Patna High Court
Kaniram Ganpat Rai vs Commissioner Of Income-Tax, Bihar & ... on 28 April, 1941
Equivalent citations: [1941]9ITR332(PATNA), AIR 1941 PATNA 527
JUDGMENT
HARRIES, C.J. - This is a reference made by the Commissioner of Income-tax, Bihar and Orissa, under Section 66(3), Indian Income-tax Act.
To appreciate the points involved, it will be necessary shortly to set out the facts of the case :-
For the assessment year 1935-36 the assessee claimed that a large number of debts had become bad and that he was entitled to write off the same. Amongst these debts were (1) Rs. 159-6-0 said to be due to the assessee form Raja Ram Khora; (2) a sum of Rs. 1,524 said to be due from Ramjatan Ram; and (3) Rs. 1,220 said to be due from Chartar Ram of Ramkunda. The Income-tax authorities rejected the assessees contention that these debts had become bad in the accounting year. They found that the debts had long before become bad and the claim should have been made very much earlier.
It appears that the assessee made a similar claim in respect of these three debts for the year 1931-35. On that occasion the Income-tax Officer disallowed the claim on the ground that the debts had become bad long before the accounting year. On appeal the Assistant Commissioner, though upholding the decision of the Income-tax Officer, disagreed with the grounds for such opinion. He disallowed the claim to write off these debts in the year in question not on the ground that they had become bad long before but on the ground that the claim was premature, that is that the debts had not become bad. The learned Commissioner upheld the view of the Assistant Commissioner, and, therefore, we find that in the year 1935-35 the Income-tax authorities had come to the conclusion that the three debts were not bad and that a claim that an allowance should be made in respect of them in that accounting year was premature. In the following year we find the Income-tax authorities coming to an entirely different conclusion and holding that these debts had become bad long before the accounting year 1935-36, and, therefore, no allowance could be made in respect of them in that accounting year. Having regard to these conflicting findings of the Income-tax authorities, this Court directed the Commissioner to state a case upon the following question.
"Was the Commissioner of Income-tax justified under the law to disallow the claim of the petitioner in respect of the alleged bad debts due from Raja Ram Khora, Ramjatan Ram and Charitar Ram of Ramkunda (items Nos. 18, 20 and 21 of this judgment) on the ground that these debts had become had long before the accounting year, though previous to the accounting year the claim was disallowed on the ground that it was premature and that the debts had not become bad till then ?"
In the case stated by the Commissioner the relevant portion of the various orders of the officers concerned are set out, and the commissioner expresses the view that as there is no bar by way of res judicata in income-tax proceedings it was open to the authorities in 1935-36 to come to conclusion contrary to the conclusion arrived at in 1934-35.
It is conceded that the principle of res judicata does not apply in income-rax proceedings; but it is said that in such proceedings an Income-tax Officer should not differ from a previous decision on the same matter unless new facts have been placed before him. Reliance was placed by Mr. Mazumdar, who has argued this case very fully, upon the case of T M M Sankaralinga Nadar and Brothers v. The Commissioner of Income-tax, Madras (1930) 53 Mad. 420., in which a Full Bench laid down that though an Income-tax Officer is not bound by the rule of res judicata or estoppel by record, yet he can reopen the matter of assessment only if fresh facts come to light, which, on investigation, would entitle the officer to come to a conclusion different from that of his predecessor. At page 434 their Lordships observed :
"The next question is whether even assuming that the matter is not res judicata, it would not create an estoppel by record against the Income-tax Officials.
In the connection the argument of Mr. Krishanaswami Ayyangar is that even treating the Income-tax Officials as a quasi judicial body and not a Court, the principles of natural justice and expediency ought to prevent Income-tax Officers from going back on their previous decisions. Reference has been made to the passage in Halsburys Laws of England which I have already quoted.
It seems to us that where Income-tax Officials have, after enquiry, proceeded to assess the assessee on a certain basis, though they may be entitled to reopen the enquiry, they cannot arbitrarily change the assessment simply on the ground that the succeeding officer does not agree with the preceding officers finding. The position is just like the position of any two parties who have proceeded on a certain basis in their relations. It may be open to one party to reopen the matter. But if he wants to do so there should be facts which would entitle him to do it. If fresh facts come to light which on an investigation would entitle the Income-tax Officer to come to a different conclusion from that of his predecessor we think he is entitled to reopen the question. But if there are no fresh facts, it is difficult to see how he can arbitrarily go behind the finding of his predecessor. The same principles of natural justice or judicial dealing, which Courts impose upon Income-tax Officers, would prevent them capriciously setting aside the orders of their predecessors based on enquiry".
That the Income-tax authorities in the year 1935-36 differed from the authorities in the previous year is clear as in 1934-35 it had been held that the debts had not yet become bad, whereas in 1935-36 it was held that they had become bad long before that accounting year. Following the principles laid down in the Madras Full Bench decision, with which I respectifully agree, it is necessary to consider whether the Income-tax authorities in 1935-36 had any fresh facts before them which would permit them to come to a different conclusion from their predecessors.
It would appear as it is assessees claims with regard to these three debts do not seems to have been seriously pressed. For the year 1935-36 the Assistant Commissioner said so in so many words and disallowed the claim. The Commissioner was not satisfied that the claim with regard to these three debts was abandoned and called for a report from the Assistant Commissioner, and that report also makes it clear that it was not strenuously urged that these debts were not old and bad a long time before. In any event, the Commissioner on the second occasion went into the matter thoroughly. The assessee appeared before him with his advocate. The assessee submitted notes of accounts to the Commissioner, and he took each item separately and came to the conclusion that each of the three debts in question was old and had become bad many years before the assessee first made the claim. There can can be no doubt that on this last occasion the Commissioners inquiry was a thorough one conducted in the presence of the assessee and his lawyer, and his finding is based on material supplied to him at that hearing by the assessee or his lawyer. There is nothing to show that these materials were before the authorities on the previous occasion, that the point was not free from difficulty appears to be clear. On the first occasion the Income-tax Officer had held that the debts had long since become bad, whereas his superiors, the Assistant Commissioner and the Commissioner had come to a different view. It is, therefore, not strange that when the matter is further investigated and fresh material produced the Assistant Commissioner and the Commissioner on the second occasion should have come to a different conclusion from that of their predecessors. As there were fresh materials on this second occasion, it cannot be said as a matter of law that the Income-tax authorities were not entitled to come to a different conclusion. Whether the debt had become bad long before is a question of fact, and as there was evidence to support it this court cannot disturb the finding. In my judgment the finding of the Income-tax authorities upon this point in their assessment for the year 1935-36 is not vitiated by any illegality, and I would answer the question submitted in the affirmative. In all the circumstances, I would make no order as to costs beyond permitting the Commissioner to retain the sum of Rs. 100 which has been deposited by the assessee.
FAZL ALI, J. - I agree.
Reference answered in the affirmative.