Facts

The Assessee is a charitable trust established in 1861 and had been claiming exemption under section 11.

The question of assessing the income for the first time arose in the assessment   year 1937-38.

For assessment years 1937-38 and 1938-39, the Commissioner deleted additions holding that the offerings made to the trust were not used for personal benefit and such offerings were exempt under section 4(3)(i) of the 1922 Act.

In assessment year 1939-40 the AO rejected the claim for exemption, but the same was allowed in appeal before the ACC.

Until assessment year 1963-64, the refund applications made by the assessee were accepted on the basis that income was exempt and that tax had been deducted       at source.

For the first time claim for refund in the years 1964-65 to 1966-67 was not allowed and the assessee was treated as an AOP and taxed.

For the assessment years 1966-67 to 1969-70 assessments were completed and the AO did not accept the assessee’s claim of exemption under section 11.

Issue

Whether, in the absence of any change in the circumstances, could the revenue reopen a question which had been decided upon in the earlier years?

Views

Strictly speaking res judicata does not apply to income-tax proceedings. Each assessment year is a separate a unit and what is decided in one year may not  apply in the following year. However, 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.

Held

In the absence of any material change justifying the revenue to take a different  view of the matter, the question should not have been reopened contrary to what had been decided by the Commissioner in the earlier proceedings. (AYs.  1964-65  to 1969-70) (CA Nos.10574 to 10583 of 1983 dt. 15-11-1991)

Editorial : In Godrej & Boyce Manufacturing Co  Ltd v.  DCIT (2017) 394  ITR 449/247 Taxman 361/151 DTR 89/295 CTR 121 (SC) In Raja Jagdambika Pratap Narain Singh v. CBDT (1975) 100 ITR 698 (SC), the Court held that earlier decision of Appellate Tribunal does not operate as res judicata if in the subsequent years, more evidence is available. inPCIT v. C. U. Inspections India

(P) Ltd (2018) 254 taxman 137 (Bom) (HC) the Court held that when the rate of   tax if the income is offered in next year the department should not dispute the   year of taxability followed CIT v. Nagri Mills Co Ltd (1981) 131 ITR 257 (Guj) (HC), CITv. Excel Industries Ltd (2013) 358 ITR 295 (SC)

“First they ignore you, then they laugh at you, then they fight you, then you win.”

– Mahatma Gandhi