did his best to 11:1dersta11d it according to his light.
This argument advanced on behalf
of the respondent appears to us to be somewhat disingenuouR.
We find no difficulty in understanding the
order of the Tribunal; it directed the respondent " to
ascertain the aYnage transport charges per maund
from the centres to the factory and add to it the rate
of Rs. ].4.6 per maund of sugar-cane". The direction
is clPar and una.mbignous.
Tho respondent instead of
ascertaining tho 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 directimis of the Tribunal; for
•
-
1 S.C.R. SUPREME COURT REPORTS
481
the respondent to say thereafter that the order of the
1960
Tribunal was not intelligible betrays a regrettable lack ·
-
of candour. We must, therefore, rei'ect the argument The Bhopal Sugar
lndustr-ies Ltd.
of learned counsel for the respondent.
v ..
The learned .Judicial Commissioner referred to three The Income-tax
decisions in support of the proposition that a direction
Officer; Bhopal
or order in the nature of a writ of mandamus cannot
be claimed as of right, nor need such a writ issue for
5 · K. Das J.
every omission or irregularity; B;mal Chand v. Chairman, Jiagunj Azimgunj Municipality('); Gram Panchayat, Vidul of Vidul v. Multi Purpose Co-operative
Society of Vidul (')and Messrs. Senairam Doongarmall
v. Commr. of Income Tax, Assam (3). 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 justiciae 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
excepti' 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 dimcting
the respondent to carry. out the directions given by
the Income-tax Appellate Tribunal, Bombay, in its
judgment and order daCed 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.
(1) A.LR. 1954 Cal 285.
(2) A.l.R. 1954 Nag. 82.
(3) A.LU. 1955 Assam 201.