The department accepted a High Court decision in someone else's case and never appealed it, and is now arguing the opposite against my client. Can it?
Not without just cause. The Supreme Court held that if the Revenue has not challenged the correctness of the law laid down by a High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause. The Gujarat High Court in Lakhanpal National Ltd had held that the whole of the excise and customs duty actually paid in a year is deductible under section 43B irrespective of how much of it is embedded in closing stock; that decision was never challenged, was followed by the Bombay and Madras High Courts and by a Special Bench of the Tribunal, and none of those was challenged either. The Court found no just cause for a departure, held that the Commissioner, the Tribunal and the Calcutta High Court had erred in permitting the Revenue to contend to the contrary, set aside the Calcutta High Court's judgments for all three assessment years and answered the questions in favour of the assessee.
Decided by the Supreme Court (K.G. Balakrishnan J and B.N. Srikrishna J; judgment delivered by Srikrishna J) on 2004-02-17, reported as Civil Appeal Nos. 1081-1083 of 2004; 2004 (2) SCR 502; cited by the Supreme Court in C.K. Gangadharan v. CIT as (2004) 12 SCC 42. It bears on section 43B, section 263, section 256(1), section 261 of the Income Tax Act 1961, in Revision & Rectification, Deductions & Disallowances and How Tax Law Is Read matters.
This is the most frequently invoked authority for holding the department to a position it has already accepted, and it is worth knowing exactly what it does and does not decide. What it decides is that acceptance of a High Court's statement of the law in one assessee's case bars the Revenue from challenging that statement in another assessee's case in the absence of just cause; the Court drew that from three earlier decisions of its own, Union of India v. Kaumudini Narayan Dalal, CIT v. Narendra Doshi and CIT v. Shivsagar Estate. What it does not decide is that non-filing is an absolute bar. Four years later a three-Judge Bench in C.K. Gangadharan v. CIT, decided on 21 July 2008 on a reference made because of observations in this very case, answered the question by holding that merely because in some cases the Revenue has not preferred an appeal, that does not operate as a bar to its preferring an appeal in another case where there is just cause for doing so, or where it is in the public interest, or for a pronouncement by a higher court when divergent views are expressed by Tribunals or High Courts. That Bench expressly did not doubt the three earlier decisions, and it also recorded that policy decisions not to appeal below a monetary limit, or where the effect is revenue neutral, provide a foundation for a departure. So the practical shape of the law is: the burden is on the Revenue to show just cause, and a taxpayer who shows an unchallenged and repeatedly followed line of authority has made out a strong case, but a Revenue that can point to divergent High Court views, or to a monetary-limit policy, has an answer.
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The assessee manufactures and sells paints, varnishes and allied products. For the previous year ending 31 December 1983, relevant to assessment year 1984-85, it disclosed income of Rs.1,33,31,370. It had incurred and fully paid customs and excise duty of Rs.5,85,87,181 during that year, debited to the profit and loss account, and had also credited to the same account Rs.98,25,833 of customs and excise duty relating to closing stock by including that sum in the valuation of closing stock. It claimed deduction under section 43B of the whole Rs.5,85,87,181 as duties actually paid. Similar claims were made for assessment years 1986-87 and 1987-88. The Inspecting Assistant Commissioner allowed the 1984-85 claim. The Commissioner then took action under section 263 on the ground that the Rs.98,25,833 credited in closing stock had been wrongly allowed; the assessee relied on the Gujarat High Court's decision in Lakhanpal National Ltd v. ITO [1986] 162 ITR 240, the Commissioner held it distinguishable and disallowed the claim, and the Tribunal confirmed him. On a reference under section 256(1) the Calcutta High Court by judgment dated 24 September 2001 in ITR No. 213 of 1993 answered against the assessee. For 1986-87 and 1987-88 the Tribunal had allowed the assessee's claims and the Revenue obtained references, which the Calcutta High Court disposed of by judgment dated 6 February 2002, again answering in favour of the Revenue. An application for a certificate to appeal under section 261 was rejected by the High Court with the observation 'we are unable ourselves to burden an already over burdened Hon'ble Supreme Court'. Lakhanpal National Ltd had not been challenged by the department; it had been followed by the Bombay High Court in CIT v. Bharat Petroleum Corporation Ltd [2001] 252 ITR 43 and by the Madras High Court in Chemicals and Plastics India Ltd v. CIT [2003] 260 ITR 193, neither of which was challenged, and by a Special Bench of the Tribunal in Indian Communication Network Pvt Ltd v. IAC [1994] 206 ITR 96, which was also unchallenged. The assessee asserted the fact of non-challenge in its written submissions and the Revenue did not dispute it in its counter affidavit.
The appeals were allowed with no order as to costs. The Court set aside the Calcutta High Court's judgment in ITR No. 213 of 1993 for assessment year 1984-85 and answered the question against the Revenue and in favour of the assessee, and set aside its judgments in ITR No. 122 of 1995 and ITR No. 137 of 1995 for assessment years 1986-87 and 1987-88 and answered those questions in favour of the assessee and against the Revenue. The principle applied is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause; the Court saw no just cause that would justify a departure, and held that the Commissioner, the Tribunal and the Calcutta High Court erred in permitting the Revenue to raise a contention contrary to what the Gujarat High Court had laid down in Lakhanpal National Ltd. The Court added that where other High Courts had taken a particular view and the Calcutta High Court desired to depart from it, in fairness to the assessee a certificate to appeal under section 261 ought to have been granted.
The Court took as its starting point that Lakhanpal National Ltd was completely in favour of the assessee and had not been challenged by the department, and that the interpretation of section 43B in it had been directly followed by the Bombay High Court in Bharat Petroleum and by the Madras High Court in Chemicals and Plastics, both of which also appeared to have been accepted by the Revenue; the assertion that these had not been challenged was not disputed in the counter affidavit. It noted that a Special Bench of the Tribunal in Indian Communication Network, constituted because of conflicting Tribunal views, had considered all the conflicting decisions and Lakhanpal National Ltd and had observed that removing the amount from closing stock is not a tinkering with closing stock but the allowing of the effective deduction to which the assessee is entitled under section 43B, the following year's opening stock standing correspondingly reduced so that there is no double deduction; that decision too was unchallenged. Against that background the Court applied Kaumudini Narayan Dalal, Narendra Doshi and Shivsagar Estate. It rejected the Revenue's attempt to distinguish the Gujarat decision as having been rendered in a provisional assessment under section 141A, calling that ground facile and holding that a reading of the judgment shows it proceeds on an analysis of section 43B and finds the whole of the duty paid in a year deductible irrespective of how much is included in the valuation of closing stock, the section 141A relief coming only afterwards.
the principle established is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has 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 assessees, without just cause
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Handle my notice → Ask a CA on WhatsAppNot without just cause. The Supreme Court held that if the Revenue has not challenged the correctness of the law laid down by a High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause. The Gujarat High Court in Lakhanpal National Ltd had held that the whole of the excise and customs duty actually paid in a year is deductible under section 43B irrespective of how much of it is embedded in closing stock; that decision was never challenged, was followed by the Bombay and Madras High Courts and by a Special Bench of the Tribunal, and none of those was challenged either. The Court found no just cause for a departure, held that the Commissioner, the Tribunal and the Calcutta High Court had erred in permitting the Revenue to contend to the contrary, set aside the Calcutta High Court's judgments for all three assessment years and answered the questions in favour of the assessee. This was decided by the Supreme Court (K.G. Balakrishnan J and B.N. Srikrishna J; judgment delivered by Srikrishna J) and bears on section 43B, section 263, section 256(1), section 261 of the Income Tax Act 1961. It is reported as Civil Appeal Nos. 1081-1083 of 2004; 2004 (2) SCR 502; cited by the Supreme Court in C.K. Gangadharan v. CIT as (2004) 12 SCC 42. This is the most frequently invoked authority for holding the department to a position it has already accepted, and it is worth knowing exactly what it does and does not decide. What it decides is that acceptance of a High Court's statement of the law in one assessee's case bars the Revenue from challenging that statement in another assessee's case in the absence of just cause; the Court drew that from three earlier decisions of its own, Union of India v. Kaumudini Narayan Dalal, CIT v. Narendra Doshi and CIT v. Shivsagar Estate. What it does not decide is that non-filing is an absolute bar. Four years later a three-Judge Bench in C.K. Gangadharan v. CIT, decided on 21 July 2008 on a reference made because of observations in this very case, answered the question by holding that merely because in some cases the Revenue has not preferred an appeal, that does not operate as a bar to its preferring an appeal in another case where there is just cause for doing so, or where it is in the public interest, or for a pronouncement by a higher court when divergent views are expressed by Tribunals or High Courts. That Bench expressly did not doubt the three earlier decisions, and it also recorded that policy decisions not to appeal below a monetary limit, or where the effect is revenue neutral, provide a foundation for a departure. So the practical shape of the law is: the burden is on the Revenue to show just cause, and a taxpayer who shows an unchallenged and repeatedly followed line of authority has made out a strong case, but a Revenue that can point to divergent High Court views, or to a monetary-limit policy, has an answer. If it applies to you, the first step is this: Build the record before you plead the principle. Identify the decision the Revenue accepted, prove that no appeal was filed against it, and if possible show that it has been followed by other High Courts or a Special Bench that were also not challenged — that accumulation is what carried this case.
The assessee manufactures and sells paints, varnishes and allied products. For the previous year ending 31 December 1983, relevant to assessment year 1984-85, it disclosed income of Rs.1,33,31,370. It had incurred and fully paid customs and excise duty of Rs.5,85,87,181 during that year, debited to the profit and loss account, and had also credited to the same account Rs.98,25,833 of customs and excise duty relating to closing stock by including that sum in the valuation of closing stock. It claimed deduction under section 43B of the whole Rs.5,85,87,181 as duties actually paid. Similar claims were made for assessment years 1986-87 and 1987-88. The Inspecting Assistant Commissioner allowed the 1984-85 claim. The Commissioner then took action under section 263 on the ground that the Rs.98,25,833 credited in closing stock had been wrongly allowed; the assessee relied on the Gujarat High Court's decision in Lakhanpal National Ltd v. ITO [1986] 162 ITR 240, the Commissioner held it distinguishable and disallowed the claim, and the Tribunal confirmed him. On a reference under section 256(1) the Calcutta High Court by judgment dated 24 September 2001 in ITR No. 213 of 1993 answered against the assessee. For 1986-87 and 1987-88 the Tribunal had allowed the assessee's claims and the Revenue obtained references, which the Calcutta High Court disposed of by judgment dated 6 February 2002, again answering in favour of the Revenue. An application for a certificate to appeal under section 261 was rejected by the High Court with the observation 'we are unable ourselves to burden an already over burdened Hon'ble Supreme Court'. Lakhanpal National Ltd had not been challenged by the department; it had been followed by the Bombay High Court in CIT v. Bharat Petroleum Corporation Ltd [2001] 252 ITR 43 and by the Madras High Court in Chemicals and Plastics India Ltd v. CIT [2003] 260 ITR 193, neither of which was challenged, and by a Special Bench of the Tribunal in Indian Communication Network Pvt Ltd v. IAC [1994] 206 ITR 96, which was also unchallenged. The assessee asserted the fact of non-challenge in its written submissions and the Revenue did not dispute it in its counter affidavit. The matter was decided on 2004-02-17 by the Supreme Court (K.G. Balakrishnan J and B.N. Srikrishna J; judgment delivered by Srikrishna J). On those facts the Supreme Court held as follows. The appeals were allowed with no order as to costs. The Court set aside the Calcutta High Court's judgment in ITR No. 213 of 1993 for assessment year 1984-85 and answered the question against the Revenue and in favour of the assessee, and set aside its judgments in ITR No. 122 of 1995 and ITR No. 137 of 1995 for assessment years 1986-87 and 1987-88 and answered those questions in favour of the assessee and against the Revenue. The principle applied is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause; the Court saw no just cause that would justify a departure, and held that the Commissioner, the Tribunal and the Calcutta High Court erred in permitting the Revenue to raise a contention contrary to what the Gujarat High Court had laid down in Lakhanpal National Ltd. The Court added that where other High Courts had taken a particular view and the Calcutta High Court desired to depart from it, in fairness to the assessee a certificate to appeal under section 261 ought to have been granted.
The Court took as its starting point that Lakhanpal National Ltd was completely in favour of the assessee and had not been challenged by the department, and that the interpretation of section 43B in it had been directly followed by the Bombay High Court in Bharat Petroleum and by the Madras High Court in Chemicals and Plastics, both of which also appeared to have been accepted by the Revenue; the assertion that these had not been challenged was not disputed in the counter affidavit. It noted that a Special Bench of the Tribunal in Indian Communication Network, constituted because of conflicting Tribunal views, had considered all the conflicting decisions and Lakhanpal National Ltd and had observed that removing the amount from closing stock is not a tinkering with closing stock but the allowing of the effective deduction to which the assessee is entitled under section 43B, the following year's opening stock standing correspondingly reduced so that there is no double deduction; that decision too was unchallenged. Against that background the Court applied Kaumudini Narayan Dalal, Narendra Doshi and Shivsagar Estate. It rejected the Revenue's attempt to distinguish the Gujarat decision as having been rendered in a provisional assessment under section 141A, calling that ground facile and holding that a reading of the judgment shows it proceeds on an analysis of section 43B and finds the whole of the duty paid in a year deductible irrespective of how much is included in the valuation of closing stock, the section 141A relief coming only afterwards. In the words reproduced by the source cited on this page: "the principle established is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has 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 assessees, without just cause" The decision followed or applied Union of India v. Kaumudini Narayan Dalal, 249 ITR 219 (SC) — applied (printed in the copy read as 'Kammudini Narayan Dalai'); CIT v. Narendra Doshi, 254 ITR 606 (SC) — applied; CIT v. Shivsagar Estate, 257 ITR 59 (SC) — applied; Lakhanpal National Ltd. v. ITO, [1986] 162 ITR 240 (Guj.) — approved and its interpretation of section 43B upheld; CIT v. Bharat Petroleum Corporation Ltd., [2001] 252 ITR 43 (Bom.) and Chemicals and Plastics India Ltd. v. CIT, [2003] 260 ITR 193 (Mad.) — noted as having followed Lakhanpal National Ltd and as unchallenged; Indian Communication Network Pvt. Ltd v. IAC, [1994] 206 ITR 96 (SB-AT) — noted as unchallenged.
It was decided by the Supreme Court on 2004-02-17 and is reported as Civil Appeal Nos. 1081-1083 of 2004; 2004 (2) SCR 502; cited by the Supreme Court in C.K. Gangadharan v. CIT as (2004) 12 SCC 42. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 43B, section 263, section 256(1), section 261, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals were allowed with no order as to costs. The Court set aside the Calcutta High Court's judgment in ITR No. 213 of 1993 for assessment year 1984-85 and answered the question against the Revenue and in favour of the assessee, and set aside its judgments in ITR No. 122 of 1995 and ITR No. 137 of 1995 for assessment years 1986-87 and 1987-88 and answered those questions in favour of the assessee and against the Revenue. The principle applied is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause; the Court saw no just cause that would justify a departure, and held that the Commissioner, the Tribunal and the Calcutta High Court erred in permitting the Revenue to raise a contention contrary to what the Gujarat High Court had laid down in Lakhanpal National Ltd. The Court added that where other High Courts had taken a particular view and the Calcutta High Court desired to depart from it, in fairness to the assessee a certificate to appeal under section 261 ought to have been granted. It arises in Revision & Rectification, Deductions & Disallowances and How Tax Law Is Read matters, on section 43B, section 263, section 256(1), section 261 of the Income Tax Act 1961, and was decided by K.G. Balakrishnan J and B.N. Srikrishna J; judgment delivered by Srikrishna J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Assert the fact of non-challenge on affidavit. Here the assessee asserted it in written submissions and the Revenue did not dispute it in its counter affidavit, which the Court twice records. Anticipate 'just cause'. Be ready to meet the answers that C.K. Gangadharan blessed: divergent High Court views, public interest, a monetary-limit policy, or a revenue-neutral effect. Do not overstate the case as res judicata or estoppel. It is a rule about the Revenue picking and choosing, qualified by just cause, and a three-Judge Bench has since said so. Where a High Court declines a certificate under section 261 while departing from a uniform view taken elsewhere, record the objection: the Court said in terms that in fairness to the assessee a certificate ought to have been granted in that situation.
Still good law. It has not been overruled, but it has been explained and confined by a larger Bench and a practitioner must cite it with that qualification. In C.K. Gangadharan v. CIT (Civil Appeal Nos. 5210-5216 of 2002, decided 21 July 2008, Dr Arijit Pasayat, P. Sathasivam and Aftab Alam JJ) a three-Judge Bench answered a reference that had been made, in its own words, 'because of certain observations in Berger Paints India Ltd. V. Commissioner of Income Tax, Calcutta (2004 (12) SCC 42)', and held at its paragraph 13 'that merely because 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 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'. The order of reference expressly said it was not doubting Kaumudini Narayan Dalal, Narendra Doshi or Shivsagar Estate, and that Bench also recorded at paragraph 12 that a small revenue effect, a monetary-limit policy, or a revenue-neutral outcome can provide the foundation for a departure. Berger Paints was decided by two Judges and C.K. Gangadharan by three, so where they diverge the later decision governs. Beyond reading C.K. Gangadharan in full I did NOT run a citator search on Berger Paints and cannot say what other later decisions have made of it. C.K. Gangadharan is not in this library and is worth its own entry. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The cause title needs correcting. This decision is commonly cited as 'CIT v. Berger Paints India Ltd', but the assessee was the APPELLANT: the judgment is headed 'PETITIONER: BERGER PAINTS INDIA LTD. RESPONDENT: COMMISSIONER OF INCOME TAX, CALCUTTA', and the Supreme Court in C.K. Gangadharan cites it as 'Berger Paints India Ltd. V. Commissioner of Income Tax, Calcutta (2004 (12) SCC 42)'. It must not be confused with M/s. Berger Paints India Ltd v. C.I.T., Delhi-V, a different Supreme Court decision of 28 March 2017 on section 35D with the same cause title, which is the one this library already holds. The judgment carries NO paragraph numbers — it opens with 'The Judgment of the Court was delivered by SRIKRISHNA, J.' and runs into unnumbered prose — so no paragraph locator is given anywhere in this entry. The copy read prints the first of the three relied-on decisions as 'Union of India v. Kammudini Narayan Dalai, 249 ITR 219 (SC)'; the Supreme Court's own later judgment in C.K. Gangadharan gives the name as 'Union of India v. Kaumudini Narayan Dalal (2001) 10 SCC 231' and '(2001 (249) ITR)', so 'Kammudini Narayan Dalai' is a corruption in the report. I have quoted the sentence exactly as the copy prints it and have not silently corrected the name. The copy also prints '[2001] 252 ITR 43 (Bom.)' for Bharat Petroleum and contains other minor typographical defects ('in any event', 'Section 141 A', 'We are. therefore'). The only citation printed in the judgment itself is '2004 (2) SCR 502'. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were allowed with no order as to costs. The Court set aside the Calcutta High Court's judgment in ITR No. 213 of 1993 for assessment year 1984-85 and answered the question against the Revenue and in favour of the assessee, and set aside its judgments in ITR No. 122 of 1995 and ITR No. 137 of 1995 for assessment years 1986-87 and 1987-88 and answered those questions in favour of the assessee and against the Revenue. The principle applied is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause; the Court saw no just cause that would justify a departure, and held that the Commissioner, the Tribunal and the Calcutta High Court erred in permitting the Revenue to raise a contention contrary to what the Gujarat High Court had laid down in Lakhanpal National Ltd. The Court added that where other High Courts had taken a particular view and the Calcutta High Court desired to depart from it, in fairness to the assessee a certificate to appeal under section 261 ought to have been granted.
TaxSphere, “Berger Paints India Ltd v. CIT, Calcutta (SC, 17 February 2004) — where the Revenue has accepted a High Court's statement of the law in one assessee's case it cannot challenge it in another without just cause”, https://taxnotice.vittsphere.com/caselaw/case/berger-paints-india-2004-revenue-cannot-take-a-different-stand-in-another-assessees-case-without-just-cause/ (validity last checked 2026-09-09)
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