1990 Supreme(Raj) 727

RAJASTHAN HIGH COURT
K.C.Agrawal, J.
Sardar Kehar Singh - Appellant
Versus
Commissioner of Income - Respondent
S.B. Civil Miscellaneous Writ Petitions Nos 2 and 4 of 1990 and 19 and 308 of 1980.
Decided On : 8-11-1990

The principle of res judicata applies to taxation proceedings, and a finding reached in the assessment proceedings for an earlier year, after due inquiry, would not be reopened in a subsequent year, if no fresh facts are found in the subsequent assessment year.

Headnote:

INCOME TAX - Reassessment - Section 147 - Reopening of assessment - Validity of notices issued under section 147 - Whether the notices were issued within the limitation period - Whether the valuer's report could be the basis for reopening of the assessment - Whether the principle of res judicata applies to taxation proceedings.

Fact of the Case:

The petitioner, a Hindu undivided family, was assessed to income-tax. During the assessment years 1968-69 to 1976-77, the petitioner disclosed investments in the construction of a house at Chandigarh. The Income-tax Officer completed assessments for the years 1968-69 to 1973-74 on May 13, 1974. Subsequently, the Income-tax Officer reopened the assessments for the years 1975-76 and 1976-77 on the basis of a valuation report which was received on March 14, 1978. The assessee filed an appeal against the reassessment orders, which was allowed by the Commissioner of Income-tax. The Department went up in second appeal before the Income-tax Appellate Tribunal, which also rejected the appeal. The High Court also dismissed the Department's application for special leave to appeal. Subsequently, proceedings for reassessment in respect of the assessment years 1970-71, 1971-72, 1972-73 and 1973-74 were taken.

Finding of the Court:

The court held that the notices issued under section 147 were invalid and quashed the same. The court held that the valuer's report could not be the basis for reopening of the assessment, as it was nothing more than a mere opinion. The court also held that the principle of res judicata applies to taxation proceedings, and a finding reached in the assessment proceedings for an earlier year, after due inquiry, would not be reopened in a subsequent year, if no fresh facts are found in the subsequent assessment year.

Issues: 1. Whether the notices issued under section 147 were valid? 2. Whether the valuer's report could be the basis for reopening of the assessment? 3. Whether the principle of res judicata applies to taxation proceedings?

Ratio Decidendi: 1. The court held that the notices issued under section 147 were invalid because they were issued after the limitation period had expired. Section 149 of the Income-tax Act provides four years of limitation from the end of the relevant assessment year within which a notice under section 148 must be issued. In the cases falling under section 147(b) where there is no failure to file a return and no concealment, the limitation is four years from the end of the relevant assessment year. In this way, the period of four years in respect of each assessment year had already expired. 2. The court held that the valuer's report could not be the basis for reopening of the assessment, as it was nothing more than a mere opinion. Such a report by itself does not lead to a reasonable belief of concealment of income justifying action under clause (a) of section 147, nor does it constitute "information" justifying action under clause (b) of the said section. 3. The court held that the principle of res judicata applies to taxation proceedings, and a finding reached in the assessment proceedings for an earlier year, after due inquiry, would not be reopened in a subsequent year, if no fresh facts are found in the subsequent assessment year. This is on the principle that there should be a finality and certainty in all litigations including those arising under the Income-tax Act.

Final Decision: The court allowed the writ petitions and quashed the notices issued under section 147 of the Income-tax Act.