Res Judicata vis-à-vis consistency in tax matters

1. INTRODUCTION

1.1. Finality to assessment facilitates the assessee to plan his affairs and to decide the business planning for long term strategies. However tax authorities feel that there is no finality to any assessment as the principle of Res Judicata is not applicable to tax proceedings. In this paper, an attempt has been made to understand the rule of Res Judicata as applicable to tax proceedings.

2. MEANING

2.1 The word ‘Res Judicata’ is derived from the Latin language. It means a case or suit already decided. The principles of Res Judicata, in the eye of law, is that if on any facts and/or law, a particular decision is made than subsequently if any lis on similar facts and/or law is to be decided between the same parties, it should be same as made earlier.

As per The Law Lexicon “Res adjudicata” means “A matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment; a thing definitely settled by judicial decision, the thing adjudged”.

Section 11 of The Code of Civil Procedure, 1908, defines “Res Judicata” as under:-

“No court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such court.”

2.2. The doctrine of Res Judicata is based on three maxims:

(1) Nemo debet lis vaxari pro eadem causa (no man should be vexed twice for the same cause);

(2) Interest republicae ut sit finis litium (it is in the interest of the state that there should be an end to a litigation); and

(3) Re judicata pro veritate occipitur (a judicial decision must be accepted as correct).

3. PRINCIPLE OF RES JUDICATA IN TAX MATTERS

3.1. The general principle of law is that no one should blow hot and cold on the same set of facts to reach different conclusions / findings in different years. The need for consistency is as important for revenue authorities as it is expected from the assessee. The common understanding is that, notwithstanding the public policy behind the rule, it has no relevance to tax disputes. It is said that a finding or an opinion recorded by an authority or even by a court of law for one assessment year has no binding effect on the issues in subsequent assessment years.

The principle of Res Judicata is not the creature of any statute or the handiwork of any code of law. It is the gift of public policy. The Bombay High Court, in H.A. Shah and Co. vs. CIT (1956) 30 ITR 618 (Bom.) has held that “the principle of estoppel or res judicata does not strictly apply to the Income Tax authorities” and yet declaring that:-

“An earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision and if the Tribunal giving the earlier decision has taken into consideration all material evidence.”

3.2 The courts have cautioned that the doctrine of Res Judicata should not be stretched too far under direct tax laws. A Tribunal should extremely be slow to depart from its earlier view.

In CIT vs. L. G. Ramamurthy (1977) 110 ITR 453 (Mad.), the court laid down the principle that “But what is relevant is not the personality of officers presiding over the Tribunal but the Tribunal as an institution. If it is conceded that simply because of the change in the personnel who manned the Tribunal, it is open to them to a conclusion totally contradictory to the conclusion which had been reached by earlier officers manning the tribunal on same set of facts it will not only shake the confidence of the public in judicial procedure as such, but it will totally destroy such confidence…….that will be destructive of the institutional integrity itself”.

VIEWS OF APEX COURT

3.3. The Supreme Court in Amalgamated Coalfields vs. Janapada Sabha AIR 1964 SC 1013 have evinced a highly, balanced approach:-

“In considering this question, it may be necessary to distinguish between decision on questions of law which directly and substantially arise in any dispute about the liability for a particular year, and questions of law which arise incidentally or in a collateral manner … the effect of legal decisions establishing the law would be a different matter. If, for instance, the validity of a taxing statute is impeached by an assessee who is called upon to pay a tax for a particular year and the matter is taken to the High Court or brought before this Court and it is held that the taxing statute is valid, it may not be easy to hold that the decision on this basic and material issue would not operate as res judicata against the assessee for a subsequent year”.

3.4 In South India Trust Association vs. Telugu Church Council (1996) 2 SCC 520, the Court observed that the rule of res judicata is founded on considerations of public policy. It is in the interest of public at large that finality should attach to the binding decisions pronounced by Courts of competent jurisdiction and it is also in the public interest that individuals should not be vexed twice over with the same kind of litigation.

3.5 In Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) the Hon’ble Apex Court observed as under:

“16. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year”.

3.6 In the case of Municipal Corporation of City of Thane vs. Vidyut Metallics Ltd & Anr. (2007) 8 SCC 688, wherein the facts were that in earlier litigation, the court had considered the evidence of Quality control Manager who was described as “expert” on the point and accepting his evidence, the court held that the goods imported by the company were ferrous in nature and not non ferrous and the company was right in paying octroi under item 71. It was thus a “fundamental factor” and the nature of goods imported by the company was directly and substantially in issue, on the basis of which the decision was taken. The Hon’ble Supreme Court observed that in taxation matters, the strict rule of res judicata as envisaged by section 11, CPC 1908 has no application. As a general rule, each year’s assessment is final only for that year and does not govern later years, because it determines the tax for a particular period.

The Hon’ble Supreme Court further observed that in facts of present case it was not possible to hold that the earlier decision would not continue to operate in subsequent years unless it is shown that there are changed circumstances or the goods imported by the company in subsequent years was different than the one which was imported earlier and in respect of which decision had been arrived at by the court. Therefore, it was held that the Revisional Court as well as the High Court were right in giving benefit of the decision in the earlier litigation to the respondent company. The Hon’ble Supreme Court upheld the observation of Supreme Court in case of Radhaswami Satsang (Supra).

4. DECISION OF CIVIL COURT

4.1 A decision of a civil court inter parties does not operate as Res Judicata or estoppels so as to bind the Revenue department. Which was admittedly not party to the proceedings before the Civil Court; CIT vs. Thobbandas Jivanlal Gajjar (1977) 109 ITR 296 (Guj.), C. Datchinamurthy & Ors. vs. Asst. Director of Inspection (1984) 149 ITR 341 (Mad.). However, once the High Court has granted probate or letters of administration in respect of will, the will is binding on the department and the Tribunal; Gopichand Gupta vs. CWT (1981) 132 ITR 308 (Cal.) and ITO vs. Jayaraman (1987) 168 ITR 757 (Mad.)

The Bombay High Court, in the facts of CIT vs. C. K. Thakore (1982) 136 ITR 464 (Bom.) 472 has taken the view that the rights and liabilities under a contract between the assessee and a third party if and as determined by a competent Civil Court cannot be overlooked or ignored while determining the legal nature of the receipt in the hands of the assessee.

5. ESTOPPEL AND ADMISSION

5.1 An assessee is entitled to resile from a position erroneously taken when filing the return; CIT vs. Bharat General Reinsurence Co. Ltd. (1971) 81 ITR 303 (Del.) (307-308), Jessaram vs. CIT (1971) 81 ITR 409 (All), Abdul Quane vs. CIT (1990) 184 ITR 404 (All). An admission or acquiescence cannot be the foundation for an assessment, and it is always open to an assessee to demonstrate and satisfy the Assessing Officer that a particular income was not taxable in his hands and that it was returned under an erroneous impression of law. Abdul Quane vs. CIT (1990) 184 ITR 404 (All).

5.2 In Nirmala L. Mehta vs. A. Balasubramaniam, CIT & Ors. (2004) 269 ITR 1 (Bom.). The Court held that merely because the assessee has offered the income that would not take away the right to contend that amount was not chargeable to tax. The Court held that no charge of tax except accordance with the law after referring the Article 265 of the Constitution of India. Article 265 of the constitution of India reads as under:-

“No tax shall be levied or collected except by authority of law.”

5.3 The Apex Court in Goetze India Ltd. vs. CIT (2006) 284 ITR 323 (SC) has held that unless the assesee files the revised return he cannot make the claim.

5.4 The Delhi High Court after considering the Judgement in the case of CIT vs. Bharat Aluminium Co. Ltd. (decided on 24th May 2007) 163 Taxman 430 (Del.), has inter-alia ruled that assessee can file revised computation in the course of ongoing assessment proceedings under the Act, without making recourse to revised return, despite the fact that time limit for revising return under section 139(5) had expired. The Court while inferring above has placed reliance on Allahabad High Court ruling in the case of Dhampur Sugar Mills vs. CIT (1973) 90 ITR 236 (All). Interestingly, Supreme Court’s ruling in the case of Goetze does not find mention in Delhi Court’s ruling.

5.5 The Mumbai ITAT in the case of Chicago Pneumatic India Ltd. vs. Dy. CIT (2007) 15 SOT 252 (Mum.) in context of allowability of new claims during the assessment proceedings without having recourse to revised return, placing reliance on principle embedded in Article 265 of Indian constitution (No tax can be collected except by the authority of law) and old CBDT Circular No. 14 dated 11 April 1955 and explaining the ratio of Goetze ruling of Supreme Court reported in (2206) 284 ITR 323 (SC) has categorically held that assessee has the right to make new claims during assessment proceedings without recourse to revised return (Refer Para. 45 to Para. 49 of the ruling).

The Delhi ITAT in Moser Baer India Ltd vs. Jt. CIT (2007) 295 ITR 148 (AT) (Del.) has also explained the ratio of Goetze (supra) in context of fresh claim (viz. opting out) under section 10B of the Act. In this connection, while explaining the ratio of Goetze (supra) ITAT has held that Goetze (supra) operates in different context and has no applicability to section 10B, which is a code in itself.

The Kolkata ITAT ruling in the case of Van Oord Altanata B.V. vs. Asst. Director of Income Tax (2007) 112 TTJ 229 (Kol.) has inter alia held that “there is no estoppel against the statute” and Assessing Officer is duty bound to bring correct legal position to assessee’s notice and give effect to the same while passing assessment order, irrespective of assessee’s mistake.

6. AGREEMENT BETWEEN ASSESSEE AND DEPARTMENT

6.1 Any arrangement or agreement between the taxpayer and the income tax authorities providing for a basis of assessment different in any respect or particular from that laid down in the Act cannot estop either party, even if it has been acted upon in the past from relying in any year upon the proper construction of the relevant provisions of statute; CIT vs. VMRP Firm (1965) 56 ITR 67 (SC); UOI vs. Banvarilal Agarwal (1999) 238 ITR 461 (SC); CIT vs. DKB & Co (2000) 243 ITR 618 (Kar.).

6.2 Dealing with matters relating to penalty under section 271 (1) (c) of the Act, the courts have held that once assessee has been given assurance that there will not be penalty, and thereafter the Assessing Officer levies the penalty the same is not valid and liable to be deleted. As held in Ramnath Jaganata vs. State of Maharashtra (1984) 57 STC 46 (Bom.) (51), Sir Shadilal Sugar and General Mills Ltd. & Anr. vs. CIT (1987) 168 ITR 705 (SC); CIT vs. Suresh Chandra Mittal (2001) 251 ITR 9 (SC)

7. DECISION OF COURT ON WRIT OPERATES AS RES JUDICATA

When a writ petition after contest is disposed of on merits by a speaking order, the question decided in that petition would operate as Res Judicata, but not a dismissal in limine or dismissal on the ground of laches or availability of alternative remedy [Pujari Bai vs. Madan Gopal, (1989) 3 SCC 433, 440 (SC); Workmen vs. Board of Trustees of the Cochin Port Trust, AIR 1978 SC 1283, 1288].

In Grih Kalyan Kendra Workers’ Union vs. Union of India, (1991) 1 SCC 619, 630-31 (SC) it was held that a question raised and decided by the Supreme Court in earlier writ proceedings cannot again be raised through a fresh writ petition under article 32.

The decision given by the High Court in a writ petition would accordingly act as a res judicata in regard to the same facts and the issues even in a criminal proceeding between the parties as was held in Gulab Chand Sharma vs. S.P. Sharma, CIT (1974) 95 ITR 117 (Del.). Thus a decision on merits rendered by the High Court while disposing of the writ petition would bring about finality to the issue between the parties till such time that judgment of the High Court is not stayed, modified or reversed by the Supreme Court in appeal or other proceedings before it.

8. DISMISSAL OF SPECIAL LEAVE PETITION BY SUPREME COURT – NON SPEAKING ORDER

8.1 The Supreme Court in Indian Oil Corporation Ltd. vs. State of Bihar & Ors. (1987) 167 ITR 897 (SC) has clarified that the dismissal of a special leave petition by the Supreme Court by a non-speaking order would not operate as res judicata by observing that-

“When the order passed by this Court was not a speaking one, it is not correct to assume that this Court had necessarily decided implicitly all the questions in relation to the merits of the award, which was under challenge before this Court in the special leave petition. A writ proceeding is a wholly different and distinct proceeding. Questions which can be said to have been decided by this Court expressly, implicitly or even constructively while dismissing the special leave petition cannot, of course, be reopened in a subsequent writ proceeding before the High Court. But neither on the principle of res judicata nor on any principle of public policy analogous thereto, would the order of this Court dismissing the special leave petition operate to bar the trial of identical issues in a separate proceeding, namely, the writ proceeding before the High Court merely on the basis of an uncertain assumption that the issues must have been decided by this Court at least by implication. It is not correct or safe to extend the principles of res judicata or constructive res judicata to such an extent so as to found it on mere guesswork”.

8.2 In all cases of admission of the SLP the further decision on merits follows whereas in every case of dismissal there is no question of further decision or proceedings from the Supreme Court and effectively the order of the lower Court/authority which is challenged before the apex Court is affirmed and becomes final. In such a situation the question whether the person/s aggrieved by the order of the lower Court could agitate his grievance by way of an application for review or rectification of mistakes apparent from record so as to pursuade the lower authority to modify its final order in the light of the application for rectification or review, to the extent and in the manner found appropriate is still open for consideration. The respondent often pleads that the order of the lower Court having been affirmed by the Supreme Court it is no more open to the lower authority, after the dismissal of the SLP to entertain any application and/or decide the same for the purpose of review, revision or modification of the order which has been upheld by the Supreme Court. The controversy is not free from doubt. The effect of dismissal of SLP by the Supreme Court is that the order of the Supreme Court does not constitute res judicata to deny the petitioner the right to agitate matters on merits before the competent Court / Tribunal.

8.3 A mere dismissal of SLP does not mean that High Court decision is approved on merits so as to be a judicial precedent. In Smt. Tej Kumari vs. CIT (2001) 247 ITR 210 (Patna) Full Bench of the Patna High Court held that when a SLP is summarily rejected or dismissed under Art. 136 of the Constitution such dismissal does not lay down any law. The decision of the High Court against which the SLP is dismissed in limine would not operate as res-judicata.

However, when Supreme court dismisses an SLP with reason it might be taken as the affirmation of the High Court views on merits of the case, thus there is no reason to dilute the binding nature of precedents in such cases.

8.4 The Supreme Court has considered the scope of Article 136 in a case Kunhayammed vs. State of Kerala (2000) 245 ITR 360 (SC) and held that:-

“(a) Where an appeal or revision is provided against an order passed by a Court, Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law.

(b) An order refusing special leave to appeal may be a non speaking order or speaking one. In entire case it does not attract the doctrine of merger

(c) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.”

8.5 In V. M. Salgaocar & Bros. Pvt. Ltd., etc vs. CIT (2000) 243 ITR 383 (SC), the Apex Court held that when an appeal is dismissed by the Supreme Court, by mere speaking order, the order of the High Court or Tribunal from which the appeal arose merges with that of the Supreme Court.

8.6 In ACIT vs. Changepond Technologies (P) Ltd. (2008) 14 DTR 336 (Chennai) (Trib.), the Tribunal held that when the Supreme Court passes an order in SLP, and also gives reasons such an order is binding precedent.

9. DISMISSAL OF APPEAL UNDER SECTION 260A

9.1 In Medicare Investments Ltd. vs. Jt. CIT (2008) 114 ITD 334 (Delhi) (SB) has held that dismissal of appeal on ground no substantial question of law arises amounts affirmation of decision of Tribunal on merits binding on Tribunal.

9.2 In Siemens India Ltd. vs. ITO (1983) 143 ITR 120 (Bom.), the Bombay High Court held that merely because an appeal has been filed or a special leave application is pending against the HC decision, it does not denude the decision of its binding effect and until set aside that decision is binding on all upon whom it operates as a binding precedent unless the operation of that judgment is stayed by the Supreme Court. The Bombay High Court also said that not to follow the decision of the jurisdictional High Court would be almost committing contempt of the Court as observed in K. Subramanian & Anr. vs. Siemens India Ltd. & Anr. (1985) 156 ITR 11 (Bom.)

However it appears that under direct tax laws, it may be permissible for the Assessing Officer, not to follow even the decision of the jurisdictional High Court, if the Department is contesting the issue in the Supreme Court. But in such a case, he cannot recover the tax which must be kept in abeyance.

10. DECISION OF APPELLATE TRIBUNAL

10.1. The Honourable Supreme Court in Kamalakshi Finance Corporation’s case AIR 1992 SC 711, has laid down that the doctrine of binding precedents is equally applicable to Tribunals orders also as Tribunal is higher authority in so far as Assessing Officer & CIT (A) are concerned in the judicial hierarchy. Khalid Automobiles vs. Union of India (1995) SCC Suppl. (4) 652. In ITAT vs. V.K. Aggarwal (1999) 235 ITR 175 (SC), the Supreme Court has considered ITAT as a ‘Court’ for the purpose of contempt of Court Act, 1971.

10.2. It is also a healthy practice that one Bench of the tribunal should follow an earlier decision of another Bench, unless there is material change either in facts or law. This was so held by the Bombay High Court in CIT vs. Goodlass Nerolac Paints Ltd. (1991) 188 ITR 1 (Bom.). It must be remembered that there is only one Tribunal under the constitution and different Benches are constituted only for the sake of convenience of the litigating public.

In DLF Universal Ltd. vs. CIT (2008) 306 ITR 271 (Delhi). The Court held that it is not only a matter of judicial propriety but also a matter of judicial discipline that when one bench of the Tribunal takes a view another bench on disagreement does not pass a contrary order but refer to a larger bench getting the matter resolved.

The legal position has been well summed up by the Bombay High Court in CIT vs. Thane Electric Supply Ltd. (1994) 206 ITR 727 (Bom.).

10.3. The following are the observations of the Supreme Court from the decision in S. l. Rooplal & Another vs. L. G. of New Delhi AIR (2000) 594 (SC); (2000) 1 SCC 644.

“At the outset, we must express our serious dissatisfaction in regard to the manner in which a coordinate Bench of the Tribunal has overruled in effect, an earlier judgment of the same tribunal. This is opposed to all principles of judicial discipline….. Precedents which enunciate rules of law from the foundation of administration of justice under our system. This is a fundamental principle which every presiding officer of a judicial forum ought to know for consistency in interpretation of law alone can lead to public confidence in our judicial system.”

10.4. The decision of the Special Bench of the Tribunal must be held to be a binding precedent for division benches otherwise the very purpose of constituting them will get frustrated. This of course is subject to the exception that if there is a High Court decision on the same issue and not noticed by the Special Bench, then the High Court decision will receive preference not withstanding the contrary view of Special Bench in case where there are conflicting decision of High Courts, other than Jurisdictional High Court a Bench is force to adopt view which it appears to be better. Chandulal Venichand vs. ITO (1991) 38 ITD 138 (Ahd.)

11. AUTHORITY FOR ADVANCE RULINGS

The Act has made the ruling binding in the case of one transaction only and the parties involved in that case in respect of that transaction. For other transactions and for other parties the ruling will be of persuasive nature. Advance ruling are judgments in personam and not in rem. Cyril Eugene Pereira, In Re (1999) 239 ITR 650 (AAR) and Union of India vs. Azadi Bachao Andolan (2003) 263 ITR 706 at 742 (SC).

In Dy. CIT vs. Boston Consulting Group Pte. Ltd. (2005) 94 ITD 31 (Mum.), the Tribunal held that, the Rulings given by the Authority for Advance Rulings are certainly not binding precedents on the Tribunal.

12. YEAR OF TAXABILITY

Where the department had not disputed that the expenditure was deductible in principle but was only disputing the year in which the deduction could be allowed. The Court held that, castigating the department, that as the tax rates were the same in both years, the department should not fritter away its energies in raising questions as to the year of deductibility / taxability. CIT vs. Nagri Mills (1958) 33 ITR 681 (Bom.) followed by Delhi High court in case of CIT vs. Vishnu Industrial Gases Pvt. Ltd. (Source: www.itatonline.org)

13. NOT FILING AN APPEAL IN EARLIER YEARS

It is well-settled that each assessment year is separate and independent and even if the Revenue does not challenge the decision of the Tribunal in an earlier year, it does not preclude it from doing so in a later year CIT vs. M. Chawla, (1989) 177 ITR 299, 301, (Del.)

In CIT vs. J. K. Charitable Trust (2008) 220 CTR 105 (SC), the Hon’ble Court held that revenue having not filed any appeal in other assessment years it is precluded from filing appeals in the relevant assessment years, involving identical situations.

14. NOT PRESSING THE GROUND

14.1 There is no estoppel against law. No concession of law is permissible. An appellant having not pressed an issue before lower authorities, can still raise and agitate the same before the Tribunal. CIT vs. VMRP Firm (1965) 56 ITR 67 (74) (SC); Hindustan Zinc Ltd vs. Dy. CIT (2002) 77 TTJ 315 (Jodhpur).

J. K. Oil Mills Co. Ltd. vs. CIT (1976) 105 ITR 53 (All) (55) – If assessee, acting on wrong legal advice, does not press a claim in controversy it does not amount to withdrawal of ground taken before AAC and, therefore, should be allowed to raise the same at later stage before Tribunal.

Vijay Kumar Jain vs. CIT (1975) 99 ITR 349 (P&H) (553 – 554) – The Assessee was not precluded from urging the ground. By giving it up the assessee could not confer jurisdiction on the ITO where he had none. Therefore, the Tribunal was bound to hear the assessee and could not reject the appeal on the ground that the ground was not agitated before the AAC and thus could not be permitted to be agitated before it.

14.2 An admission made by the counsel in the course of proceedings can be withdrawn, unless the circumstances are such as to give rise to an estoppel. Abdul Hameed vs. CIT (1967) 63 ITR 738 (AP) (744); CIT vs. Jyoti 164 ITR 301 (1987) (Patna).

14.3 No person can act as Authorised Representative on behalf of assessee without the power of authority in writing. Additions by Assessing Officer on statement of such Authorised Representative is required to be deleted. Vamadeven Bhanu vs. Dy. CIT (2006) 8 SOT 147 (Coch.)

15. CONFLICTING STANDS BY REVENUE

The revenue cannot take conflicting stands. It has got the assistance of technical persons and should be consistent. It cannot discriminate between the assessees. Seshasayee Paper and Boards Ltd. vs. CIT (2003) 260 ITR 419 (Mad.), Union of India vs. Kaumudini Narayan Dalal (2001) 249 ITR 219 (SC), Berger Painters vs. CIT (2004) 266 ITR 99 (SC), Union of India vs. Satish Panalal Shah (2001) 249 ITR 221 (SC).

16. FINDINGS OF ASSESSMENT PROCEEDINGS NOT BINDING ON PENALTY PROCEEDINGS

Penalty proceeding and assessment proceeding are separate and distinct.

CIT vs. Dharamchand L. Shah (1993) 204 ITR 462 (Bom.)

Quantum finding is not binding on the penalty proceeding.

Durga Kamal Rice Mills vs. CIT (2003) 265 ITR 25 (Cal.)

CIT vs. Bimal Kumar Jalan (2003) 261 ITR 87 (Cal.)

In the penalty proceedings, the authorities must consider the matter a fresh as the question has to be considered from different angle.

T. Ashok Pai vs. CIT (2007) 292 ITR 11 (SC)

17. SPECIAL PROVISION FOR AVOIDING REPETITIVE APPEALS – PRINCIPLE OF RESJUDICATA

Chapter XIV-A consisting of sub-sections (1) to (6) of section 158A, provides that where assessee claims any question of law arising in his case is identical with a question of law arising in his case for another assessment year which is pending before the High Court on a reference under section 256 or before the Supreme Court on a reference under section 257 or in appeal under section 261, he may furnish a declaration to the authority that if such authority agrees to apply in the relevant case the final decision on the question of law shall be applied to the relevant case. The provisions of section 158A are in the spirit of principles of Res judicata. If the specific provisions under Income-tax Act, following the principles of Res judicata is inserted then up to such extent principles of Res judicata applies under Income-tax Act.

18. CONCLUSION

On going through the various judicial pronouncement following principles emerge:-

i) As a general rule principle of res judicata or estoppel is not applicable to income-tax proceedings. An assessment of particular year is final and binding in relation to the assessment year in which the decision is given.

ii) In income-tax proceedings though the principle of res judicata does not apply, yet rule of consistency does apply i.e., if no fresh facts come to light on investigation, the Assessing Officer is not entitled to reopen the same question on mere ground of suspicion or change of opinion. This is based on principle of natural justice and expediency. The principle of comity lends weight to this preposition.

iii) A finding arrived at in a subsequent year ignoring, without material, the conclusion arrived at earlier would be vitiated in law. There should be no deviation/variation from earlier year’s decision unless there are fresh circumstances to warrant a deviation from such previous decision unless it otherwise emerges that the previous decision is wrong.

iv) Principle of res judicata or estoppel and principle of consistency or expediency apply with equal force to both Income-tax authorities on one hand and the Tribunal/High Courts on the other.

v) This principle broadly safeguards the interests of the assessees against arbitrary actions arising out of prerogative interpretations and biased actions.