C I T vs. RAJ STATE MINES and MINEARAL LTD
What did the High Court hold?
The High Court held that the ITAT was justified in allowing the sum of Rs. 6,61,85,333.00 as business expenditure. The reasoning was based on the principle of consistency, drawing from the Supreme Court's decision in M/s. Radhasoami Satsang Saomi Bagh, Agra vs. Commissioner of Income Tax. The Court noted that in the assessment year 1989-90, the same expenditure was accepted as revenue/business expenditure. Although res judicata does not strictly apply, it would be inappropriate to allow the position to be changed in a subsequent year without a material change justifying a different view. The Court found that the revenue had previously failed to pursue an appeal on a similar issue where a substantial question of law was framed. Therefore, to avoid inconsistency, the reference was answered against the revenue and in favour of the assessee. The appeal was dismissed.
What were the facts?
The appellant, Commissioner of Income Tax (CIT), Jaipur-II, challenged a judgment of the Income Tax Appellate Tribunal (ITAT) which had dismissed the assessee's appeal and confirmed the order of the CIT(Appeals). The assessee is Rajasthan State Mines and Mineral Ltd. The core dispute revolves around the allowance of Rs. 6,61,85,333.00 as business expenditure. The High Court admitted the appeal and framed a substantial question of law. The procedural history indicates that the ITAT had previously allowed the sum as business expenditure. The High Court's decision is based on prior judgments concerning the same assessee and similar issues.
What were the issues?
1. Whether, in the facts and circumstances of the case and in law, the ITAT was justified in allowing the sum of Rs. 6,61,85,333.00 as business expenditure? (Question of law) Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The revenue contended that the order passed by the Assessing Officer (AO) was just and proper, and therefore, the orders of the CIT(Appeals) and the ITAT should be reversed. The revenue relied on the principle that while res judicata does not strictly apply to income tax proceedings, consistency in treatment of the same expenditure across different assessment years is important. The revenue argued that if the expenditure was allowed as business expenditure in one year (1989-90), it should not be treated differently in subsequent years, especially when the revenue had an opportunity to challenge it earlier but failed to pursue the appeal after a substantial question of law was framed.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
“We find that while challenging the order passed on a proceeding under Section 148 of the Act of 196, the revenue took other issues also, which includes, the issue raised herein. The High Court accordingly framed substantial questions of law. It was as to whether the ITAT was justified in holding the expenditure as business expenditure when the assessee had acquired benefits of enduring nature, thus to be taken as capital expenditure. The revenue did not pursue the appeal and accordingly, the assessment got confirmed where the same expenditure was accepted
towards
revenue/business expenditure. The question for our consideration is as to whether the same expenditure for subsequent assessment year can be given different treatment. No doubt, it is true that principal of res judicata does not apply but whether the revenue can take different and inconsistent view on one and the same issue. Whether payment to the State Government for the work assigned to the assessee can be taken as business expenditure for one assessment year and capital expenditure for the next years? In the assessment year of 1989-90, it was shown to be revenue/business expenditure. The proceedings under Section 148 of the Act of 1961 were initiated but held to be void. In the appeal before the High Court, a substantial question of law on the issue referred herein was framed but the revenue failed to pursue the issue as the appeal was dismissed for default. If the reference is answered in favour of the revenue by holding that amount of Rs.6 crore was wrongly
allowed
towards revenue/business expenditure, the outcome would be nothing but inconsistency in the 3 assessment for one and the same assessee and, that too, for the one and same expenditure. If the argument taken by the revenue is allowed to be sustain then for the year 1989-90, the same expenditure remains in contradiction and, that too, when not only the revenue was having opportunity to challenge the assessment but even substantial question of law was also framed on it but thereafter, it was not perused. In the case of M/s. Radhasoami Satsang Saomi para Nos.18 & 19 are quoted hereunder for ready reference:
We are aware of the fact 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 the 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 be at all appropriate to allow the position to be changed in a subsequent year.
On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assessee-we do not think the question the assessee before us is none-else but a Government undertaking. It is informed to this Court that the matter was earlier taken before the High Power Committee as dispute is between the Government and its undertaking. The fact aforesaid is also taken note of by this Court while answering the reference herein. In view of the discussion made above, we are of the opinion that the amount of Rs.6 crore accepted
towards
revenue/business expenditure is not illegal, rather taking into consideration the assessment year 1989-90, where the same expenditure was taken as revenue/business expenditure, we are unable to take a consistent view and accordingly, the reference is answered against the revenue and in favour of the assessee.”
In that view of the matter, the issue is answered in favour of the assessee and against the department.
The appeal stands dismissed. (DINESH MEHTA), J. (K.S. JHAVERI), J. Asheesh Kr. Yadav 71
More judgments on Section 148
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Vinod Agrawal, Kawardha vs Assisstant Commissioner of Income Tax…ITA 666/RPR/2026[2019-20]Status: Heard21 Oct 2026AY 2019-20
- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
- Adj Agri International LLP, Rajkot vs The Income Tax Officer, Ward-1(1)(1), RajkotITA 1198/RJT/2026[2018-19]Status: Disposed21 Oct 2026AY 2018-19
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