Case: The New Jahangir Vakil Millsco., Ltd. Bhavnagar Vs. The Commissioner Of Income-Tax, Bombay North,Kutch &amp; Saura

consider that the High Court correctly answered the question relating to this aspect of the case.8. Now, as to computation of profits. Though it is true that the question which directly arose before the taxing authorities in the present case was whether the assessee was a dealer in 1944, the question of the position of the assessee in 1943, the also arose in determining how the profits made in 1944 should be computed. It is not therefore quite correct to say that the position of the assessee in 1943 was completely outside the scope of the assessment proceedings of 1945-46. In determining or computing the profits made by the sale of shares in 1944, the assessing authorities had to go into the question - did the assessee start its trading activity on January 1, 1944 or did it start the trading activity at an earlier date? If the assessee was a dealer when the shares sold in 1944 were originally purchased, then, obviously the principle in 1962-46 ITR 86 : (AIR 1963 SC 477 ) will not apply and the profits will be the excess of the sale price over the original cost price. The extent to which a decision given by an Income-tax Officer for one assessment year affects or binds a decision for another year has been considered by courts several times and speaking generally it may be stated that the doctrine of res judicata or estoppel by record does not apply to such decisions; in some cases it has been held that though the Income-tax Officer is not bound by the rule of res judicata or estoppel by record, he can reopen a question previously decided only if fresh facts come to light or if the earlier decision was rendered without taking into consideration material evidence etc. As to the argument based on Ss. 34 and 35, it is enough to point out that the assessment relating to the year 1943 is not being reopened. That assessment stands. What is being done is to compute the profits of 1944, which the assessing authorities could do, by finding out when the trading activity in shares began. The question of the profits in 1944 was not and could not be the subject of any assessment proceeding relating to 1943, for such profits arose only on the sale of the shares in 1944.8a. In Broken Hill Proprietary Co. v. Broken Hill Municipal Council 1926 AC 94, the question was one of the capital value of a mine for rating purposes. This question of valuation as between the parties was determined by the High Court of Australia in a previous year. But it was held that the decision did not operate as res judicata. The reason given was:"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 question .. .. namely, the valuation for a different year and the liability for that year. It is not eadem question, and therefore the principle of res judicata cannot apply".In another decision reported in the same volume, Hoystead v. commissioner of Taxation 1926 A C 155 one of the questions was whether certain beneficiaries under a will were joint owners. It was held that although in a previous litigation no express decision had been given whether the beneficiaries were joint owners, it being assumed and admitted that they were, the matter so admitted was so fundamental to the decision then given that it estopped the commissioner. The latter decision was distinguished in society of Medical Officers of Health v. Hope 1960 A C 551. Both the decisions were again considered by the Judicial Committee in Caffoor v. Income Tax Commissioner Colombo 1961 AC 584. The decision in Broken Hill Proprietary Companys case 1926 A C 94 was approved and the principle laid down was that in matters of recurring annual tax a decision on appeal with regard to one years assessment is said not to deal with eadem question as that which arises in respect of assessment for another year and consequently not to set up an estoppel. As to the decision in Hoysteads case 1926 A C 155, it was stated:"Their Lordships are of opinion that it is impossible for them to treat Hoysteads case, 1926 A C 155 as constituting a legal authority on the question of estoppels in respect of successive years of tax assessment. So to treat it would bring it into direct conflict with the contemporaneous decision in the Broken Hill case 1926 AC 94 and to follow it would involve preferring a decision in which the particular point was either assumed without argument or not noticed to a decision, in itself consistent with such other authority, in which the point was explicitly raised and explicitly determined."9. In 1962-2 SCR 644 : (AIR 1962 SC 53 ) the court referred to the decisions just mentioned and said that it was well settled that in matters of taxation there would be no question of res judicata.10. On the principle stated above, it seems to us that it was open to the taxing authorities to consider the position of the assessee in 1943 for the purpose of determining how the gains made in 1944 should be computed, even though the subject of the assessment proceedings was the computation of the profits made in 1944. The circumstance that in an earlier assessment relating to 1943 the assessee was treated as an investor would not in our opinion estop the assessing authorities from considering, for the purpose of computation of the profits of 1944, as to when the trading activity of the assessee in shares began. The assessing authorities found that it began in 1943. On that finding the profits were correctly computed and the answer given by the High Court to the question of the computation of the profits was correctly given.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The question no doubt has two aspects. Firstly, there is the aspect whether there is any evidence to justify the finding that the assessee was a dealer in shares in 1943. Secondly, there is the aspect as to how the profits made from the sale of shares in 1944 should be computed in the assessment year 1945-46.The argument appears plausible at first sight and it may perhaps be conceded that the question of the computation of profits in a case like this is not entirely free from difficulty. However, on a very careful consideration of the argument we have come to the conclusion that it is not worthy of acceptance. As to the first aspect of the question we see no difficulty. The Appellate Assistant Commissioner and the Tribunal have referred to various transaction relating to shares shown in the books of the assessee. From those transactions they came to the conclusion that the assessee was a dealer in 1943. The High Court has also summarised the various transactions in which the assessee indulged in the year 1943.Having regard to the frequency and nature of those transactions it was open to the taxing authorities to come to the conclusion that the assessee was a dealer in shares in 1943. We are not prepared to say that the rule of "no evidence" can be applied to the present case. We, therefore, consider that the High Court correctly answered the question relating to this aspect of the case.8. Now, as to computation of profits. Though it is true that the question which directly arose before the taxing authorities in the present case was whether the assessee was a dealer in 1944, the question of the position of the assessee in 1943, the also arose in determining how the profits made in 1944 should be computed. It is not therefore quite correct to say that the position of the assessee in 1943 was completely outside the scope of the assessment proceedings ofto the argument based on Ss. 34 and 35, it is enough to point out that the assessment relating to the year 1943 is not being reopened. That assessment stands. What is being done is to compute the profits of 1944, which the assessing authorities could do, by finding out when the trading activity in shares began. The question of the profits in 1944 was not and could not be the subject of any assessment proceeding relating to 1943, for such profits arose only on the sale of the shares in 1944.On the principle stated above, it seems to us that it was open to the taxing authorities to consider the position of the assessee in 1943 for the purpose of determining how the gains made in 1944 should be computed, even though the subject of the assessment proceedings was the computation of the profits made in 1944. The circumstance that in an earlier assessment relating to 1943 the assessee was treated as an investor would not in our opinion estop the assessing authorities from considering, for the purpose of computation of the profits of 1944, as to when the trading activity of the assessee in shares began. The assessing authorities found that it began in 1943. On that finding the profits were correctly computed and the answer given by the High Court to the question of the computation of the profits was correctly given.