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The Principle of Res Judicata in Taxation
By Kumar Deepraj
Jun 13, 2019

Concept of Res Judicata

'SOMETHING which is already decided' is the literal meaning of the Latin word 'Res Judicata'. The principal of Res Judicata enumerate that a court shall not try an issue or any question of law, if the same dispute of the same subject matter between the same parties has already been decided by a competent Court. Res Judicata pro veritate accipitur is the full maxim, which over the years has shrunk to Res Judicata.

Res Judicata derives its source in Indian jurisprudence from Section 11 of the Civil Procedure Code, 1908. As per the bare reading of this section,

Res Judicata – No Court shall try any suit or issue in which the 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.

The objective of bringing concept like Res Judicata was to put a full stop on subsequent litigation. It is believed that in absence of such principal there would be endless litigation wherein the parties would be mentally and financially exploited. The basic idea was to bring every dispute/litigation to an end. This concept is derived from Common Law but today it is being included in almost every countries' jurisprudence.

The Supreme Court of India in the case of Satyadhyan Ghosal versus Deorajin Debi (1960) 3 SCR 590: AIR 1960 SC 941 observed that the principle of res judicata is based on the need of giving a finality to judicial decisions. It also observed that this principle of res judicata is embodied in relation to suits in Section 11 of the Code of Civil Procedure; but even where Section 11 does not apply, the principle of res judicata has been applied by courts for achieving finality in litigation.

The Doctrine of Res Judicata is based on three maxims:

•  Nemo debet lis vaxari pro eadem causa; which means no person should be vexed twice for the same cause;

•  Interest republicae ut sit finis litium; which means that it is the interest of the State that there should be an end to a litigation; and

•  Re judicata pro veritate occipitur; which means that a judicial decision must be accepted as correct.

In Sri B. Temple v. V.V. Bhavanarayana charyulu (1970)1 SCC 673 the Supreme Court observed that "The doctrine of res judicata is not confined to the limits prescribed in Section 11, Civil Procedure Code. The underlying principle of that doctrine is that there should be finality in litigation and that a person should not be vexed twice over in respect of the same matter."

The requisites for the application of Res Judicata are:

•  There must a final decision/judgement;

•  The subject matter must be same;

•  It should be between the same parties;

•  The Court which adjudicated the former suit must be Competent to decide that suit.

It was observed in reference to Res Judicata by 5 Judges Bench of the Supreme Court, in Gulabchand Chhotalal Parikh v. State of Gujarat (1965) 2 SCR 547: AIR 1965 SC 1153:

'A decision in a previous suit would not be res judicata in a subsequent suit unless the stringent conditions laid down in Section 11 of the Code were satisfied; whereas a decision in a proceeding which was not a suit would be res judicata whether or not the said conditions were complied with. If the fundamental requisites of res judicata were satisfied, a decision, if it fell under Section 11 of the Code, would be res judicata in a subsequent suit; and even if it did not fall thereunder, it would equally be res judicata. That could not have been the intention of the Legislature.'

Moreover, the principal of Res Judicata is also applicable to the writs filed under Article 32 and 226 of the Constitution of India. The applicability of the doctrine of res judicata to the petitions filed under Article 32 came before the Supreme Court of India in Daryao v. State of U.P. (1962) 1 SCR 574, wherein it was held where the petition under Article 226 is considered on the merits as a contested matter and dismissed by the High Court, the decision pronounced is binding on the parties, unless modified or reversed by appeal or other appropriate proceedings under the Constitution, and so, if the said decision was not challenged by an appropriate remedy provided by the Constitution, a writ petition filed in respect of the same matter would be deemed to be barred by res judicata. Therefore, there can be no doubt that the general principle of res judicata applies to writ petitions filed under Article 32 or Article 226. It is necessary to emphasize that the application of the doctrine of res judicata to the petitions filed under Article 32 does not in any way impair or affect the content of the fundamental rights guaranteed to the citizens of India. It only seeks to regulate the manner in which the said rights could be successfully asserted and vindicated in courts of law.

Applicability of the principal of Res Judicata in Taxation Matters

There is a conflicting view regarding the application of Res Judicata in Taxation Matter. This doctrine is accepted in every field of law, but the same is doubtful in taxation matters. While deciding that an Income Tax Officer can be brought under umbrella of Res Judicata, the Full Bench of Madras High Court in T.M.M Sankaralinga Nadar and Brothers versus The Commissioner of Income-tax, Madras 1929 SCC OnLine Mad 181: (1930) 31 LW 738: (1930) 58 Mad LJ 260 (FB): AIR 1930 Mad 209 observed that the dispute related to assessment of income in any financial year does not very with the income every year. While observing the same, the Hon'ble High Court held:

"The principle to be deduced from these two cases is that 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 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 question if decided by a Court on a reference made to it would be res judicata in that the same question cannot be subsequently agitated. But if the question is decided by a Court on a reference which depends upon considerations which may vary from year to year".

Bringing rest to the speculations regarding the applicability, the Supreme Court in Amalgamated Coalfields v. Janapada Sabha AIR 1964 SC 1013, rightly observed that the liability to pay tax from year to year is a separate and distinct liability; it is based on a different cause of action from year to year, and if any points of fact or law are considered in determining the liability for a given year, they can generally be deemed to have been considered and decided in a collateral and incidental way. Observing further, the Supreme Court held it would be relevant to add that even if a direct decision of the Court on a point of law does not operate as res judicata in a dispute for a subsequent year, such a decision would, under Article 141, have a binding effect not only on the parties to it, but also on all courts in India as a precedent in which the law is declared by this Court. The question about the applicability of the res judicata to such a decision would thus be a matter of merely academic significance.

The Bombay High Court was also in a view that the principal of estoppel and res judicata will not apply to Income Tax Authorities. However, while holding the same it also stated that until and unless fresh facts are placed before, same question in subsequent proceedings cannot be reopened H.A. Shah and Co.  v.  CIT (1956) 30 ITR 618.

The High Court of Delhi also part allowed the operation of Res Judicata in the Tax Matter but only to the extend. It observed that only the decision of the courts can be operated as Res Judicata and not of the decision of the departmental authorities Chiranjilal  v.  ITO (1978) 115 ITR 410. In another instance J.K Synthetics v. Union of India(1981) 8 ELT 328, reiterating its view, the Delhi High Court observed that the principle of res judicata or estoppel will not apply in tax matters and that the view taken by the assessing or appellate or revisional authority or even the High Court in respect of any one assessment year period will not be final and conclusive for subsequent periods.

In the view of the High Court of Allahabad, there can be no doubt that if any question of right or title which is not peculiar to the year of assessment has been decided by a competent Court, the decision may be treated as res judicata in subsequent years, but the law is well settled that if the decision is of the income-tax authorities, that decision cannot operate as res judicata Messrs Kamlapat Moti Lal Versus Commissioner, Income-Tax, U.P 1949 SCC OnLine All 71 : AIR 1950 All 249 : (1950) 18 ITR 812.

The Hon'ble Supreme Court in Commissioner of Income-Tax versus Excel Industries Ltd. & Ors. - TOG-1678-SC-IT-2013 disallowed reconsideration of an issue in a subsequent year if the same "fundamental aspect" permeated different assessment years. The underlying principle is that at one point of time litigation must come to an end. It cannot be reopened. A point cannot be re-agitated again just because a person with "legal ingenuity" thinks that the decision could have been different if certain law points not cited were placed or a certain weight were given to a particular piece of evidence.

Recently, the High Court of Kolkata Man Mohan Kedia Versus Income Tax Officer 2014 SCC OnLine Cal 17490 while discussing the issue of Res Judicata observed that If one follows the ordinary rules of  res-judicata   reopening of an issue in a subsequent year or with regard to another assessee may not be barred. But at least in taxation cases the revenue is taken as one party for all assessment years and the assessees together taken as the other party. That which is decided between the revenue and one assessee in an assessment year, having permanent effects should not be decided otherwise or treated in any other way by the revenue with regard to any other assessee, so as to maintain consistency and fairness in government action.


Taking into consideration the precedents discussed above, it can be rightly said that principal of Res Judicata is partly applicable in the matters of taxation. In the income-tax proceedings, the principal of Res Judicata is not applicable. An assessment of particular year is final and binding in relation to the assessment year in which the decision is given. In income tax proceedings, the rules of consistency do apply even when this principal of res judicata does not apply. i.e. a same case cannot be open until and unless a new fact or evidence arises.

However, this principle is applicable to that context in taxation matters when the issue does not depend upon considerations which may vary from year to year. Hence, it can be said that the principal of res judicata is partly allowed in the matter of taxation.

(The author is Legal Associate, ASAV Attorneys & Advisors LLP and the views expressed are strictly personal.)