PUKHRAJ RIKHABDASS VS COMMISSIONER OF WEALTH TAX, 1994 PTD-RAJASTHAN-HIGH-COURT-INDIA 1073 (1992)

Wealth tax---

----Reference---Valuation of assets ---Res judicata---Valuation accepted for a number of years---No new facts---Question whether valuation was correct in a subsequent year could not be referred---Indian Wealth Tax Act, 1957, S.27.

Normally, res judicata does not apply to taxation proceedings. However, this general rule is subject to the qualification that 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 finality and certainty in all litigations including those arising out of the tax laws.

Held accordingly, rejecting the application to direct reference, that the valuation of the house property which was adopted by the Income Tax Appellate Tribunal and continued for a number of years had become final and there being no change in the circumstances, the assessee could not be allowed now to reagitate the same issue on the same facts and circumstances.

Sardar Kehar Singh v. CIT (1992) 195 ITR 769 (Raj.) applied.

Radhasoami Satsang v. CIT (1992) 193 TTR 321 (SC) ref.

Vineet Kothari for the Assessee.

D.S. Shishodia for the Commissioner.

JUDGMENT

V.K. SINGHAL, J: --The assessee has submitted an application under section 27(3) of the Wealth Tax Act, 1957, raising the following question arising out of the order of the Tribunal in respect of the assessment year 1978-79:

"Whether, under the facts and circumstances of the case, the Tribunal was justified, in valuing the Bombay property on the basis of the valuation made by the final valuer adopting hypothetical rent capitalisation method and rejecting the claim of the assessee for valuing the property on the basis of capitalisation of actual receipts of rent?"

The brief facts of the case are that there was a property, which was given on rent to Messrs N.P. Metal Works. The said firm consisted of the assessee and his brother as partners. The rent, which was received from the property was not considered as adequate and was considered collusive. A suit was also pending in the Court and, therefore, the valuer estimated the valuation of the property at Rs.1,95,000. Half share of it was taken at Rs.98,000. The assessee submitted the return showing the valuation of the property at Rs.75,000 which was subsequently reduced to Rs.36,140. The Income Tax Officer held that there was no change in the facts and circumstances of the case and, therefore, he adopted the valuation of the property at Rs.98,000 as assessed earlier. The appeal before the Appellate Assistant Commissioner was also rejected and the Income Tax Appellate Tribunal has held that the matter has already been considered by the Tribunal in, which the same valuation was taken and as such there is no reason to take a different view. The appeal was dismissed.

The submission of learned counsel for the assessee is that a property, which is let on rent should be assessed on rent capitalisation basis. A number of authorities have been cited in the respect, which we do not propose to take into consideration as this proposition is not in dispute that, once a property is let on rent, then normal rent capitalisation method should be adopted. In the present case, these factors were taken into consideration and the Income Tax Appellate Tribunal has already taken into consideration the fact of its being let on rent. Since the firm to which the property was rented out consisted of the assessee and his brother, the figure as shown in the return was not considered as adequate and, therefore, the valuation was taken independently. The said valuation continued for a number of years. The Income Tax Appellate Tribunal was justified in taking the view that there being no change in the circumstances, the valuation cannot be changed.

This Court has held in Sardar Kehar Singh v. CIT (1992) 195 ITR 769 that, normally, res judicata does not apply to taxation proceedings. However, this general rule is subject to the qualification that a finding reached in 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 finality and certainty in all litigations including those arising out of the Income-tax law. Recently, the Supreme Court in Radhasoami Satsang v. CIT (1992) 193 ITR 321, 329, has held 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 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 at all be appropriate to allow the position to be changed in a subsequent year".

The above proposition of law is very clear and fully applies to the facts of this case. The valuation which was adopted by the Income Tax Appellate Tribunal having become final and there being no change in the circumstances, the assessee cannot be allowed now to reagitate the same issue on the same facts and circumstances. There should be finality even under the income-tax law in respect of a finding, which has been given in a particular year. The finding, which has been given with regard to valuation of the property is undisturbed and. as such we are of the opinion that the Income Tax Appellate Tribunal was justified in rejecting the application for reference.

The reference application under section 27(3) of the Wealth Tax Act, 1957, is accordingly dismissed.

No order as to costs.

M.BA./208/T.F. Reference dismissed.