[Opinion] Cherry Picking Is Not Allowed in Income Tax Assessments

P.V.R. Prabhakar – [2025] 176 taxmann.com 66 (Article)

1. Introduction

The I.T. Act vests in the Assessing Officer discretionary powers to determine the taxable income of the assessee in scrutiny assessment proceedings in case the Assessing Officer is not satisfied with the explanations and evidences submitted by the assessee to substantiate his claims regarding incomes and expenses as per I.T. return. However, these discretionary powers are circumscribed by judicial guidelines and principles governing the exercise of such powers. One such principle deals with the doctrine of approbate and reprobate. The object of this article is to discuss the mode of application of the stated doctrine with the help of illustrative case laws..

2. Doctrine of Approbate and Reprobate

2.1 The doctrine of approbate and reprobate, also called the doctrine of election, is a legal principle that prohibits a party to a suit from adopting or taking inconsistent or contradictory stands with reference to same set of facts or evidences or transactions by accepting a part of the same and rejecting the other part. In other words, a party is not permitted to blow hot and cold simultaneously with respect to the same materials and, as such, selective acceptance or “cherry-picking” of materials or facts within the same set of information is not permitted.

2.2.1 The relevant observations of the Honourable Apex Court in some relevant asses are summarized below to explain the doctrine lucidly.

2.2.2 In R.N. Gosain v. Yashpal Dhir (1992) 4 SCC 683, the Supreme Court observed that law does not permit a person to both approbate and reprobate and that this principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and also that a person cannot say at one time that a transaction is valid and thereby obtain some advantage and then turn round and say it is void for the purpose of securing some other advantage.

2.2.3 In Joint Action Committee of Air Line Pilots’ Association of India (ALPAI) v. DG of Civil Aviation [2011] 5 SCC 435, the Honourable Supreme Court observed that the doctrine of estoppel by election is rooted in equity and that the parties should not blow hot and cold by taking inconsistent stands thereby prolonging the proceedings unnecessarily

2.2.4 In Union of India v. N. Murugesan [2022] 2 SCC 25, the Honourable Supreme Court observed that the a party cannot enjoy the benefits of a transaction and then, upon near completion of such benefit, challenge other aspects of it. In terms of this ruling the doctrine by election is a common law principle with fair play inbuilt therein rather than one based solely on statutory provisions such as S.115 of the Indian Evidence Act.

2.2.5 In Premalata @ Sunita v. Naseeb Bee [Civil Appeal Nos. 2055-2056 of 2022, dated on 23-3-2022] the Hon’ble Supreme Court applied the doctrine of approbate and reprobate holding that a litigant cannot be permitted to take two different/contradictory stands before two different forums.

2.3 From the above observations, it may be discerned that the doctrine of approbate and reprobate is essential to maintain integrity and consistency in legal proceedings and provides an equitable safeguard ensuring that no party can manipulate the legal system by changing positions to suit his convenience.

3. Observations of the Hon’ble Apex Court in CIT v. V. MR. P. Firm Muar [1965] 56 ITR 67 (SC)

3.1 At this juncture the observations of the Honourable Apex Court in V. MR. P. Firm Muar (supra) are to be noted. In this case the assessees had opted for a certain scheme framed by the Government of India and derived benefits of the Scheme, having agreed to have their discharged debts excluded from the assets side in the balance-sheet subject to the condition that subsequent recoveries by them would be taxable income. The issue before the Honourable Court was whether those assessees were precluded, on the principle of “approbate and reprobate”, from pleading that the subsequent income from the realisation of the revived debts was not taxable income. The relevant observations of the Honourable Court are stated as follows:

(i) the doctrine of “approbate and reprobate” is only a species of estoppel; it applies only to the conduct of parties.

(ii) As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine.

(iii) Equity is out of place in tax law; a particular income is either liable to tax under the taxing statute or it is not. If it is not, then the Income-tax Officer has no power to impose tax on that particular income.

3.2 But then it should be appreciated that the issue before the Hon’ble Court in the last cited case revolved around the legal issue involving pure estoppel as against the provisions of the income tax law. Thus, these observations, it is humbly submitted, should not be invoked to counter the proposition that there should be consistent approach with regard to the appreciation of factual matters involving same set of facts, explanations, materials or evidences and such approach should not be self-contradictory with part acceptance and part rejection within that particular set.

4. Applicability of the doctrine to income tax assessments

As stated supra, consistency in approach regarding factual appreciation of the information and materials is required while assessing the income and the doctrine of approbate and reprobate is certainly applicable in this context so as to ensure fair and just assessment of income. The applicability of this doctrine to the computation of income under the I.T. Act, 1961, is explained with the help of relevant case laws infra.

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