I am sure everyone who is associated with the tax practice would have some time confrontation with the tax officer with respect to the allowance of the certain claims in line with judicial precedence. Tax authority usually states that we are not following said respective judgement, since it is not acceptable by the tax department.
There is a DOCTRINE OF STARE DECIS, which means “abide by the former precedents”. The doctrine stare decisis is one of policy grounded on theory that security and certainty require that accepted and established legal principle, under which rights may accrue, be recognised and followed, though later found to be not legally sound, but whether a previous holding of the Court shall be adhered to, modified, or overruled is within the Court's discretion under the circumstances of case before it. Ref Peirce Leslie & Co. v. Commissioner of Income-tax 86 Taxman 554 (Mad.)
The ITO would be bound by a decision of the Supreme Court as also by that of the High Court within whose jurisdiction he is, irrespective of the pendency of any appeal or special leave application against that judgment. He would equally be bound by a decision of another High Court on the point, because not to do so would cause grave prejudice to the assessee. Ref Siemens India Ltd. v. K. Subramanian, ITO 13 Taxman 146 (Bom)
Recently an writ petition came before Bombay High Court (Garware Polyester Ltd & Ars v The Sate of Maharashtra & Ors Writ Petition No 1085 of 2010 order dated 1-7-2010) where in tax assessing officer (Dy. Commissioner, Large Tax Unit) while passing assessment recorded that the judgment of High Court is not accepted by the sales tax department and legal proceeding is initiated against the said judgment. High court observed that in the event where order of High Court is not stayed, refusal to follow and implement the judgment of High Court by the tax assessing officer prima facie amounts to contempt of court.
The judge may impose fines and or jail upon any person committing contempt of court. The judge will make use of warnings in most any situation that may lead to a person being charged with contempt. It is relatively rare that a person is charged for contempt without first receiving at least one warning from the judge.
However now the issue may arise what would be would be the remedy available with the tax payer when placed with similar issue? Whether to file a writ or to follow normal appeal procedure? Filing of writ is always a costly affair both in terms of money & time. But still at times, in order to inculcate the judicial discipline amongst the tax officers’ payers would be required to exercise writ jurisdiction.
