TEJMAL BHOJRAJ Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is an application under s. 66(2) of the Indian IT Act. The assessee is a trader of Malkapur. In the asst. yr. 1943 -44 for the account year ending Diwali 1942, the assessee did not produce the books of account saying that those books along with one cash book for Samvat 1999 -2000 were stolen from the railway train between Wardha and Nagpur. This explanation was accepted and income was worked out on the basis of other evidence and assessment was made under s. 23(3). In the subsequent assessment year also the books for the account year were not produced for the same reason. The assessment was made under s. 23(3) on an estimated income of Rs. 5,000, though the assessee had turned a loss of Rs. 8,708. That loss could not be proved in the absence of account books. In the asst. yr. 1945 -46, which is the year with which we are concerned, the assessee was required by a notice under s. 22(4) to produce the account books for the two years preceding the account year. The assessee pleaded loss of those books. He offered evidence in support of his contention. It was disbelieved and it was found that the story of loss of books was not true. The ITO therefore made an assessment under s. 23(4) of the Act. The assessee was unsuccessful in convincing the AAC or the Tribunal that the story of loss of books was true.

(2.) SEC . 23(4) empowers the ITO to make assessment to the best of his judgment and to determine the sum payable by the assessee on the basis of such assessment when the assessee having made a return fails to comply with all the terms of a notice issued under s. 22(4). The question for decision therefore is whether the assessee failed to comply with the terms of the notice requiring him to produce the books of account for the two preceding years. Having found that the story of loss was not true, the IT authorities found that the assessee failed to comply with "all the terms of the notice". The learned counsel for the applicant, however, submits that as his client had produced the account books for the account year in question and as the assessment could have been made on the basis of those account books, he has complied with the terms of the notice; at any rate, the default was only partial. He further submits that s. 23(4) is not attracted unless there is a default in compliance with each and every term of the notice. This contention is not acceptable. Sec. 23(4) is attracted if the assessee fails to comply with all the terms of the notice issued under s. 22(4) or s. 23(2). In other words, a summary assessment under this sub - section would follow the failure to comply with any of the terms of the notice and a partial default involves the same consequences as a total default : Banarsi Das vs. CIT (1936) 4 ITR 142 (Lah) : TC11R.168 and Tulsi Das Nagin Chand vs. CIT (1938) 6 ITR 385 (Lah) : TC11R.213.

(3.) IN the assessment year in question, the ITO was certainly entitled to issue a notice under s. 22 (4) requiring the applicant to produce the account books of the three previous years, to test the correctness of the return submitted by him. There is therefore no substance in the argument advanced for the applicant that the books were not really required and assessment could have been made without those books since the books for the account year were duly submitted, as that would be substituting "assessee" for "ITO" in that section. It is the requirement of the ITO and not of the assessee that is material under that section. The ITO alone is the judge of his requirement. "His discretion to issue such notice is uncontrolled." : Per Wort, J., in Ananda vs. CIT AIR 1930 Pat 306. It is next contended that the ITO was bound to accept on the principles of res judicata the finding in the two previous assessment years that these books were lost. It is well settled both in England and in this country that the principle of estoppel by record or res judicata, applicable to decisions of Civil Courts, has no application to income -tax proceedings so as to prevent a decision in a prior year from being reopened in the assessment proceedings in a subsequent year because of the nature of enquiry and because the ITO is not a Court : CIT vs. Massey & Co. Ltd. AIR 1929 Mad 453, Sankaralinga vs. CIT AIR 1930 Mad 209 and Deokinandan & Sons vs. CIT AIR 1930 Lah 605 etc. In IRC vs. Sneath (1932) 17 Tax Cases 149 Lord Hanworth, M. R., observed at page 163 :