SHAH H A AND CO Vs. COMMISSIONER OF INCOME TAX EXCESS PROFITS TAX

JUDGEMENT

(1.) THE assessee before us is the firm of H. A. Shah and Co. and the assessment years are 1942 -43, 1943 -44, and 1944 -45. It appears that one Hiralal Shah had three sons, Shantilal, Kantilal, and Vasantlal, and the father and the sons constituted a joint and undivided Hindu family. This family was disrupted on 16th April, 1938. At that date Shantilal and Kantilal were majors, but Vasantlal was a minor and he attained majority on 13th October, 1943. On this disruption applications were made by Hiralal under section 25A. of the Income -tax Act, but the Income -tax authorities did not accept the disruption of the joint family and the application of Hiralal was refused. Two appeals in this a connection went before the Income -tax Tribunal. One was the appeal with regard to the refusal of the Income -tax Authorities to recognize the fact of the disruption under section 25A and the other was the assessment of the firm Shantilal Shah and Co. which had come into existence on the disruption of the joint family, and in these appeals the Tribunal took the view that the view taken by the Income -tax Authorities that there was no disruption of the joint family in 1938 was erroneous and that there was no joint family in existence after 1938, and it also took the view that Hiralal was a partner in the partnership not in his own right but as a trustee of Vasantlal. In deciding this the Tribunal took into consideration a partnership deed which was executed on 13th December, 1939, between Hiralal and his two sons Shantilal and Kantilal, and the question that arose for its consideration was whether Hiralal was a partner under this deed of partnership in his own right or he was really there on behalf of Vasantlal who was at that time a minor. This decision of the Tribunal was arrived at for the assessment year 1941 -42. With regard to the assessment for 1942 -43, 1943 -44, and 1944 -45 appeals were preferred to the Income -tax Tribunal both by Hiralal, the Individual, and the firm of H. A. Shah and Co. and in these appeals the Tribunal held that Hiralal was a partner in his own right. This decision was given both in the assessment of the individual Hiralal and also in the assessment of the firm, and the question that we have to consider is whether the 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.

(2.) 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 records. 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 higher 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 upon under the Indian Income -tax Act and dealing with assessments from year to year of assessees who come up before it ? The principle has been well stated by Hanworth, Master of the Rolls, in Commissioners of Inland Revenue v. Sneath : 'The assessment is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made. No doubt, a decision reached in one year would be a cogent factor in the determination of a similar point in a following year, but I cannot think that it is to be treated as an estoppel binding upon the same party for all years.' Therefore, the very basis of an assessment is that it is self -contained and the decision given by the Income -tax Authorities is a decision relating to that particular assessment and binding upon the parties to the extent of that assessment. When these authorities consider the case of the assessee with regard to a different assessment year they are dealing with an entirely new case and the decision given in the earlier assessment has no binding force upon either the assessee or the Income -tax Authorities in the next assessment. This is a principle which is not merely helpful to the Income -tax Authorities but it is equally helpful to the assessee because if the Income -tax Authorities are not bound by any decision given in an assessment in favour of the assessee, equally so an assessee is not bound by any decision given in favour of the Department in any assessment.

(3.) BUT the interesting point that has been 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 Commissioners and Commissioners of Income -tax, and it is Chapter II -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 comprehensive assessment machinery, the Income -tax Tribunal plays an important part in the machinery and it will be entirely erroneous to contend that the Income -tax Tribunal stands outside that machinery and has nothing to do with that machinery. The Advocate -General has drawn our attention to section 37 where the Income -tax Officer, the Appellate Assistant Commissioner, Commissioner and The Appellate Tribunal are all grouped together for the purpose of vesting in them certain powers under the Civil Procedure Code. Again, under section 28 power is given to all these authorities to impose a penalty for certain income -tax offences.