Case Law Details

Case Name : ACIT Vs. Pawan Hans Helicopters Ltd. (ITAT Delhi)
Appeal Number : ITA No. 2843/Del. /2009
Date of Judgement/Order : 18-01-2012
Related Assessment Year : 2003- 04
Courts : All ITAT (5374) ITAT Delhi (1224)

ACIT Vs. Pawan Hans Helicopters Ltd. (ITAT Delhi)- Hon’ble Delhi High Court in A.R.J. Security Printers’ case [2003] 264 ITR 276 and CIT Vs. Neo Poly Pack P. Ltd. [2000] 245 ITR 492 (Delhi ), held that even when the doctrine of res judicata does not apply to income-tax proceedings, where an issue has been decided consistently in a particular manner for earlier assessment years, the same view should prevail even during the subsequent years unless there is a material change in the facts. The law is, therefore, fairly well settled. For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. There is no gainsaying that the previous view will have no application even in cases where the law itself has undergone a change but before an earlier view can be upset or digressed from, one of the two must be demonstrated, namely, a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court . In the instant case, the ld. CIT(A) followed his own decision for the AY 2002- 03 in allowing the claim, which decision has been accepted by the Revenue. In the absence of material change in facts or any additional input , there is no compelling reason for taking a different view.

In view of the foregoing, especially when facts and circumstances in the year under consideration are indisputably,parallel to the facts and circumstances obtaining in the AYs 1996- 07 to 2002- 03 & AY 2004- 05 while the ld. DR did not place before us any material so as to enable us to take a different view in the matter nor brought to our notice any contrary decision, we are not inclined to interfere with the findings of the ld. CIT(A).

 INCOME TAX APPELLATE TRIBUNAL, DELHI

ITA No. 2843/Del. /2009 -Assessment Year: 2003- 04

Assistant C. I .T.

V/s.

M/s Pawan Hans Helicopters Ltd.  

Date of pronouncement: 18-01-2012

                                                                  

O R D E R

A.N.Pahuja:-

This appeal filed on 11.06.2009 by the Revenue against an order dated 16.03.2009 of the learned CIT(A)-XVII, New Delhi, raises the following grounds:-

1.“That the CIT(A) erred in law and on the facts of the case in deleting the addition of  Rs. 11,88,00,000/- made on account of dis allowance of provision for revision of pay and allowances of pilots pending finalization of settlement.

2. That appellant craves to be allowed to amend, delete or add any other grounds of appeal.”

2. Facts, in brief, as per relevant orders are that assessment in this case was completed u/s 143(3) of the Income-tax Act, 1961 (hereafter referred to as the Act) vide order dated 30.12.2004, determining income of Rs. 28,28,40,870/- Subsequently, after recording reasons, in writing, the Assessing Officer (A.O. in short) reopened the assessment u/s 147 of the Act with the service of a notice dated 28.01.2008 u/s 148 of the Act. During the course of reassessment proceedings, the AO asked the assessee as to why the provision of Rs. 11.88 crore on account of revision of pay and allowances of pilots, pending finalization of settlement be not disallowed. The assessee replied that provision amounting to Rs. 11.88 crore for the financial year 2002-03 was towards revision of pay and allowances, which was due and accrued from 1st January, 1997 on similar line as per the 5th Pay Commission for Central Govt. Employees as well PSUs in which the revision trend was changed over from every 5 years to every 10 years from the earlier wage revision and was made effective from 01.1.1992 to 31.12.1996. An estimated provision of 35% increase in wages was made over the actual expenditure. However, later based on the Pay Commission report for PSUs and negotiations held with different Workers unions, Pilots and Engineers Guilds, the pay and allowances had been revised w.e.f. 1.1.97 in the financial year 2002- 03 and 2003- 04, which had net impact of 55% increase as against provision of 35% over old Pay and allowances. The said provision made was virtually lower than actual payments made during the subsequent financial year. The legitimate arrears for pay and allowance due upon revision could not be denied against which the actual payments were made subsequently in view of the settlement arrived at between the different workers unions, pilots guilds, engineers guild and executive associations in accordance with the directions and the guidelines issued by the Department of Public Enterprises vide their order No. DPE O.M. No.2(49)/98-DPE(WC) dated 25th June, 1999 and DPE O.M. No.2/11/96- DPE(WC)-GL-1 dated 11th Feb, 2004 and the approval of Board of Directors of the company. Since the company followed the mercantile system of accounting, the liability ,which had thus accrued, had to be taken into account while working out the profits and gains of the business, the assessee pleaded. However, the AO did not accept the submissions of the assessee on the ground that provision for revision of pay and allowances was an unascertained liability and accordingly, disallowed the claim.

3. On appeal, the ld. CIT(A) allowed the claim of the assessee in the light of his own order dated 15th January, 2009 in appeal No.51/07-08 for the AY 2002-03, in the following terms:-

“4.2 I have carefully considered the facts of the case, order of the Assessing Officer and submissions made by the learned AR appearing for the appellant. I find that an identical issue was decided by me in favour of the appellant in my order in Appeal No.51/07-08 dated 15.01.2009, wherein it was held that the provisions for revision of pay and allowances is an ascertained liability which is an allowable deduction. As the facts and circumstances of the present case are similar to the one decided in Appeal No.51/07-08, the addition made on account of provision of  Rs. 11.88 crores towards pay and revisions of employees pending finalization of revised pay scale, is hereby deleted.”

4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). At the outset, the ld. AR on behalf of the assessee submitted that similar claim in the AYs 1996-97 to 2000-01 & AY 2004-05 was allowed by the AO himself in terms of his orders u/s 143(3) of the Act. However, in the AY 2001-02 and 2002-03, though the claim was disallowed by the AO, the same was allowed by the ld. CIT(A).Since the Revenue did not prefer any further appeal against the findings of the ld.CIT(A) in the AYs. 2001-02 & 2002-03 and in the year under consideration, the ld. CIT(A) merely followed his own order for the AY 2002-03, there is no merit in the appeal of the Revenue, the ld. AR added. On the other hand, the ld. did not oppose these submissions of the ld. AR on behalf of the assessee.

5. We have heard both the parties and gone through the facts of the case. We find that similar claim for deduction of provision for revision of pay and allowances, pending finalization of settlement ,was allowed by the AO himself in the AYs 1996-97 to 2000-01 as also in the AY 2004-05 and by the ld. CIT(A) in the AYs 2001-02 and 2002-03. Indisputably, the Revenue have accepted the  findings of the ld. CIT(A) in these two assessment years. Though the principle of res judicata has no application to proceedings under the Act and the findings reached for one particular assessment year  cannot be held to be binding in the assessment proceedings for a subsequent year, but this general rule is subject to the qualification that a finding reached in the assessment proceedings for an earlier year would not be reopened in a subsequent year if it is not arbitrary or perverse, has been arrived at after due enquiry and 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 litigations arising out of the Act [see Burmah-Shell Refineries Ltd. v. G. B. Chand [1976] 61 ITR 493 (Bom) and CIT v. Dalmia Dadr i Cement Ltd. [1970] 77 ITR 410 (P & H)] . In the instant case, no fresh material was brought in the assessment proceedings for the year under considerat ion and the ld. CIT(A) merely followed his own order for the AY 2002-03 while allowing the claim. In the case of Taraben Ramanbhai Patel [1995] 215 ITR 323 (Guj),Hon’ble High Court observed that it is no doubt true that the strict rule of the doctrine of resjudicata does not apply to proceedings under the Act , at the same time, it is equaly true that unless there is a change of circumstances, the authorities will not depart from previous decisions at their sweet will in the absence of material circumstances or reasons for such departure. The Hon’ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 has approved the principle of consistency, when they observed that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the 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.Though the principle of res- judicata is not applicable in the income- tax matter, but findings of earlier years on the same matter are relevant as per the ratio laid down in Sardar Kehar Singh Vs. CIT [1992] 195 ITR 769  (Raj), Taraben Ramanbhai Patel Vs. ITO [1995] 215 ITR 323 (Guj ) and CIT Vs. Hindusthan Motors Ltd. [1991] 192 ITR 619 (Cal ). Earlier Hon’ble Apex Court in Parashuram Pottery Works Co. Ltd. Vs. ITO [1977] 106 ITR 1 (SC) observed :

“At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity.”

5.1 Hon’ble Delhi High Court in A.R.J. Security Printers’ case [2003] 264 ITR 276 and CIT v. Neo Poly Pack P. Ltd. [2000] 245 ITR 492 (Delhi), held that even when the doctrine of res judicata does not apply to income-tax proceedings, where an issue has been decided consistently in a particular manner for earlier assessment years, the same view should prevail even during the subsequent years unless there is a material change in the facts. The law is, therefore, fairly well settled. For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. There is no gainsaying that the previous view will have no application even in cases where the law itself has undergone a change but before an earlier view can be upset or digressed from, one of the two must be demonstrated, namely, a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court . In the instant case, the ld. CIT(A) followed his own decision for the AY 2002-03 in allowing the claim, which decision has been accepted by the Revenue. In the absence of material change in facts or any additional input , there is no compelling reason for taking a different view.

5.2 In view of the foregoing, especially when facts and circumstances in the year under consideration are indisputably,parallel to the facts and circumstances obtaining in the AYs 1996- 07 to 2002- 03 & AY 2004- 05 while the ld. DR did not place before us any material so as to enable us to take a different view in the matter nor brought to our notice any contrary decision, we are not inclined to interfere with the findings of the ld. CIT(A). Therefore, ground no.1 in the appeal is dismissed.

6. No additional ground having been raised before us in terms of residuary ground no. 2 in the appeal, accordingly this ground is dismissed.

7. In the result, appeal is dismissed.

Order pronounced in Open Court

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