2020 (10) TMI 1027 - HC - Income Tax

Court Upholds Prior Decision; Dismisses Application Citing CBDT Circular for Tax Disputes Below Rs. 1 Crore.

Commissioner Of Income Tax Panaji – Goa Versus V.M. Salgaonkar Brothers Private Limited

The HC dismissed the Miscellaneous Application under Stamp No. 1499 of 2020, maintaining its prior refusal to frame a third substantial question of law. ... Substantial questions law - Court’s earlier refusal to frame a third substantial question of law - HELD THAT:- Sub-section (4) of Section 260A, especially the proviso appended to it, liberates the High Court to formulate and hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it. But it does not, despite the Revenue’s insistence, empower the High Court to reconsider its earlier view in the same proceedings and reformulate a question of law which it had refused to formulate. In other words, (1) a question that escaped the Court’s earlier attention, or (2) a question the appellant not presented to the Court, or even (3) a question that cropped up because of subsequent developments stands on a different footing. But a question the High Court consciously refused to treat as a substantial question of law fails to qualify under none of the above three categories. Revenue ought to have challenged this Court’s order, dated 7 January 2016, which refused to frame a particular question as a substantial question of law. That said, the Revenue is not remediless. If it chooses to question the High Court's judgment u/s 260A of the Act before the Apex Court, it may have its options open. It may comprehensively contend even on the grounds that the High Court has erred in not formulating a substantial question of law at the stage of admission. Res Judicata and Tax Disputes - second contention the Revenue has advanced is that the concept of res judicata is alien to the tax jurisprudence - Forest Development Corporation of Maharashtra Ltd., [2015 (8) TMI 421 - BOMBAY HIGH COURT] has stressed two aspects. One concerns consistency; it is the law's cardinal virtue. That is, even if the principle of res judicata does not apply to tax matters, yet consistency and certainty of law would require the State to take a uniform position and not change their stand in the absence of change in facts and/or the law. The second one concerns the distinct factors that differentiate one order from the other. That is, a mere change in the assessment year, will not warrant an appeal. The appellant should show “distinctive features either in facts or in law” warrant a different treatment to the order in the succeeding assessment year. Forest Development Corporation of Maharashtra Ltd., found “no distinction in facts or law” between the orders for AY 2002-03 and AY 2003-04. Unquestionable as the proposition of law in Forest Development Corporation of Maharashtra Ltd., we wonder how it relates to the issue before us. Regrettably, this case does not help the Revenue’s cause. What we have been faced with may not be termed res judicata per se. In some jurisdictions, it is called the law of the case: entertaining what has been rejected earlier in the same proceedings. And we have addressed that principle above. So even if we were to hold that res judicata is alien to adjudication under taxation regime, that plea is unavailable for the Revenue here. Maintainability of appeal - Circular - Ministry of Finance, the Government of India, has issued Circular No.17/2019. It reveals the Revenue’s policy decision. To file appeals before the High Court, the Central Board of Direct Taxes has fixed the limit of ₹ 1,00,00,000/-. Here, the disputed tax falls short of that amount. In tune with the Revenue’s consistent policy, the learned Standing Counsel has already told us that if this Court does not find favour with the Revenue on the additional substantial questions of law it wanted us to frame, there is nothing further in this matter to be adjudicated. Given this Court’s earlier refusal to frame a third substantial question of law, now it has been left with only two questions of law. And because of the Circular CBDT No.17/2019, dt. 08.08.2019 and clarification dated 20.08.2019, these questions of law need no adjudication, for the disputed tax falls below ₹ 1 Crore. Issues Involved:1. Whether the High Court can reconsider its earlier refusal to frame a substantial question of law in the same proceedings.2. Whether the expenditure on afforestation is of revenue nature or capital nature.3. Applicability of the principle of res judicata in tax jurisprudence.4. Impact of the CBDT Circular on the disputed tax amount.Issue-wise Detailed Analysis:1. Reconsideration of Earlier Refusal to Frame a Substantial Question of Law:The primary issue was whether a different Bench of the same strength could reconsider and frame a substantial question of law that was previously refused. The Court noted that the doctrine of the law of the case prevents reopening issues that have already been decided. This doctrine ensures consistency and avoids relitigation of matters explicitly or implicitly decided in earlier stages of the same case. The Court cited various precedents, including *Commissioner of Income-tax-I, Lucknow, v. Indo-Gulf Fertilizers Ltd.*, which allows framing new questions but not reconsidering previously rejected ones. The Court concluded that it cannot revisit its earlier decision to refuse framing a substantial question of law.2. Nature of Afforestation Expenditure:The Revenue contended that the afforestation expenses should be considered capital in nature, providing enduring benefits to the assessee. However, this Court had previously refused to frame this as a substantial question of law, noting that an identical question had already been answered against the Revenue in *Tax Appeal No. 15/2012*, which was upheld by the Supreme Court. The Court reiterated that this issue had been settled and did not warrant reconsideration.3. Principle of Res Judicata in Tax Jurisprudence:The Revenue argued that the principle of res judicata does not apply to tax matters, suggesting that the Court could reformulate the substantial question of law. However, the Court distinguished this from the law of the case doctrine, emphasizing that while res judicata might not strictly apply, the principle of maintaining consistency in judicial decisions does. The Court referred to *Commissioner of Income-Tax-I v. Forest Development Corporation of Maharashtra Ltd.*, which stressed the need for consistency and uniformity in tax matters unless distinctive features in facts or law justify a different approach.4. Impact of CBDT Circular on Disputed Tax Amount:The disputed tax amount was less than Rs. 1 crore, which, according to CBDT Circular No. 17/2019, should not be contested by the Revenue. Given this policy, the Court noted that there was no need to adjudicate the two substantial questions of law already framed, as the disputed amount fell below the threshold set by the Circular.Conclusion:The Court dismissed the Miscellaneous Application under Stamp No. 1499 of 2020, adhering to its earlier refusal to frame the third substantial question of law. Consequently, due to the CBDT Circular and the disputed tax amount being below Rs. 1 crore, the Court dismissed the appeal without any order on costs.