2023 (5) TMI 1228 - HC - Income Tax

Reopening of assessment u/s 147 - validity of order u/s 148A(d) - concerned ACIT dropped the proceedings, while pertaining to the assessment year 2015-16 opted to proceed further under Section 148A - consistency (or lack thereof) in the decision making - bogus sale entries - as argued two contradictory final outcomes pertaining to assessment years 2015-16 and 2016-17 clearly show not just non-application of mind but even extreme arbitrariness, more so, because the officer serving as the decision making authority of ACIT is the same officer - HELD THAT - As significant to note that in order dated 28.07.2022, while dropping the proceedings, the ACIT concerned recorded his analysis of the documentary material; but in the subsequent order dated 31.07.2022, while deciding to proceed further u/s 148A the same ACIT recorded not even a whiff of analysis, if any, carried out by him of the documentary record and simply reiterated the allegations borne out of the alleged admission of Shri Rajeev Khushwaha. There is no dispute to the legal proposition as submitted by counsel for respondents revenue that the doctrine of res judicata does not apply to income tax proceedings pertaining to different assessment years since each assessment year is a separate assessment unit in itself if rests in separate factual scenario. In the case of J.K. Charitable Trust, Kamal Tower, Kanpur 2008 (11) TMI 8 - SUPREME COURT the basic question framed by the Hon ble Supreme Court was as to whether the revenue could be precluded from filing an appeal even though in respect of some other years, involving identical disputes, no appeal was filed. The Hon ble Supreme Court after elaborate discussion through multiple judicial precedents arrived at a conclusion that fact situation in all the assessment years was same and dismissed the appeal. The issue before us is the consistency (or lack thereof) in the decision making. There was nothing wrong if in the impugned order dated 31.07.2022 the ACIT concerned had taken a view different from the view taken in order dated 28.07.2022, provided the diversion was supported by way of cogent reasoning. Consistency does not mean putting iron fetters on the subsequent decision making; it only means expecting that a deviation from the previous decision in similar set of circumstances is explained by way of cogent and rational reasons. In the present case, the decision taken first in point of time (order dated 28.07.2022) was a reasoned decision, based on the analysis of material on record, but the decision taken subsequently (order dated 31.07.2022) not just took a view completely inconsistent with the previous view but even without an iota of reason. Respondent s argument of two different sanctioning authorities is concerned, no doubt order dated 28.07.2022 was issued with the approval of Principal Commissioner Income Tax-10 and order dated 31.07.2022 was issued with the approval of Principal Chief Commissioner of Income Tax, but the satisfaction recorded in both orders was of same Assistant Commissioner of Income Tax. There is nothing on record to suggest even feebly that the latter sanctioning authority was apprised of the earlier view taken in order dated 28.07.2022. An assessee, deals with the income tax department as a whole, like a body and not its individual organs, especially where left hand does not know what right had sanctioned. The impugned notice and order suffer two infirmities, namely the same proceed on a view inconsistent with the earlier order despite the facts and circumstances being similar and the ACIT concerned did not support the said subsequent divergent view with reasoning - unable to uphold the impugned notice and order u/s 148 so the same are set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Consistency in decision-making by the same authority.
2. Validity of notice and order under Section 148 and 148A(d) of the Income Tax Act.
3. Application of the doctrine of res judicata in income tax proceedings.

Summary:

1. Consistency in Decision-Making:
The court emphasized the importance of consistency in decision-making by authorities, whether judicial or administrative, to avoid arbitrariness and ensure predictability. It noted that the same decision-making authority rendered inconsistent decisions for the assessment years 2015-16 and 2016-17 under similar circumstances, which led to the present writ action.

2. Validity of Notice and Order under Section 148 and 148A(d):
The petitioner, a senior citizen and proprietor of M/s Chopra Brothers, challenged the notice dated 31.07.2022 issued under Section 148 and the order dated 31.07.2022 under Section 148A(d) of the Income Tax Act. The petitioner argued that the contradictory outcomes for the assessment years 2015-16 and 2016-17 demonstrated non-application of mind and arbitrariness by the Assistant Commissioner of Income Tax (ACIT). The court found that the ACIT's order dated 28.07.2022 for the assessment year 2016-17 was reasoned and based on an analysis of the material on record, while the subsequent order dated 31.07.2022 for the assessment year 2015-16 lacked any analysis and merely reiterated allegations.

3. Application of Doctrine of Res Judicata:
The court acknowledged that the doctrine of res judicata does not apply to income tax proceedings for different assessment years, as each year is a separate unit. However, it emphasized that consistency in decision-making is expected unless there is a material change in the factual situation or law. The court cited precedents where earlier views were upheld unless distinguished by new grounds or material changes.

Conclusion:
The court found that the impugned notice and order dated 31.07.2022 were inconsistent with the earlier order dated 28.07.2022 and lacked cogent reasoning. It set aside the impugned notice and order, allowing the petition. The court noted that the satisfaction recorded in both orders was by the same ACIT, and there was no indication that the latter sanctioning authority was aware of the earlier view. The petition was allowed with no costs.