LEGAL MAXIM :

RES JUDICATA
A legal maxim is an established principle or proposition; a tenet of law universally admitted as being just and consonant with reasons. The subject of legal maxims has the depth of an ocean. Maxims in law are said to be somewhat like axioms in geometry. They are the principles and authorities, and part of the general customs or common law of the land. These are sort of legal capsules, useful in dispensing justice. Both historically and practically, they have always possessed interest and value. However, all the maxims did not have a respectable origin. Lord Denning in his book The Family Story has described his fascination for the use of maxims. He was very fond of a particular maxim: FIAT JUASTITIA RUAT COELUM (Justice should be done though the heaven falls). But when he investigated its origin, he discarded the RUAT COELUM part of the maxim. According to Lord Denning, if justice is done, the heaven should not fall, but should rejoice. Maxims are useful in finding out the MENS LEGIS (Intention of the Legislature), in construing the meaning of a statute. However, the principles enunciated in the maxims should be applied with due care, as there are exceptions to the rule and qualification for the applicability of dictum. One of the most important maxims is Res Judicata, which is discussed below. What is the principle of Res Judicata ? Res Judicata is a Latin term and literally means a matter already decided. As per The Law Lexicon Res adjudicata means A matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment; a thing definitely settled by judicial decision, the thing adjudged. The principle is that the cause of action cannot survive, if it is covered by an earlier judgment. The principle of Res Judicata is not the creature of any statute or the handiwork of any code of law. It is the gift of public policy. Sec.11 of Civil Procedure Code, 1908 deals with the principle of Res Judicata. According to this section, no court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim litigating under the same title, in a court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally

decided by such court. Res judicata is sometimes treated as part of the doctrine of estoppel but the two are essentially different. Res Judicata prohibits an inquiry in limine, whereas an estoppel is only a piece of evidence. The doctrine of Res Judicata rests on the principle that one should not be vexed twice for the same cause and that there should be finality of litigation. If a decision of a court or a Tribunal is without jurisdiction, such a decision or finding cannot operate as res judicata in any subsequent proceedings. The plea of res judicata presupposes that there is in existence a decree or judgment which is legal but when the judgment is non est in law, no plea of res judicate can be founded on such a judgment, as observed in Sayyed Ali v. A.P. Wakf Board (1998) 2 SCC 642. Res Judicata with reference to upholding of the validity of a statute Once the validity of a statute or a statutory provision is upheld by the Supreme Court, it must be presumed that all grounds which could validly be raised were raised and considered by the Court. The validity of such a statute or a statutory provision cannot be challenged subsequently on the plea that the grounds which are being raised in such subsequent proceedings were neither raised nor considered by the Supreme Court in earlier proceedings. _ Kesho Ram & Co. v. Union of India (1989) 3 SCC 151 (SC). Applicability of Res Judicata in case of writ When a writ petition after contest is disposed of on merits by a speaking order, the question decided in that petition would operate as Res Judicata, but not a dismissal in limine or dismissal on the ground of laches or availability of alternative remedy [Pujari Bai vs. Madan Gopal, (1989) 3 SCC 433, 440 (SC); Workmen vs. Board of Trustees of the Cochin Port Trust, AIR 1978 SC 1283, 1288]. In case of Life Insurance Corporation of India v. Gangadhar Vishwanath Ranade (1989) 180 ITR 1, 10-12 (SC), it has been held on the facts that the writ petition was not barred by the principle of res judicata or constructive res judicata. In Grih Kalyan Kendra Workers Union vs. Union of India, (1991) 1 SCC 619, 630-31 (SC), it was held that a question raised and decided by the Supreme Court in earlier writ proceedings cannot again be raised through a fresh writ petition under Article 32. The decision given by the High Court in a writ petition would accordingly act as a res judicata in regard to the same facts and the issues even in a criminal proceeding between the parties as was held in Gulab Chand

Sharma vs. S.P. Sharma, CIT (1974) 95 ITR 117 (Del.). Thus, a decision on merits rendered by the High Court while disposing of the writ petition would bring about finality to the issue between the parties till such time that judgment of the High Court is not stayed, modified or reversed by the Supreme Court in appeal or other proceedings before it. Principle of Res Judicata not applicable to income tax proceedings The strict doctrine of Res Judicata is not applicable to tax matters. This is due to the reason that since each assessment year is independent of others, all issues relevant to a particular assessment year could be considered and decided, irrespective of the fact that the same issues arose in the earlier years. However, questions of fundamental nature or questions relating to assessment which do not vary every year but depend on the nature of the property or questions on which the rights of parties to be taxed are based, principle of Res Judicata to that extent would apply to tax matters. Further, principle of finality to a decision and rule of consistency do apply to income tax proceedings. The principle of res judicata or estoppel by record has no application to decisions of income-tax authorities, so as to preclude the determination of a question in a previous assessment order from being reopened in proceedings relating to a subsequent assessment year. _ New Jehangir Vakil Mills Co. Ltd. v. CIT (1963) 49 ITR 137 (SC); ITO v. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC). This principle of res judicata is not applicable because the income-tax authorities, including the appellate tribunal, are not courts; and the purpose and the subject-matter of the proceedings in a subsequent year are not the same as those in a previous year. _ CIT v. Kotrika Ramaswamy Chetty (1967) 64 ITR 388, 390 (AP); Chiranji Lal Ramji Dass v. ITO (1978) 115 ITR 842 (Del). Thus, an assessment for a particular year is final and conclusive between the parties only in relation to that year and decisions given in an assessment for an earlier year are not binding either on the assessee or the department in a subsequent year. Some of the important judicial pronouncements regarding res judicata in the proceedings under the Income Tax Act are as follows : Though the principle of res judicata will not apply to income-tax proceedings when a question of law or fact is decided in the assessee's own case, for an earlier assessment year and the identical question comes up for consideration for a later year, the Tribunal will be justified in placing reliance on the earlier decision to base its conclusion, in the absence of any new material or change in circumstances or a fresh look being necessitated on existing facts on a closer and more intelligent analysis. _ CIT v. Velimalai

Rubber Co. Ltd. (1990) 181 ITR 299 (Ker), CIT v. L.G. Ramamurthy (1977) 110 ITR 453 (Mad), M.M. Ipoh & Ors. v. CIT (1968) 67 ITR 106 (SC). In Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC), the Honble Apex Court observed as under: 16. 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. Where the question relating to assessment does not vary with the income every year but depends on the nature of the property or any other question on which the rights of the parties to be taxed are based, e.g., whether a certain property is trust property or not, it has nothing to do with the fluctuations in the income, such questions if decided by a court on a reference made to it would be res judicata in that the same question cannot be subsequently agitated. _ T.M.M. Sankaralinga Nadar and Bros. & Ors. v. CIT 4 ITC 226. It cannot be said that merely because in rectification proceedings some written down value and the depreciation amount have been determined, they are a final determination binding for all times to come nor does the determination operate as estoppel or res judicata for the following years. The assessing officer can recompute written down value every year. _ Maharana Mills (P) Ltd. v. ITO (1959) 36 ITR 350 (SC). It was held in Nawal Kishore Kharaiti Lal v. CIT (1936) 4 ITR 287 (Lah) that the history of the assessment of the previous years is not relevant for the purpose of determining whether the sales have been understated during the relevant assessment years. Though the assessing officer is not bound by the principle of res judicata, yet he could reopen the assessment only if fresh facts came to light, which, on investigation, would entitle the officer to come to a conclusion different from that of his predecessor. _ Raja Textiles Ltd. v. CIT (1987) 34 Taxman 130 (All). In Orissa State Civil Supplies Corporation Ltd. v. Dy. CIT (2003) 259 ITR (AT) 20 (Ctk-Trib), it was held that it is fairly well settled in law that there is no res judicata in the income-tax proceedings, though principle of consistency should normally be maintained, unless there are strong reasons to depart from the stand taken in earlier assessment proceedings and unless parties have allowed that position to be sustained by not challenging earlier orders.

Doctrine of res judicata is not applicable to income-tax proceedings. Further, where returns for earlier year were accepted under section 143(1) it could not be said that a conscious decision was taken after considering the material on record thus, rule of consistency or res judicata would not be applied. _ Sudisha Farm Nursery v. ITO (2004) 88 ITD 638 (Del-Trib) : (2003) 81 TTJ (Del-Trib) 714. Though the principle of res judicata does not apply in tax proceedings, the rule of precedents applies and a Supreme Court decision will be binding in the absence of any difference in facts or subsequent legislation. _ CIT v. Shri Agastyar Trust (1984) 149 ITR 609 (Mad). A decision of a Bench of Supreme Court is binding on another Bench of the Supreme Court. _ Kalyan Municipal Council v. Usha Paper Products (P) Ltd. (1990) 184 ITR 80 (SC). Broken Hill Proprietory Co. V. Municipal Council, 1926 AC 94 : The Judicial Committee of the Privy Council observed - The decision of the High Court related to a valuation and a liability to a tax in a previous year, and no doubt as regards that year the decision could not be disputed. The present case relates to a new situation, namely, the valuation for a different year and the liability for the year. It is not 'Ieadem questio', and therefore, the principle of res judicata cannot apply. Udayan Chinubhai V. Commissioner of Income Tax, Gujarat, 1967 (1) SCR 913 : When the Income Tax Officer, Bombay recorded a finding that the original Hindu Undivided Family of Sir Chinubhai had been divided and ceased to exist, and the property had been partitioned, it was not open to the Income Tax Officer, Ahamedabad to revise or reconsider the previous order passed by the Income Tax Officer, Bombay and to revise the original family as if there was no partition and the status of joint family continued to exist. The Court observed- It is true that an assessment year under the Income Tax Act is a self contained assessment period and a decision in the assessment year does not ordinarily operate as res judicata in respect of the matter decided in any subsequent year, for the assessing officer is not a Court and he is not precluded from arriving at a conclusion inconsistent with his conclusion in another year. It is open to the Income Tax Officer, therefore, to depart from his decision in subsequent years, since the statement is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made. A decision reached in one year would be a cogent factor in the determination of a similar question in a following year, but ordinarily there is no bar against the investigation by the Income Tax Officer of the same facts on which a decision in respect of an earlier year was arrived at. In the case of Municipal Corporation of City of Thane vs. Vidyut Metallics Ltd & Anr. (2007) 8 SCC 688, (2007) Indlaw SC 900, the facts were that in

earlier litigation, the court had considered the evidence of Quality Control Manager who was described as expert on the point and accepting his evidence, the court held that the goods imported by the company were ferrous in nature and not non ferrous and the company was right in paying octroi under item 71. It was thus a fundamental factor and the nature of goods imported by the company was directly and substantially in issue, on the basis of which the decision was taken. The Honble Supreme Court observed that in taxation matters, the strict rule of res judicata, as envisaged by section 11, CPC 1908, has no application. As a general rule, each years assessment is final only for that year and does not govern later years, because it determines the tax for a particular period. The Honble Supreme Court further observed that in facts of present case, it was not possible to hold that the earlier decision would not continue to operate in subsequent years unless it is shown that there are changed circumstances or the goods imported by the company in subsequent years were different than those which were imported earlier and in respect of which decision had been arrived at by the court. Therefore, it was held that the Revisional Court as well as the High Court were right in giving benefit of the decision in the earlier litigation to the respondent company. The Honble Supreme Court upheld the observation of Supreme Court in case of Radhasoami Satsang (Supra). That it is true that neither the principle of res judicata nor the rule of estoppel is applicable to assessment proceedings. But the fact that the assessee included the income of the premises in his return for several years, and that after objecting to the inclusion of that income in his total income in earlier assessment year, in the absence of any satisfactory explanation, was undoubtedly a circumstance which the taxing authorities were entitled to take into consideration. _ CIT v. Durga Prasad More (1971) 82 ITR 540 (SC). The courts have cautioned that the doctrine of Res Judicata should not be stretched too far under direct tax laws. A Tribunal should extremely be slow to depart from its earlier view. In CIT vs. L. G. Ramamurthy (1977) 110 ITR 453 (Mad.), the court laid down the principle that But what is relevant is not the personality of officers presiding over the Tribunal but the Tribunal as an institution. If it is conceded that simply because of the change in the personnel who manned the Tribunal, it is open to them to a conclusion totally contradictory to the conclusion which had been reached by earlier officers manning the tribunal on same set of facts, it will not only shake the confidence of the public in judicial procedure as such, but it will totally destroy such confidence.that will be destructive of the institutional integrity itself. The Supreme Court in Amalgamated Coalfields vs. Janapada Sabha AIR 1964 SC 1013 have evinced a highly balanced approach :-

In considering this question, it may be necessary to distinguish between decision on questions of law which directly and substantially arise in any dispute about the liability for a particular year, and questions of law which arise incidentally or in a collateral manner the effect of legal decisions establishing the law would be a different matter. If, for instance, the validity of a taxing statute is impeached by an assessee who is called upon to pay a tax for a particular year and the matter is taken to the High Court or brought before this Court and it is held that the taxing statute is valid, it may not be easy to hold that the decision on this basic and material issue would not operate as res judicata against the assessee for a subsequent year. In South India Trust Association vs. Telugu Church Council (1996) 2 SCC 520, the Court observed that the rule of res judicata is founded on considerations of public policy. It is in the interest of public at large that finality should attach to the binding decisions pronounced by Courts of competent jurisdiction and it is also in the public interest that individuals should not be vexed twice over with the same kind of litigation. In Director of Income Tax (Exemption) and another v. Apparel Exports Promotion Council (No.1), [2000] 244 ITR 734 (Delhi), it has been held that when there was no material change in the activities of the assessee as compared to the earlier years, the question of exemption under Section 11 of the Act which had been examined in earlier years cannot be raised again though the doctrine of res judicata would not strictly apply to income tax proceedings, yet in order to maintain consistency, the revenue could not be permitted to take up stale issues merely because the scope of appeal is wider than a reference. Dismissal of Special Leave Petition by Supreme Court : Nonspeaking Order The Supreme Court in Indian Oil Corporation Ltd. vs. State of Bihar & Ors. (1987) 167 ITR 897 (SC) has clarified that the dismissal of a special leave petition by the Supreme Court by a non-speaking order would not operate as res judicata, by observing that When the order passed by this Court was not a speaking one, it is not correct to assume that this Court had necessarily decided implicitly all the questions in relation to the merits of the award, which was under challenge before this Court in the special leave petition. A writ proceeding is a wholly different and distinct proceeding. Questions which can be said to have been decided by this Court expressly, implicitly or even constructively while dismissing the special leave petition cannot, of course, be reopened in a subsequent writ proceeding before the High Court. But neither on the principle of res judicata nor on any principle of public policy analogous thereto, would the order of this Court dismissing the special leave petition operate to bar the trial of identical issues in a separate proceeding, namely, the writ proceeding before the High Court merely on the basis of an

uncertain assumption that the issues must have been decided by this Court at least by implication. It is not correct or safe to extend the principles of res judicata or constructive res judicata to such an extent so as to found it on mere guesswork. In all cases of admission of the SLP, the further decision on merits follows, whereas in every case of dismissal, there is no question of further decision or proceedings from the Supreme Court and effectively the order of the lower Court / Authority which is challenged before the Apex Court is affirmed and becomes final. In such a situation the question whether the person/s aggrieved by the order of the lower Court could agitate his grievance by way of an application for review or rectification of mistakes apparent from record so as to persuade the lower authority to modify its final order in the light of the application for rectification or review, to the extent and in the manner found appropriate is still open for consideration. The respondent often pleads that the order of the lower Court having been affirmed by the Supreme Court it is no more open to the lower authority, after the dismissal of the SLP to entertain any application and/or decide the same for the purpose of review, revision or modification of the order which has been upheld by the Supreme Court. The controversy is not free from doubt. The effect of dismissal of SLP by the Supreme Court is that the order of the Supreme Court does not constitute res judicata to deny the petitioner the right to agitate matters on merits before the competent Court / Tribunal. A mere dismissal of SLP does not mean that High Court decision is approved on merits so as to be a judicial precedent. In Smt. Tej Kumari vs. CIT (2001) 247 ITR 210 (Patna), Full Bench of the Patna High Court held that when a SLP is summarily rejected or dismissed under Article 136 of the Constitution, such dismissal does not lay down any law. The decision of the High Court against which the SLP is dismissed in limine would not operate as res judicata. However, when Supreme Court dismisses an SLP with reason, it might be taken as the affirmation of the High Court views on merits of the case and therefore, there is no reason to dilute the binding nature of precedents in such cases. Dismissal of Appeal under section 260A In Medicare Investments Ltd. vs. Jt. CIT (2008) 114 ITD 334 (Delhi) (SB), it has been held that dismissal of appeal on ground that no substantial question of law arises amounts affirmation of decision of Tribunal on merits binding on Tribunal. In Siemens India Ltd. vs. ITO (1983) 143 ITR 120 (Bom.), the Bombay High Court held that merely because an appeal has been filed or a special leave application is pending against the HC decision, it does not denude the decision of its binding effect and until set aside, that decision is binding on

all upon whom it operates as a binding precedent, unless the operation of that judgment is stayed by the Supreme Court. The Bombay High Court also said that not to follow the decision of the jurisdictional High Court would be almost committing contempt of the Court, as observed in K. Subramanian & Anr. vs. Siemens India Ltd. & Anr. (1985) 156 ITR 11 (Bom.) However, it appears that under direct tax laws, it may be permissible for the Assessing Officer, not to follow even the decision of the jurisdictional High Court, if the Department is contesting the issue in the Supreme Court; but in such a case, the recovery of tax must be kept in abeyance. Non-filing of an Appeal in earlier years It is well-settled that each assessment year is separate and independent and even if the Revenue does not challenge the decision of the Tribunal in an earlier year, it does not preclude it from doing so in a later year. _ CIT vs. M. Chawla (1989) 177 ITR 299, 301, (Del.) In CIT vs. J. K. Charitable Trust (2008) 220 CTR 105 (SC), the Honble Court held that revenue having not filed any appeal in other assessment years, it is precluded from filing appeals in the relevant assessment years, involving identical situations. Ground not pressed There is no estoppel against law. No concession of law is permissible. An appellant having not pressed an issue before lower authorities, can still raise and agitate the same before the Tribunal. CIT vs. VMRP Firm (1965) 56 ITR 67 (74) (SC); Hindustan Zinc Ltd vs. Dy. CIT (2002) 77 TTJ 315 (Jodhpur). J. K. Oil Mills Co. Ltd. vs. CIT (1976) 105 ITR 53 (All) (55) If assessee, acting on wrong legal advice, does not press a claim in controversy, it does not amount to withdrawal of ground taken before AAC and, therefore, should be allowed to raise the same at later stage before Tribunal. Penalty Proceedings Although penalty has been regarded as an additional tax in certain sense and for certain purposes, still penalty proceedings are not essentially a continuation of proceedings relating to assessment. Levy of penalty is not a necessary concomitant of assessment proceedings. Both the proceedings are different in nature and findings in assessment proceedings are not conclusive in penalty proceedings. Though such findings may be relevant and admissible in evidence they do not operate as res judicata so as to preclude production of other evidence in penalty proceedings to show that the assessee had concealed his income or to rebut the charge. The bare fact that it was held in assessment proceedings that the assessee concealed his

income cannot be made the basis of the conclusion that he had been guilty of deliberately concealing particulars of his income. Before the assessee is held liable for concealing the particulars of income or for furnishing inaccurate particulars of such income, it has to be independently found in penalty proceedings that the disputed amount represents his income. _ Jain Brothers v. Union of India (1970) 77 ITR 107 (SC), Anantharam Veerasinghaiah & Co. v. CIT (1980) 123 ITR 457 (SC), CIT v. Punjabhai Shah (1968) 67 ITR 337 (MP), Ninth ITO v. V.R. Bendre & Co. (1990) 34 ITD 480 (Bom-Trib) and Thakur V. Hari Prasad v. CIT (1987) 167 ITR 603 (AP). Conclusion The following principles emerge from the various judicial pronouncements :1. As a general rule principle of res judicata is not applicable to income-tax proceedings. The assessment of particular year is final only for that year. Even though the principle of res judicata does not apply in income-tax proceedings, still the rule of consistency does apply, i.e., if no fresh facts come to light on investigation, the Assessing Officer is not entitled to reopen the same question on mere suspicion or change of opinion.

2.