TaxTMI 
TaxTMI 
1955 (9) TMI 53
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....October, 1943, when the minor Vasantlal came of age. Hiralal A. Shah came up in appeal before the Tribunal in respect of an order under section 25A in the assessment year 1941-42. It was claimed that the family assets had been partitioned between the coparceners of the family. The Tribunal by its order dated 29th January, 1952, held that the disruption of the family took place as on 16th April, 1938, as alleged by Hiralal A. Shah and allowed the appeal. The firm of Hiralal, Shantilal and Kantilal had also appealed to the Tribunal. The Tribunal's order reads as under : " 7. . . . . . . The Department has taken the view that Mr. Hiralal represented the Hindu undivided family in this firm. We are of opinion that Mr. Hiralal was only Vasantlal's trustee. We have already held that the partition took place on 16th April, 1938. Relief consequential to this finding will now be given by the Income-tax Officer. " It may be noted here that in the assessment year 1941-42 the Department had not accepted the partition. It had held that Hiralal A. Shah represented his Hindu undivided family in the firm. The question whether Hiralal represen....
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....n application for renewal of registration was made on 6th May, 1943. This is signed by Kantilal, Shantilal and Hiralal. Partner No. 3 however is described as " Vasantlal Hiralal by his guardian Hiralal Amritlal ". A copy of this application is annexure ' F ', and forms part of the case. (6) Hiralal took active interest in the partnership. He had a general power of attorney from the firm. 5. A copy of the order of the Tribunal giving detailed reasons is annexure ' G ' and forms part of the case. 6. We refer the following question as framed by their Lordships : " Whether in the circumstances of the case the Tribunal was justified in law in departing from its previous finding that Hiralal was trustee of the minor Vasantlal. " 7. The case has been finalised after giving the parties a hearing. The Departmental Representative accepts the statement of the case and has no suggestions to offer. The assessee has made a number of suggestions. Some of the suggestions relating to the facts relied upon by the Tribunal have been given effect to. N. A. Palkhivala with S. P. Mehta, for the ass....
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.... Tribunal which considered the assessments for 1942-43, 1943-44 and 1944-45 was justified in law in departing from the previous finding given by the Tribunal that Hiralal was not a partner in his own right but was a trustee of the minor Vasantlal. A large number of authorities have been cited and before we look at them or consider them we might consider what is the principle of law involved in the question that has been raised for our consideration. A Court is prevented from coming to a different or contrary conclusion to the one arrived at by itself earlier mainly on the ground of res judicata or on the ground of estoppel by record. Courts of law have adopted this particular rule of res judicata in order to give finality to litigation and also to confer the characteristic of conclusiveness to its decision. Therefore, if a matter is litigated between parties and a decision is arrived at by a Court, that decision is binding between the parties and it is not open to either of the parties to reagitate the question covered by that decision. The first question that obviously arises is this. Does the principle of res judicata as we have just explained apply to Tribunals set up under t....
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.... the Income-tax Authorities at their sweet will to come to a conclusion which is contrary to the one arrived at in the earlier assessment. While taking the view that the principle of estoppel or res judicata does not strictly apply to the Income-tax Authorities, we wish to make it clear that we do not suggest that it is open to a Tribunal to come to a different conclusion to the one arrived at by that very Tribunal earlier without any limitation whatsoever, and we shall presently indicate what in our opinion are the limitations upon the right of an Income-tax Authority not to be bound by the earlier decision or the right to revise the earlier decision. If the first decision was not an arbitrary decision or a perverse decision, if the first decision was arrived at after due inquiry and if no fresh facts were placed before the Tribunal giving the second decision, would it still be open to the second Tribunal to come to a contrary conclusion ? Two or three different positions may arise. The first Tribunal may come to a particular decision on a construction of a particular document. Take this very case. The partnership deed referred to played an important part in the decision arrived a....
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....d be said that the decision of the first Tribunal was a perverse decision, and if the decision of the first Tribunal was either arbitrary or perverse it would justify the second Tribunal in departing from the decision arrived at by the first Tribunal. Therefore in our opinion 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. We should also like to sound a note of warning, especially with regard to a Tribunal like the Appellate Tribunal, that it should be extremely slow to depart from a finding given by an earlier Tribunal. Even though the principle of res judicata may not apply, even though there may be no estoppel by record, it is very desirable that there should be finality and certainty in all litigations including litigations arising out of the Income-tax Act. It is not a very satisfactory thing that an assessee should feel a grievance that one Tribunal came to one conclusion and another Tribunal came to a....
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....een raised by Mr. Palkhivala is that although these principles may apply to Income-tax Authorities they do not apply to the Appellate Tribunal which stands on a different position to the Income-tax Authorities. It is pointed out that under the Income-tax Act under section 5 the Income-tax Authorities are set out who are Income-tax Officers, Appellate Assistant Commissioner and Commissioners of Income-tax, and it is Chapter 11-A which deals with the Appellate Tribunal which is not an Income-tax Authority. Therefore it is contended that although the principle of res judicata may not apply so far as an Income-tax Officer or the Appellate Assistant Commissioner is concerned, it should apply to a judicial Tribunal like the Appellate Tribunal which is not in any way under the control or authority of the Central Board of Revenue or the Income-tax Commissioner. In order to appreciate this argument we must consider what role does the Appellate Tribunal play under the Income-tax Act. It is clear that the Tribunal is a part of the machinery of assessment. It may be the final link in the sense that it is the final appellate authority on facts. But when the Income-tax Act sets up a complete com....
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....tax Officer was not bound by the rule of res judicata or estoppel by record. But the Full Bench made it clear that the power of the Income-tax Tribunal to reopen a matter was not unlimited and the limitation they laid down was this. At pages 214-215 the judgment states : " It seems to us that where income-tax officials have, after enquiry, proceeded to assess the assessee on a certain basis, though they may be entitled to reopen the enquiry, they cannot arbitrarily change the assessment simply on the ground that the succeeding officer does not agree with the preceding officer's finding. The position is just like the position of any two parties who have proceeded on a certain basis in their relations. It may be open to one party to reopen the matter. But if he wants to do so, there should be facts which would entitle him to do it. If fresh facts come to light which on an investigation would entitle the Income-tax Officer to come to a different conclusion from that of his predecessor we think he is entitled to reopen the question. But if there are no fresh facts it is difficult to see how he can arbitrarily go ....
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....ces, namely (a) the previous decision is not arrived at after due enquiry ; (with respect, that is not the test laid down by the Madras Full Bench) ; (b) the previous decision is arbitrary ; (what the Madras Full Bench says is not that the previous decision is arbitrary, but that the subsequent decision should not be arbitrary or capricious) ; or (c) if fresh facts come to light which on investigation would entitle the officer to come to a conclusion different from the one previously reached ; (iii) in the absence of such circumstances, the Income-tax Officer cannot arbitrarily depart from the finding reached after due inquiry by his predecessor in office simply on the ground that the succeeding officer does not agree with the preceding officer's findings. " Therefore, to apply the test of the Nagpur High Court, if the previous decision has not taken into consideration material evidence or material facts, can it be said of that previous decision that it was arrived at after due inquiry ? Then we have the judgment of the Allahabad High Court in Kamlapat Motilal v. Commissioner of Income-tax, U. P. ([1950] 18 I. T. R. 812) The Allahabad High Court....
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....ural justice require that if there is prior determination by the Income-tax Department, ordinarily there should be no variation from that decision unless there are fresh circumstances to warrant a deviation from the previous decision. " So what this decision of the Madras High Court has emphasised is fresh circumstances being present to justify a departure from the earlier decision. Fresh circumstances are not necessarily the same as fresh facts brought before the Tribunal considering revising the earlier decision, and in our opinion " fresh circumstances " is a much wider expression than merely " fresh facts brought before the authority. " Reference was also made to a judgment of the Patna High Court in Kaniram Ganpat Rai v. Commissioner of Income-tax, Bihar & Orissa ([1941] 9 I. T. R. 332). The learned Judges of that High Court followed the decision of the Madras Full Bench and at page 337 this is what they state : " It may be open to one party to reopen the matter. But if he wants to do so there should be facts which would entitle him to do it. If fresh facts come to light which on an i....
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....ry different footing from the High Court, and even assuming that the principle laid down by the Madras High Court would apply to a decision of the High Court on a reference, it does not necessarily follow that the same principle would apply to the Tribunal. In this connection Mr. Palkhivala strongly urged upon us to consider that the position of the parties before the Income-tax Tribunal was very different from the position of the parties before the Income-tax Officer. There was no lis before the Income-tax Officer, there were no two parties and the Incometax Officer was really representing his Department and trying to assess the assessee according to his view of the liabilities of the assessee. But according to Mr. Palkhivala when the matter comes before the Tribunal there is a lis, there are two parties to that lis-the Income-tax Officer on one side and the assessee on the other-and the decision of the Tribunal is a proper judicial decision in the same sense in which a Court would decide after hearing parties, and therefore we should not hesitate to apply the principle applicable to decisions of the High Court to the decisions of the Tribunal. If what Mr. Palkhivala says is true,....
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....iveness has been applied to decisions not of record in numerous cases, of which the following are examples : A sentence of expulsion passed by a college ; of deprivation by a college visitor ; of trustees dismissing a schoolmaster ; an order of the General Medical Council ; the award of an arbitrator. " It will be noticed that what is emphasised is the conclusive nature of the decision given by the Tribunal. It will also be noticed that the cases mentioned in this paragraph are cases of a Tribunal dealing with a specific issue which is not likely to arise again. It is perfectly true that when a Tribunal decides a particular issue, that issue becomes conclusive with regard to the rights of parties between whom the issue was decided. But what we have to consider in this reference is entirely a different matter, and what we have to consider is the power of one Tribunal to revise or reopen a decision given by another Tribunal in a different assessment. Income-tax Tribunals deal with different assessments, and it could not be said that when the first Tribunal gave a decision the issue was at an end and the question could not be raised again, because when a fresh assessment came befor....
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....at the earlier Tribunal came to its conclusion on materials which were not complete nor detailed, whereas more detailed and more elaborate materials were gone into by the present Tribunal in coming to the conclusion which it did. We are bound by the statement of the case submitted to us. The answer therefore to the question that is submitted to us, which is : " Whether in the circumstances of the case the Tribunal was justified in law in departing from its previous finding that Hiralal was a trustee for the minor Vasantlal ? ", must be in the affirmative. We would like to emphasise the fact that we are answering this question on the specific facts and circumstances set out in the statement of the case. A notice of motion has been taken out by the assessee which has been argued by Mr. Palkhivala, and the notice of motion wants a supplementary statement of the case to be submitted by the Tribunal. The fresh facts which the assessee wants to be placed before us are the various documents which according to the assessee were placed before the first Tribunal and from that it is sought to be argued that the first Tribunal in coming to its decision carefully weighed all the materials....