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TMI Blog1981 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... an association of persons. Exhibits P-5 to P-7 are the assessment orders. The assessee appealed to the AAC. The latter, by Ex. P-8 order, held that the petitioner-respondent is to be treated as an individual and the income derived by his minor children is to be added to his income and assessed in his hands. The Deputy Commissioner (Appeals) on revision confirmed Ex. P-8 order as per Ex. P-10 order. By the decision under appeal the learned single judge held that the assignment in Exs. P-5 to P-8 and P-10 to the assessee, of a status different from that assigned to him in Exs. P-2 to P-4, was not warranted, and on that score quashed the said orders. The principle governing such cases, as stated in the judgment under appeal, is (p. 898 of 130 ITR): " The principle that emerges on a consideration of the decisions which have a bearing on the question is that, while the doctrine of res judicata or estoppel by record does not apply to assessment proceedings under the I.T. Act, or for that matter to the Agricultural I.T. Act or the Sales Tax Act, the taxing authority would be entitled to reopen the matter or to deviate from the basis on which the assessment was concluded during the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by courts of competent general jurisdiction fall within the exception to the general rule, and no estoppel can be founded upon them when the same point is raised again in another year of assessment, or in respect of list other than that fixed in the original decision. This will be so even in cases where there is a formal admission that no material circumstance has in the meantime changed. The reason appears to be because the question of the liability of the taxpayer for the subsequent year's tax or rates is not to be regarded as the same question as that of his liability for the first. What might in other types of case be regarded as eadem quaestio is not so to be regarded in taxation and rating cases, which are sui generis in this regard. This principle, though now firmly established, was for long in some doubt, and formed the subject of a remarkable conflict between two decisions of the judicial Committee of the Privy Council, the subject of argument in the same year, and reported in the same volume of the Reports. In the first of these it was decided that an earlier decision of a court of competent jurisdiction did not, and in the second that it did, estop the parties from re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision is a precedent having the force of law binding not only on actual parties to the decision but all alike. The decision of the Supreme Court in Instalment Supply (P.) Ltd. v. Union of India [1961] 12 STC 489; AIR 1962 SC 53 supports what we have said in the preceding paragraph. Between the same parties, the assessee and the revenue, the Punjab High Court had, concerning an earlier assessment proceeding relating to sales tax, held that hire-purchase transactions are not assessable to sales tax and that a provision in the concerned Act providing for such assessment was unconstitutional. However, after the constitutional validity of that provision was upheld by the Supreme Court in another case, Mithan Lal v. State of Delhi [1958] 9 STC 417; AIR 1958 SC 682, the revenue again assessed the first-mentioned assessee to sales tax in respect of hire-purchase effected during the subsequent period. That assessee, inter alia, contended that the earlier decision of the Punjab High Court between the same parties " is final and conclusive as between the parties to that judgment ". The Supreme Court repelled the said contention for two reasons, each independent of the other. That court sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profits made in 1944. The circumstance that in an earlier assessment relating to 1943, the assessee was treated as an investor would not in our opinion estop the assessing authorities from considering, for the purpose of computation of the profits of 1944, as to when the trading activity of the assessee in shares began. The assessing authorities found that it began in 1943. On that finding the profits were correctly computed and the answer given by the High Court to the question of the computation of the profits was correctly given." Mark, in both these cases decided by the Supreme Court, the material circumstances obtained at the time of the earlier assessment and the subsequent assessment remained unchanged and no new materials were relied on by the revenue on the respective assessees. In Instalment Supply (P.) Ltd. v. Union of India [1961] 12 STC 489; AIR 1962 SC 53, the nature of the transaction was the same. Normally, a competent decision inter partes as regards the legal character of a transaction, is final and conclusive as between them whether an identical transaction is decided in another case between one of them and another to be of a different legal character or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is a 'new question'. It is not eadem quaestio. The 'cause of action is different'. 'The subject-matter is a different year's tax and a different year's assessment and is not the same as the subject-matter 'of the previous ruling'. All these things have been said with reference to rates or taxes and the list of decisions that recognise or enforce the principle is a long one (decisions referred to omitted). " It would not be at all easy for us to depart from this long line of authoritative opinion, even if we wanted to. Personally, I do not want to, because I think that, on the whole, it is more in the public interest that tax and rate assessments should not be artificially encumbered with estoppels (I am not speaking, of course, of the effect of legal decisions establishing the law, which is quite a different matter), even though in the result some expectations may be frustrated and some time wasted." In Mohamed Falil Abdul Caffoor v. CIT [1961] AC 584 (PC), the question that came up for the decision of the Privy Council was whether on the construction to be placed on a trust deed, the trust was an " institution of public character established solely for charitable purposes " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be determined in another year, but they are not binding and conclusive." In view of what is stated above, we are unable to subscribe to the view expressed in T. M.M. Sankaralinga Nadar and Bros. v. CIT, AIR 1930 Mad 209 [FB]. In this decision, the Madras High Court which (as then) was bound by the two conflicting decisions of the Privy Council in Broken Hill Proprietary Company Ltd. v. Municipal Council of Broken Hill [1926] AC 94 and Hoystead v. Commr. of Taxation [1926] AC 155 (PC in attempting to reconcile the said two decisions, said that unless fresh facts come to light, the ITO is bound by the earlier assessment proceedings. After the authoritative pronouncement of the Supreme Court in the decisions discussed hereinbefore and particularly in the Ipoh case [1968] 67 ITR 106 (SC) referred to in the preceding paragraph to the effect that (headnote): " the findings on questions of fact may be good and cogent evidence in subsequent years, when the same question falls to be determined in another year, but they are not binding and conclusive ", the proposition of law, as laid down in the Madras case cannot, with great respect we venture to say, be treated as good law. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee are Tejmal Bhojraj v. CIT [1952] 22 ITR 208 (Nag) and CIT v. Dalmia Dadri Cement Ltd. [1970] 77 ITR 410 (P H). Chagla C.J., in the Bombay case, discussed the above-said Nagpur decision as follows (pp. 628, 629 of 30 ITR): " Turning first to the Nagpur High Court in Tejmal Bhojraj v., Commissioner of Income-tax, the learned judges deduced certain propositions from the decision of the Madras Full Bench and the propositions are: (i) The doctrine of res judicata or estoppel by record does not apply to the decisions of income-tax authorities ; (ii) a previous finding or decision of such an authority may, however, be reopened and departed from in subsequent years in the following circumstances, namely (a) the previous decision is not arrived at after due enquiry; (with respect, that is not the test laid down by the Madras Full Bench); (b) the previous decision is arbitrary; (what the Madras Full, Bench says is not that the previous decision is arbitrary, but that the subsequent decision should not be arbitrary or capricious); or (c) if fresh facts come to light which on investigation would entitle the officer to come to a conclusion different from the one previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion for another year has been considered by courts several times and speaking generally it may be stated that the doctrine of res judicata or estoppel by record does not apply to such decisions; in some cases it has been held that though the Income-tax Officer is not bound by the rule of res judicata or estoppel by record, he can reopen a question previously decided only if fresh facts come to light or if the earlier decision was rendered without taking into consideration material evidence, etc." As we understand the above passage, it only refers to the fluid state of law on this point as obtained previously and made more confusing by the two conflicting decisions of the Privy Council in Broken Hill Proprietary Co. v. Broken Hill Municipal Council [1926] AC 94 (PC) and Hoystead v. Taxation Commissioner [1926] AC 155. The Privy Council resolved this conflict only in Mohamed Falil Abdul Caffoor v. CIT [1961] AC 584 (PC) where the Board expressly approved the decision in the Broken Hill case as laying down the correct law on the point and disapproved the decision in the Hoyslead case. In Caffoor's case the Privy Council said not only that the question arising in the assessment rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the result is one that should be regretted in the public interest." Then, as regards the second pillar on which that doctrine of res judicata is rested, namely, private justice: it is achieved to the extent of giving finality and attributing conclusiveness to what is decided in one assessment, so far as that assessment is concerned, and only to that extent. Such confinement of the operation of the principle of res judicata to the particular assessment in which the decision is given is a necessary consequence of accepting the fact that it is in public interest that there be no bar or prohibition in examining a question afresh each time that question recurs, recurrence of the same question for a decision in assessment after assessment being an inevitable feature of taxation. On the merits, no arguments were advanced before us on behalf of the assessee. The only reason stated in the judgment under appeal for quashing Exs. P-5 to P-8 and P-10 orders is (p. 899 of 130 ITR): " In this case, Ex. P-2 to P-4 revised assessment orders for the years 1966-67, 1967-68 and 1968-69 were passed assigning the status of tenants-in-common to the petitioner and his sons after due enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X
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