Income Tax Appellate Tribunal - IT
Birumal Gaurishankar Jain And Co. And ... vs Income-Tax Settlement Commission on 9 March, 1992
Equivalent citations: [1992]195ITR792(ITAT)
ORDER
K. Rangarajan (Member).
1. Prior to the amendments made by the Finance (No. 2) Act, 1991, Sections 245D(1) and 245D(1A) read as under :
"245D. (1) On receipt of an application under Section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application :
Provided that an application shall not be rejected under this subsection unless an opportunity has been given to the applicant of being heard.
(1A) Notwithstanding anything contained in Sub-section (1), an application shall not be proceeded with under that sub-section if the Commissioner objects to the application being proceeded with on the ground that concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable under this Act, has been established or is likely to be established by any income-tax authority, in relation to the case :
Provided that where the Settlement Commission is not satisfied with the correctness of the objection raised by the Commissioner, the Settlement Commission may, after giving the Commissioner an opportunity of being heard, by order, allow the application to be proceeded with under Sub-section (1) and send a copy of its order to the Commissioner."
2. By Section 66(b) of the Finance (No. 2) Act, 1991, Section 245D(1A) came to be omitted. This amendment became effective from September 27, 1991, the date on which the Finance Act received the assent of the President.
3. In the two cases before us it is an admitted position that the same applicant had, at least for some of the years for which the present application has been made, made an application earlier and the same had been rejected by the Commission upholding the objection raised by the Commissioner under Section 245D(1A). The present applications have come to be made on or after September 27, 1991. Vide Notification No. 1/43/ Tech/90/SC, dated October 22, 1991, read with Notification No. 1/45/Tech/ 90/SC, dated December 2, 1991, the issue which was referred to the Special Bench for its consideration and opinion in these two cases was set out as follows :
"In view of the omission of Section 245D(1A), the issue that arises for consideration is the validity of an application for the very same years for which the application had been earlier rejected by upholding the objection raised by Commissioner of Income-tax earlier under Section 245D(1A)."
4. For the sake of convenience, the arguments advanced by counsel for the applicants and counsel for the Department have been dealt with together in this common order.
5. On behalf of the Department, Shri Pradeep S. Jetley, junior standing counsel, contended that the consideration of an application for the very same year for which it had been earlier rejected upholding the objection taken by the Commissioner under Section 245D(1A) would amount to a review of the very same order, which the Settlement Commission was not empowered to do. He then referred to the provisions of Section 245K. This section provides three instances where an applicant is debarred from coming once again for a settlement before the Commission. Shri Jetley maintained that notwithstanding these specific provisions there could be a bar to a fresh application for settlement even in other circumstances.
6. Shri Jetley also referred to the doctrine of res judicata enshrined in Section 11 of the Civil Procedure Code. Stating that all the requirements specified therein were satisfied, he claimed that the earlier orders under Section 245D(1) in the very same case acted as res judicata and, therefore, the present applications would not be maintainable. According to him, the point directly or substantially in issue in the earlier orders of the Commission was the same as the point directly or substantially in issue in the present applications. Reference was made by him in this regard to a decision in Forward Construction Co. v. Prabhat Mandal, AIR 1986 SC 391. He quoted the observation made therein that an adjudication between two parties would be final and conclusive not only as to the actual matter determined but as to every other matter which the parties might and ought to have litigated and have had decided as incidental to or essentially connected with the subject-matter of the litigation. It was his submission that when an application had earlier been rejected it could be taken as having been rejected not only because the Commissioner's objection under Section 245D(1A) was acceptable to the Commission but also because, in the view of the Commission, the nature and circumstances of the case warranted the rejection of the application. In this regard he also put forth a contention that it was not relevant whether the case was argued in regard to matters other than the objection of the Commissioner as it should only be taken that such matters were considered by the Commission when it took its decision.
7. Shri A.C. Chandra, Commissioner of Income-tax (DR), in his arguments stated that if one went by the purpose behind the setting up of the Settlement Commission and the observations in this regard made by the Supreme Court in CIT v. B.N. Bhattachargee [1979] 118 ITR 461, the tax evader had to be kept out from seeking a settlement and the amendment made to the law would not in any way affect the role of the Settlement Commission, which is only to take up such cases for settlement wherein concealment had not been established by the Department. According to him, there was, in fact, no substantial change in law. He submitted that earlier the law specifically provided that the fact of concealment of income by the applicant had to be taken into account but, nevertheless, since even after the change in law the nature and circumstances of the case have to be considered, concealment of income would still be a factor to be considered by the Commission in looking into the nature and circumstances of the case. He also stated that there is no provision in the Act for the passing of more than one order under Section 245D(1) in any case and what was sought by the applicants was, in fact, one more such order. He further pointed out that the earlier orders had not been passed under Section 245D(1A) upholding the objection of the Commissioner but under Section 245D(1). In other words, his claim was that in the earlier orders, all matters relating to the case had been taken into account and not merely the objection raised by the Commissioner.
8. Shri S.P. Varma, Advocate, appearing on behalf of Messrs Birumal Gaurishankar Jain and Co., submitted that what was under consideration was the fresh application under Section 245C and not a petition for review of an earlier order. He saw, therefore, no substance in the claim made on behalf of the Department that a review of the earlier orders was being sought. According to him, the amendment brought about in the Act removed the earlier existing "disability clause" and the very purpose of removing that was to enable those who were hit by it to seek a settlement by the Commission by a fresh application, if otherwise such a fresh application was maintainable. Referring to the language of the earlier Section 245D(1A) which starts with the words "notwithstanding anything contained in Sub-section (1)", he pointed out that in view of this provision, when an objection raised by the Commissioner under Section 245D(1A) was accepted by the Commission, it had no other go but to reject the application and in such circumstances it could be not at all be said that other facts and circumstances of the case were also taken into account in the rejection of the application. He pointed out that the bar against a fresh application contained in Section 245K could only apply to the cases referred to therein and could not, by any stretch of imagination, be taken to apply to any other case. Since there was no specific bar to an applicant's coming once again, before the Settlement Commission as long as the application was maintainable, it had to be considered by the Commission, if the earlier disability from which the applicant suffered could no more be held against him. Shri Varma also claimed that the matter in issue before the Commission in the fresh application was not the same as in the earlier application as, in fact, the matter in issue in the order relating to the earlier application, which was the correctness of the objection raised by the Commissioner under Section 245D(1A), cannot come up for consideration at all while dealing with the present application.
9. According to Shri G.C. Sharma, Senior Advocate, who appeared on behalf of Messrs Kahyaka Metal Mart, Guntur, the entire issue related to the matter of assumption of jurisdiction by the Commission. According to him, Chapter XIX-A is a self-contained code and unless there was a specific provision in this chapter debarring a person from making an application once again in respect of the same matter, the Commission would be duty-bound to examine his application and pass necessary orders under Section 245D(1), taking into account the nature and circumstances of the facts prevailing at the time the fresh application came to be considered. In this regard he also quoted from the headnote in the case of L. Hirday Narain v. ITO [1970] 78 ITR 26, 31 (SC) as under :
"If a statute invests a public officer with authority to do an act in a specified set of circumstances, it is imperative upon him to exercise his authority in a manner appropriate to the case when a party interested and having a right to apply moves in that behalf and circumstances for exercise of authority are shown to exist. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise power which is invested in aid of enforcement of a right--public or private--of a citizen."
10. According to Shri Sharma, the right of the applicant to come once again to the Settlement Commission for a settlement of his case when his earlier application had been rejected prevailed all along and, as far as this right is concerned, only a higher right has been conferred by the amendment. In other words, he could see no nexus between the point under consideration by this Special Bench and the amendment to the Act. The amendment, according to him, has only enlarged the scope of the exercise of jurisdiction of the Commission. As long as there was a "case" within the meaning of that term contained in Section 245A(b), he submitted, an applicant cannot be prevented from seeking a settlement for the very same assessment years for which he had earlier sought a settlement. In this connection, he pointed out that as provided in Section 245C(1) an application is made "to have the case settled."
11. Shri Sharma then referred to the various "amnesty" schemes announced in the 1991 Budget and claimed that from the new policy enunciated by the Government, the Notes on Clauses of the Finance (No. 2) Bill, 1991, the Memorandum Explaining the Provisions of the Finance (No. 2) Bill, 1991, and the Finance Minister's Budget Speech, what clearly emanated was that the Government's intention was to take away the hindrance to the admission of the application which was earlier present in Section 245D(1A) in all the cases. He submitted that the very purpose and meaning of the omission of Section 245D(1A) from the Act would be lost if a very narrow view was taken that an applicant in whose case an earlier application had been rejected upholding the objection under Section 245D(1A), cannot come once again, after the removal of this provision, on the ground that there should be some finality to matters decided by the Settlement Commission.
12. Shri Sharma maintained that it is well settled that the principle of res judicata does not apply to income-tax proceedings. This is, he said, on the ground that, even in so far as the Commission is concerned, there is no lis in the sense that there are no two contending parties. Even otherwise, he said, the earlier finding would not act as res judicata because that finding, which was with reference to Section 245D(1A), was no longer available. Restating the earlier claim that what was involved was only the question of jurisdiction, he said that nothing more was to be looked into in dealing with the application than whether the conditions specified in Section 245C(1) were satisfied. He also referred in this connection to the observations of the Supreme Court in the case of S.S. Gadgil v. Lal and Co. [1964] 53 ITR 231, that a proceeding for assessment is not a suit for adjudication of a civil dispute arising between two parties, but merely the exercise of jurisdiction for purposes of making an assessment of the income of the person for the assessment years involved.
13. We have given careful consideration to the arguments advanced by counsel for the applicants and on behalf of the Department. We find that there is no merit in the general proposition canvassed by Shri Sharma that an applicant can come any number of times for the very same years, despite the rejection of his earlier applications. There has got to be a finality in regard to matters decided by the Commission. The Income-tax Act may be a self contained code ; but it cannot possibly provide for all contingencies. General principles of the law have to be applied in regard to these matters. It is true that it is well-settled that the principle of res judicata does not apply to income-tax proceedings in the sense that a decision taken for one assessment year does not preclude fresh determination of the same question for another assessment year. But, even here, it is relevant to note that the Supreme Court observed in Radhasoami Satsang v. CIT [1992] 193 ITR 321 (at page 329) :
"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,"
14. In any case, a decision on a matter taken in respect of one assessment year cannot be changed for that year, except where the law specifically provides for redetermination of the matter. In the reference before us the assessment years in the earlier and present applications are the same. Even where they are different, there would be circumstances when the earlier decision has to be followed. The Madras High Court observed in CIT v. S. Devaraj [1969] 73 ITR 1 at page 11, while referring to contradictory interpretations regarding the scope and effect of a provision of the Indian Income-tax Act, 1922, given by the Income-tax Appellate Tribunal in the same assessee's case but for different assessment years, that though the doctrine of res judicata is not applicable to the orders of the Tribunal, it is proper and desirable that when the Tribunal takes a particular view on the scope and effect of a statutory provision, it does not contradict itself and come to a diametrically opposite view later on as it would be embarrassing for the Revenue and assessees in general. In any case, as a judicial Tribunal, we cannot overlook the wholesome rule of public policy that there should be a finality to a decided issue and, hence, the same issue cannot be required to be considered again. The observation of the Supreme Court in Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 at page 10 : "We have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings" is relevant in this regard. Thus, whether we proceed on the principle of res judicata or the rule of public policy, we have to consider whether in the present applications the same issue as was decided earlier has come up for consideration.
15. The crux of the matter, therefore, is : what was the issue decided earlier ? The earlier applications had, no doubt, been rejected by the passing of orders under Section 245D(1). The rejection was only the necessary result of a decision on an issue which was whether the Commissioner's objection under Section 245D(1A) was correct: or, in other words, whether the Commission concurred with the view of the Commissioner that concealment was established, or was likely to be established, or there was a perpetration of fraud on the part of the applicant. The finding of the Commission was only in that regard. Rejection of the application which was the necessary concomitant of the finding should not be taken to be the finding itself. A finding on this issue does not come up for consideration in the present applications, as it is not germane to the matter under consideration. We hence hold that the matter directly or substantially in issue in the previous applications is not the same as the matter directly or substantially in issue in the present applications, in so far as the admission or the rejection of the applications is concerned. The previous orders will not thus, act as res judicata in the present applications. Neither does any rule of public policy get violated if the present applications are taken up for consideration on merits and passing of orders.
16. As regards the claim made on behalf of the Department that what was sought to be attempted by the applicants was merely a review of the earlier orders, we must say, we find no substance in it. This is for the reason that, as set out above, the matter in issue in the present applications is not the same as in the earlier applications and, therefore, we are not going over the same issue once again. In view of the mandatory nature of the earlier existing provisions of Section 245D(1A) under which the Commission had no option but to reject the application in case the Commissioner's objection taken under Section 245D(1A) was sustainable, we should say that there is also no merit in the contention that if the earlier applications had been rejected upholding the objection raised by the Commissioner under Section 245D(1A) they should be taken to have been rejected after taking into account the other facts and circumstances of the case also. No merit also lies in the Department's contention that the earlier orders were passed under Section 245D(1) and not under Section 245D(1A), as what is relevant is the substance of the order.
17. For the reasons set out above, we answer the reference made to this Bench as follows :
18. In a case where a settlement application made under Section 245C has been rejected before September 27, 1991, upholding the objection raised by the Commissioner under Section 245D(1A), an application by the same applicant for the very same years must be considered on or after September 27, 1991, as a valid application, if maintainable otherwise.
19. The application in the case of Birumal Gaurishankar Jain and Co. (Application No. 9/28/91/10-I.T.) will now go back to the Principal Bench of the Settlement Commission, New Delhi, and the application in the case of Kanyaka Metal Mart (Application No. 2/G/21/91-I.T.) to the Additional Bench of the Settlement Commission, Madras, for appropriate orders to be passed by them under Section 245D(1).
D.C. Shukla (Chairman).
20. I agree.
21. C.V. KOTHARI and S.C. BAHL (Members) and V.K. SHRIVASTAVA (Vice-Chairman).--We are unable to express any views with regard to the general proposition canvassed by Shri Sharma that an applicant can come any number pf times for the, very same years despite the rejection of his earlier applications. We find that the issue referred to us for our consideration and opinion is whether in view of the omission of Section 245D(1A) an application for the very same years for which it had been earlier rejected by upholding the objections raised by the Commissioner of Income-tax under Section 245D(1A) was valid. Thus we have not been asked to state our views on the general proposition canvassed by Shri Sharma, namely, that an applicant can come any number of times for the very same years despite the rejection of his earlier applications. All that we are required to answer is the effect of the omission of Section 245D(1A) on the validity of a fresh application when the earlier application had been rejected by invoking the provisions of Section 245D(1A).
22. Subject to the above, we agree with the order by Member Shri Rangarajan.