CIT vs. Escorts Ltd (Delhi High Court)

Due to consistency principle, CIT not permitted to change view & revise u/s 263 without changed circumstances

The asseessee regularly entered into transactions of purchase & sale of units which had been examined by the department in the earlier years and accepted as being on capital account. In AY 1992-93, the assessee entered into similar transactions which led to a capital loss of Rs. 3.15 crores. This was allowed by the AO u/s 143(3). However, the CIT passed an order u/s 263 in which he held that the transactions were not on capital account but on trading account and “speculative” and that the expenditure incurred towards brokerage etc had to be adjusted against the dividends. On appeal, the Tribunal cancelled the revision order. On appeal by the department, HELD dismissing the appeal:

As the department had examined the fundamental nature of the transaction in the earlier years and its nature remained unchanged, the department could not have changed its view as regards the nature of the transaction by dubbing it as erroneous. Though the principle of res judicata does not apply to income-tax proceedings, Courts have held that where a fundamental aspect of a transaction is found as having permeated through different assessment years, the revenue is not permitted to change its view unless there is a change in circumstances. The department is not entitled to re-open an assessment based on a fresh inference of transactions accepted by the revenue for several preceding years on the pretext of dubbing them as erroneous. Associated Food Products 280 ITR 377 (MP), Sirpur Paper Mills Ltd 114 ITR 404 (AP) & CIT vs Gopal Purohit 228 CTR 582(Bom) followed