TMI Blog2011 (2) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... KAUL, MR JUSTICE RAJIV SHAKDHER, JJ. For the Appellant : Ms. Prem Lata Bansal, Advocate For the Respondent : Mr. R.M. Mehta, Advocate RAJIV SHAKDHER, J 1. This is an appeal preferred under Section 260A of the Income Tax Act, 1961 (hereinafter, referred to as the Act") against the judgment of the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal") dated 08.10.1998 passed in I.T.A. No.3003/DEL/1997, pertaining to the assessment year 1992-1993. By the impugned judgment the Tribunal set aside the order of the Commissioner of Income Tax, Delhi-II (hereinafter, referred to as CIT‟) dated 27.03.1997. 1.1 The CIT by virtue of this order disallowed the claim of the assessee in respect of the capital loss on transactions relating to purchase and sale of units issued by the Unit Trust of India, which were ubiquitously referred to at the relevant point in time as Unit-64. Besides this, by the same order, the CIT also directed the Assessing Officer to verify whether any expenditure had been incurred in regard to the impugned transactions towards brokerage and administrative expenses, and that if it were so found, the expenditure incurred was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has come up in an appeal to this court. This court by order dated 30.08.2000 framed the following question of law: whether on the facts and in the circumstances of the case, Tribunal was justified in cancelling the order passed under Section 263 of the Income-Tax Act, 1961 ? 3. In support of the appeal, arguments were addressed by Ms. Bansal, while the case of the assessee was put forth by Mr. Mehta. 4. Briefly, Ms. Bansal contended as follows:- 4.1 The Tribunal had misdirected itself in as much as it had set aside the order of the CIT under section 263 of the Act by holding that the genuineness of the transactions was in issue, and that the said issue was not squarely put forth in the show cause notice issued to the assessee. It was submitted that the genuineness of the transaction from the point of view of the department was never in issue. According to the learned counsel, in so far as the department was concerned, the central issue was: whether the cost of retaining the legal ownership in the units had to be adjusted against dividend income earned by the assessee, in respect of which deduction was sought evidently by the assessee under section 80 M read with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay that the Tribunal s finding, that the order of the CIT, proceeded on a basis entirely different to what was put to the assessee in the show cause notice issued to it; was contrary to the record and hence, perverse. 4.5 It was also contended that the CIT s order enhancing and/or modifying the order was in consonance with the power conferred on him under section 263 of the Act. In support of her submissions, the learned counsel relied upon the following judgments :- CIT Vs. Electro House 82 ITR 824 (SC), 827 and CIT vs Panna Devi Saraogi (1970) 78 ITR 728 (Cal.) at pages 739-40. 5. As against this, Mr. Mehta submitted that the respondent/assessee had been carrying out the aforementioned transactions for past several years including in the assessment year which preceded the relevant assessment year. The department had not impugned the genuineness of the transactions. Mr Mehta relied upon the assessment order of the relevant assessment year to demonstrate that the Assessing Officer had allowed the assessee s claim to only carry forward the impugned short term capital loss. The attempt being to show that transactions were not novel. To buttress this submission, Mr. Mehta dre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Vs. Gulmohar Finance Ltd. 170 Taxman 483 and CIT Vs. Ashish Rajpal 180 Taxman 623. 6. In rejoinder Ms Bansal apart from reiterating the stand taken in the opening, laid particular emphasis on the submission that principle of res judicata had no applicability to income tax proceedings. 7. We have heard the learned counsel for both parties and perused the material available on record. 7.1 Before we proceed further it may be noticed that while admitting the appeal this court vide order dated 30.08.2000 had directed the department to file paper books with orders, not only those pertaining to assessee, but also in relation to any other assessee which the Tribunal had been following. Unfortunately, the department has not bothered to file the paper book. Even though we had the option of dismissing the appeal on the ground of the failure on the part of the department to file requisite paper books, we have, based on the submissions of Ms. Bansal that the appeal can be argued based on the material available on the file of this court, decided to hear the mater on merits. We must express our anguish at the approach adopted by the department, especially with regard to matters which have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der was available only subsequently which, evidently prompted the CIT to proceed under Section 263 of the Act. 8.3 These broad facts, therefore, form the background in which a show cause notice (in short SCN ) was issued by the CIT to the assessee. It therefore becomes necessary, at this stage, to advert to the relevant parts of the show cause notice dated 18.02.1997. The CIT, after giving a prefatory note of the transaction at hand, as understood by him, concluded by observing as follows: the order u/s 143(3) for the Asstt. Year 1992-93 is, thus found to be erroneous on a/c of 1) Treating the transaction relating to purchase, sale, re-purchase and re-sale on investment account whereas the transactions are actually in the nature of trading of Units 64. 2) Allowing carry forward of short term capital loss of Rs. 315.60 lakhs, in trading of Units 64 that were ready forward transactions and speculative in nature. 3) Allowance of interest to the extent of funds borrowed for the business of the company but actually utilized in trading of Units 64 . 8.4 A reading of the operative part of the SCN would clearly demonstrate that the department impugned the transactions carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transactions which was examined year after year; more importantly in the assessment year 1986-87 remained the same. Therefore, in our opinion, the department could not have changed its view as regards the nature of the transactions in issue in the relevant assessment year by dubbing it as erroneous. If the fundamental nature of transactions had to be questioned it necessarily had to be carried to its logical conclusion in the assessment year 1986-87. 10. It was sought to be argued before us by Ms Bansal that the principle of res judicata did not apply to the income tax proceedings, and that by its very nature every assessment year provided a fresh cause of action to the department. Broadly, this proposition is correct, though with a caveat. Courts in the recent past have increasingly veered to the view that where a fundamental aspect of a transaction is found as having permeated through different assessment years and, this fundamental aspect has stood uncontested then, the revenue cannot be allowed to change its view taken in earlier assessment years unless it is able to demonstrate a change in circumstances in the subsequent assessment year. The department in the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction . 10.2 The principle received further elucidation by the Supreme Court in the case of Municipal Corpn. Of City of Thane vs Vidyut Metallics Ltd. Anr. (2007) 8 SCC 688. The Court speaking through Justice C.K. Thakker (as he then was) articulated the applicability of principle of res judicata broadly as follows: The proposition that the strict rule of res judicata as envisaged in Section 11 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration, since the principle of res judicata is not applicable to assessment proceedings. The Tribunal correctly accepted the position, that the principle of res judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. This approach of the Tribunal cannot be faulted. The revenue did not furnish any justification for adopting a divergent approach for the Assessment Year in question. Question (b), therefore, does not also raise any substantial question . (emphasis is ours) 11.2 This court in the case of CIT vs Neo Poly Pack (P.) Ltd. (2000) 245 ITR 492 similarly followed the principle of consistency as against the principle of res judicata propounded by the revenue. 12. In our opinion, at the heart of the matter, is the issue: whether the department could re-open an assessment based on a fresh inference of transactions which have been carried on by the assessee and accepted in-turn by the revenue for several preceding years on the pretext of dubbing them as erroneous. In our view the answer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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