LOT Dwarka Das Keshardeo Morarka Vs. Commissioner of Income Tax (1962)42 ITR 529 On law of Estoppel in Taxation

 

Leading Case: Dwarka Das Keshardeo Morarka Vs. Commissioner of Income Tax (1962) 42 ITR 529 (SC)

Facts of the Case:

1. The appellant, Dwarka Das Keshardeo Morarka, was an assessee under the Income Tax Act, 1922.
2. He was assessed for a particular year and had accepted the assessment without raising any objections at that time.
3. Later, he sought to challenge the assessment on the ground that the Income Tax Officer had made an error in law.
4. The Income Tax Department contended that the appellant was estopped from challenging the assessment because he had earlier accepted it.

Issues Before the Court:

1. Whether the doctrine of estoppel applies in tax matters, preventing an assessee from challenging an assessment they had initially accepted.
2. Whether an erroneous assessment, if accepted by the taxpayer, can be later questioned.

Judgment of the Supreme Court:

1. The Supreme Court held that the doctrine of estoppel does not apply to matters of tax law and assessment.
2. It was ruled that an assessee cannot be estopped from contending that a tax has been wrongly levied or an assessment has been made contrary to law.
3. Taxation is governed by statute, and neither the taxpayer nor the tax authorities can contract out of the legal provisions.
4. If an assessment is made erroneously, it can still be corrected despite the initial acceptance by the assessee.

Law Laid Down by the Supreme Court:

1. Doctrine of Estoppel is Not Applicable to Taxation – A taxpayer’s acceptance of an assessment does not prevent them from challenging it later if it is contrary to the law.
2. Tax Liability is Based on Law, Not Consent – The liability to pay tax is determined strictly by statutory provisions, and it cannot be altered or waived merely because a party did not initially object.
3. Errors in Assessment Can Be Corrected – Even if an assessee has earlier accepted a tax assessment, they can later contest it if it is found to be legally incorrect.

Significance of the Judgment:

• The ruling reaffirmed that tax laws are statutory in nature and must be applied correctly, irrespective of past conduct or acceptance by the assessee.
• It clarified that a mistake in tax assessment does not become valid simply because the assessee did not initially dispute it.
• This decision has been cited in subsequent tax cases where the Revenue has tried to invoke estoppel to prevent taxpayers from questioning an earlier assessment.

Conclusion:

The Dwarka Das Keshardeo Morarka case established that the principle of estoppel does not apply to tax matters, reinforcing the supremacy of statutory provisions over past conduct or acceptance. This case remains a cornerstone in tax jurisprudence, ensuring that taxpayers are not unfairly bound by previous errors in tax assessments.