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Judgment
B.V. Nagarathna, J.—These appeals arise out of the common order of the Income Tax Appellate Tribunal passed in ITA. Nos. 957 to 960/Bang/2003 dated 2.9.2005 pertaining to the Assessment Years 1999-2000, 2000-2001, 2001-2002 and 2002-2006. The said appeals have been filed by the assessee by raising the following substantial questions of law:
i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in rejecting the appellant''s claim for exemption of the dividend on the principles of mutuality, on the ground that the appellant is a business concern?
ii) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in law in ignoring the fact that when the appellant subscribed to chit, it does so in its character as a subscriber?
The facts leading to the filing of these appeals are that, the appellant which is a private limited company carrying on business of conducting chits, for the relevant assessment years, filed Its return of income and sought exemption of payment of tax on the Foreman''s dividend on the basis of doctrine of mutuality on the ground that the appellant is a business concern. The Assessing Officer did not allow the said exemption and concluded the assessment u/s 143(3) of the Income Tax Act. Being aggrieved by the said order, the appellant assessee preferred an appeal before the Commissioner of Income Tax (Appeals) who upheld the disallowance of Foreman''s dividend as liable to tax. As against the said order the appellant preferred an appeal before the Income Tax Appellate Tribunal.
Before the Tribunal, counsel on both sides submitted that, the appeals could be disposed of on the basis of the earlier order of the tribunal passed in ITA. Nos. 748 to 751 of 1998 dated 8.4.2003 for the assessment years 1992-93 to 1995-96. Consequently, by recording the said submission, the tribunal disposed of the appeals by holding that the assessee''s claim for exemption on the principle of mutuality did not hold any water and dismissed the appeals of the appellant herein. Being aggrieved by the said order of dismissal, these appeals have been preferred by raising the aforesaid substantial questions of law.
We have heard the learned Senior Counsel, Sri. Sarangan, for Sri. Ramamurthy, Advocate, for the appellant and Sri. M.V. Seshachala, learned Counsel for the respondent-revenue.
It is submitted on behalf of the appellant that, the tribunal was not right in dismissing the appeal of the appellant by not applying the doctrine of mutuality with regard to the income of the appellant by taking into consideration the activity of the appellant, that the very same contention was raised in respect of the earlier assessment years also, but there has been no finality in the matter as far as this appellant is concerned on the question of applicability of the doctrine of mutuality and that the income of the appellant is exempted from the payment of income tax if the said doctrine is applied to the appellant.
Per centra, learned Counsel for the respondent submits that, with regard to the earlier assessment years i.e., 1992-93 to 1995-96, the tribunal in ITA. Nos. 748 to 751 of 1998, by its order dated 8.4.2003, negatived the contention of the appellant with regard to the applicability of the principle of mutuality to the business of the appellant and that for the Assessment Years 1996-97 to 1998-99, also the appeals of the appellant were dismissed by order dated 28.1.2004 in I.T.A. Nos. 215 to 218 of 2002. Challenging the said orders, ITA. Nos. 233 to 236 of 2004 were filed for the assessment years 1996-97 to 1998-99 and ITA. Nos. 301 to 304 of 2003 were filed for the assessment years 1992-93 to 1995-96 respectively before this Court, but on 20.10.2008 during the pendency of the present appeals under consideration, the aforementioned appeals were withdrawn by the appellant and that the order of the Division Bench permitting withdrawal of the appeals has in effect, resulted in the order of the tribunal attaining finality for those assessment years and since the tribunal out of which these appeals arise disposed of the matters by merely relying upon the earlier orders of the tribunal, against which appeals were preferred before this Court were withdrawn without reserving any liberty, it is not permissible for this Court to once again consider the issue of the applicability of the doctrine of mutuality for the assessment years in question viz., 1999-2000 to 2002-03 and hence, according to him these appeals would also have to be dismissed. He has also stated that when the aforementioned appeals were withdrawn by the appellant before this Court, the order of the tribunal merged with the order of the High Court and when reliance was placed on the said order of the tribunal in respect of the assessment years in question before the tribunal for getting the said matters disposed off, there is nothing further which needs to be considered. He has further submitted that the impugned order of the tribunal is a consent order and in view of the withdrawal of the appeal before this Court, these appeals also have become devoid of merit and the substantial questions of law would not arise in these appeals and hence, they have to be dismissed.
In reply to the said submission, learned Senior Counsel has stated that, in income tax matters the concept of res judicata or estoppel do not arise and that for every successive assessment year, the very same contentions can be raised and even if the assessee has not been able to get the relief in a particular assessment year in a subsequent assessment year, the said relief can be granted. The withdrawal of the appeals by the appellant has no effect whatsoever on the present appeals that the tribunal simply followed its earlier decision in ITA. Nos. 748 to 751 of 1998 and disposed of the appeals and that the withdrawal of one set of appeals would not come in the way of pursuing the remedy in these appeals which are for the subsequent assessment years and relying upon the decision of the Apex Court reported in AIR 1961 SC 1461 and other judgments he has submitted that the question of the applicability of the doctrine of mutuality can be gone into in the present appeals and the relief can be granted to the appellant.
Having heard learned Counsel on both sides and on perusal of the material on record, the point that arises for our consideration is, as to whether, the withdrawal of the appeals filed against the order dated 8.4.2003 in ITA. Nos. 748 to 751/Bang/1998 and other cases passed by the tribunal for the particular assessment years would entitle the appellant to raise the issue of doctrine of mutuality for the assessment years under consideration.
In order to answer the said question, it is necessary to extract the relevant portion of the impugned order of the tribunal at the outset:
At the time of hearing, both the counsels agreed that identical issue arose in assessee''s own case in ITA No. 748 to 751/Bang/1998 dated 8.4.2003 and 28.1.2004. In view of the decision of this Tribunal in assessee''s own case, the claim of assessee that income is exempt on principle of mutuality do not hold any water. Thus, the AO was justified in treating Foreman''s dividend as taxable income in the hands of assessee. The appeals of assessee are to be dismissed.
From a reading of the aforesaid order, it is apparent that the tribunal disposed of the appeals against the assessee by placing reliance on its earlier order in ITA. Nos. 748 to 751/Bang/1998 disposed of on 8.4.2003. As regards the said order pertaining to the assessment years 1992-93 to 1995-96, ITA. Nos. 301 to 304/2003 were filed before this Court. Similarly, ITA. Nos. 233 to 236/04 were filed before this Court against the order dated 28.1.2004 passed in ITA. Nos. 215 to 217/2002 for the assessment years 1996-97 to 1997-98. Also the appellant herein suppressed the fact that the aforementioned appeals were pending before this Court against the order of the Tribunal in ITA Nos. 748 to 751/Bang/98, when the Tribunal passed the impugned order in the instant case on 2/9/2005. The appeals filed before this Court in the aforesaid cases were withdrawn on 20.10.2008 and the said order permitting withdrawal reads as follows.
JUDGMENT
Counsel for the appellant submits that the appeals may be dismissed as withdrawn. Accordingly, the appeals are dismissed.
On a reading of the said judgment, it is clear that during the pendency of the appeals under consideration pertaining to the assessment years 1999-2000 to 2002-03 in respect of the assessment years 1992-93 to 1998-99 i.e., the earlier assessment yeans viz., the appeals were withdrawn. It is a blanket withdrawal without reserving any liberty. The question is whether the very same issue could be contested in any other matter pending before this Court. It is to be borne in mind that based on the order of the tribunal in ITA. Nos. 748-751 of 1998 against which ITA. Nos. 301 to 304/2003 were pending before this Court and which were withdrawn, the tribunal in the orders impugned disposed of the appeal based on the submission made by counsel on both sides. In view of the aforesaid facts, in the present case, we are of the view that the appellant cannot agitate these appeals on merits. In fact when ITA. Nos. 301 to 304/2002 and ITA. Nos. 233 to 236/2004 were withdrawn the present appeals under consideration were also pending. While withdrawing the aforementioned appeals, no liberty was sought to pursue the present appeals on merits. No doubt in the field of Income Tax Law, for every assessment year, similar contentions could be raised, but in the instant case what we are considering is the effect of a consent order passed by the tribunal based its earlier decision, against which, appeals which were filed before this Court were withdrawn without reserving liberty to agitate the very same question in the present appeals which are filed challenging the consent orders. In our view, the effect of withdrawal of appeals on 20.10.208 without reserving liberty to agitate the very same question, in the instant appeals would amount to a constructive binding precedent, as far as the assessment years under consideration in these appeals are concerned as the tribunal for the said period only followed its earlier order which were in ITA. Nos. 748 to 751/98 which was an order passed on merits, by declining to apply the principle of mutuality vis-vis the appellant-assessee. When the appeal filed against the order passed in ITA. Nos. 748 to 751/98 and connected matters were withdrawn, it would mean that the appeals were withdrawn without reserving any liberty. It would mean that the appellant has given up its rights to contest the matter on merits in the present appeals also which are pertaining to the assessment years 1999-2000 to 2002-2003. We hasten to add that in respect of assessment years subsequent to 2002-03 i.e., from 2003-04 onwards, the appellant may be entitled to raise the very same contention if so advised. But as far as the assessment years 1999-2000 to 2002-03 are concerned, in the present appeals since the order of the tribunal impugned in these appeals was passed based on the submission of the counsel with reference to the order passed by the tribunal in ITA. No. 748-751/98 disposed of on 8.4.2003 and other appeals disposed of on 28.1.2004 against which, the appeals filed before this Court were also withdrawn, keeping in view the doctrine of merger and judicial discipline, it is not proper for us to interfere. If as submitted by the learned Senior Counsel for the appellant, we have to dispose of these appeals on merits, it would amount to indirectly reconsidering the decision of the tribunal in ITA. Nos. 748-751/1998 which were disposed of on merits and against which the appeals filed before this Court were withdrawn before another Division Bench of this Court.
In this context, it is relevant to refer to the well settled theory of Precedents as cited by a learned author. Every judicial decision contains three basis postulates:
i) Finding of material facts direct and inferential. Inferential finding of facts, which inference the judge draws from direct or perceptible fact;
ii) Statement of the principles of law applicable to the legal problems disclosed by the facts;
iii) Judgments made in combined effect of the above.
In this context, it is also relevant to bear in mind the judicial discipline and propriety demands that this Division Bench cannot allow itself to adjudicate these appeals on merits when another Division Bench of this Court permitted has withdrawal of appeals filed against another set of impugned orders of the tribunal, based on which the tribunal passed the orders which are impugned in these appeals.
The effect of an order of withdrawal of a suit or proceeding with leave is to relegate the parties to the same position which they occupied before the said suit or appeal was brought. In fact, in the context of Order 23 Rule 1 CPC. the Apex Court in a case reported in Sarguja Transport Service Vs. State Transport Appellate Tribunal, M.P., Gwalior and Others, has held that the principle enunciated thereto is based on public policy and not a rule of res judicata.
In fact, u/s 260A of the Income Tax Act an appeal before this Court can be maintained only if there is a substantial question of law involved. A substantial question of law does not mean a question of general importance, but a substantial questions between the parties involved in the case. In fact, the concept of substantial question of law u/s 260A of the Income Tax Act is analogous to Section 100 of CPC which also permits filing of an appeal only on a substantial question of law. In fact, it is necessary to note at this stage that the substantial question of law raised in these appeals were by reference to the substantial question of law raised in ITA. No. 233/04 and as the said appeal was pending consideration when the order in these cases were made on 2.2.2006 in ITA. No. 3249/05 by this Court which reads as follows:
Sri. Rama Murthy, the learned Counsel for the appellant, submits that the questions involved in this appeal is similar to the one raised in ITA No. 233/2004 and the said appeal is pending consideration before this Court.
In the light of the said submission, this appeal is also admitted to consider the substantial questions of law set out herein below:
Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in rejecting the Appellant''s claim for exemption of the dividend on the principles of mutuality, on the ground that the appellant is a business concern?
Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in law in ignoring the fact that when the appellant submitted to chit, it does so its character as a subscriber?
Similarly, on 14.3.2006 by referring to the order passed in ITA. No. 3249/05, ITA. Nos. 3251/05, 3250/05 and 3252/05 were admitted. When we read the order dated 26.7.2004 in ITA.233/04, we find that the said appeal was admitted on the ground that the question of law raised therein was similar to the question of law raised in ITA. Nos. 301 to 304/03 pending before this Court. The order passed in ITA. No. 233/04 dated 26.7.2004 reads as follows:
26th July, 2004
ITA 233/2004
Counsel for the appellant in para 4 of the memorandum of appeal has stated that the questions similar to the one raised in this appeal are pending consideration before this Court in ITA 2301-2304/2003.
In the light of the said submission, we are of the view that this appeal requires to be admitted. Accordingly, it is admitted to consider the following question of law:
Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in rejecting the appellant''s claim for exemption of the dividend on the principles of mutuality, on the ground that the appellant is a business concern?
Whether on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was correct in law in ignoring the fact that when the appellant subscribed to a chit, it does so in its character as a subscriber?
List this appeal along with ITA 301-304/2003.
In fact, the counsel who appeared in ITA. Nos. 233 to 235/2005 and ITA. Nos. 301 to 304/2003 and the present appeals is one and the same. Therefore, when the aforesaid substantial questions of law were not taken up for consideration by this Court on account of the withdrawal of the said appeals and based on the impugned order of the tribunal in those appeals the impugned order in the present appeals were passed by the tribunal, it has to be held that in view of the withdrawal of those appeals, no substantial question of law can arise in these appeals for the assessment years in question. We reiterate the contentions raised in these appeals could be raised for he subsequent assessment years.
The decision relied upon by the learned Senior Counsel on the aforesaid question can be referred to at this stage. In the case of Commissioner of Wealth Tax v. Meattles (P) Ltd. reported in (1986) 156 ITR 569 it has been held that the decision arrived at in one assessment year are binding neither on the assessee nor on the revenue in respect of the subsequent assessment years. It also states that the principle of estoppel as to applicability to succeeding assessment and the revenue authorities are not bound by any contention or decision taken up in one assessment when the same issue comes up for decision in the different assessment year. The aforesaid observations are made in the context of a revenue authority taking a particular view of the statutory provisions in the income tax assessment and later on realising that it was a mistaken view which could not be established from taking a correct view of the statutory provisions later on, as there is no estoppel against a statute. The context in which the aforesaid observations have been made are not applicable to the present case keeping in mind the peculiar factual matrix.
Similarly in the case of The New Jahangir Vakil Mills Co., Ltd. Bhavnagar Vs. The Commissioner of Income Tax, Bombay North, Kutch and Saurashtra, Ahmedabad, it is observed that in matters of taxation there can be no question of res judicata and the decision given by the Income Tax Officer for one assessment year would effect or bind his decision for another year and generally doctrine of res judicata or estoppel by record does not apply to such decisions, also has no application to the assessment years under consideration. However, in view of the aforesaid observations, the appellant-assessee can raise the issue of applicability of doctrine of mutuality for the subsequent assessment years.
In the case of Daryao and Others Vs. The State of U.P. and Others, it is stated that the rule of res judicata is not only a technical rule, but it is founded on considerations of public policy inasmuch as it is in the interest of the public at large that a finality should attach to the binding decisions pronounced by the 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 the said case, the question was whether a decision of the High Court on a writ petition under Article 226 could be considered as a bar under Article 32 filed before the High Court. The Apex Court held that if an order on merits is made under Article 226 of the Constitution, the same would operate as a res judicata in a petition filed under Article 32 before the Supreme Court. The context in which the observations of the Supreme Court have been made, do not apply to the present case at all.
For the aforesaid reasons, we hold that no substantial question of law raised in these appeals for the assessment years 1999-2000 to 2002-03 and accordingly, these appeals are dismissed. However, this order would not come in the way of the appellants agitating the very same substantial questions of law for the assessment years 2003-04 onwards. Ordered accordingly.