P L D 1965 Supreme Court 171 (PLP)

B. Z. KAIKAUS, J.‑This is an appeal against an order of the High Court of East Pakistan answering a question referred to it under section 66 of the Income‑tax Act against the Commissioner of Income‑tax who is the appellant before us. The brief facts giving rise to the reference under section 66 are the following. It was for the assessment year 1949‑50 that Wahiduzzaman respondent filed his first income‑tax return in Pakistan showing income from business started in 1948‑

49. A sum of Rs.75,000 had been invested by the respondent in the business. The Income tax Officer called upon the respondent to explain the source of this money. The respondent alleged that he had brought a sum of Rs. 6,90,000 from Calcutta immediately after the Partition of India and that the disputed investment was out of this amount. He produced before the Income‑tax Officer two certificates from accountants of two banks which according to the concise statement of the appellant were defunct banks, the Sterling Bank Limited, Bahawalpur and the National Bank of Bengal Limited, Calcutta, dated 30‑12‑1949 and 11‑11‑1952 respectively showing that the respondent had a credit balance on 11‑8‑1947 of Rs.185,326‑4‑9 in the first and of Rs. 4,87,000 in the second named bank, the total amount being Rs. 6,72,326‑4‑

9. The sum of Rs. 17,674 remained unexplained. It is the case of both parties in their concise statements that the Income‑tax Officer accepted the statement of the respondent without any enquiry, but added back the sum of Rs. 17,674 which had remained unexplained. The respondent filed an appeal against his assessment and the Appellate Assistant Commissioner set aside the order of the Income‑tax Officer and directed a fresh assessment after a full inquiry. This assessment is still pending and has not been decided. The income‑tax return of the respondent for the assessment year 1950‑51 showed cash credit to the extent of Rs. 8,

676. The successor of the Income‑tax Officer who had dealt with the assessment of 1949‑50 called upon the respondent to explain the source of this sum of Rs. 8,676 and again the respondent stated that this money was out of the sum of Rs. 6,90,000 which he had brought from Calcutta. The Income‑tax Officer by an order which dealt fully with the matter refused to accept this explanation and added the sum of Rs. 8,676 to the income shown in the return as income from undisclosed sources. There was an appeal by the respondent and by an order to which more detailed reference will presently be made the Appellate Assistant Commis sioner held that the respondent had a source of money for the amount of Rs. 8,676 and that this sum could not be regarded as income from undisclosed sources. There was no appeal against this order by the Income‑tax Department. In 1952‑53 again the return filed by the respondent showed a cash credit of Rs. 1,05,908 and again the respondent stated that this was out of the money brought from India. The Income‑tax Officer again rejected the plea and regarded the unexplained money as income from undisclosed sources. The respondent filed an appeal against the order of the Income‑tax Officer and the Income‑tax Appellate Assistant Commissioner again set aside the order saying that he had already while dealing with the 1950‑51 assessment held in favour of the respondent as to his having brought Rs. 6,90,000 from India. Against this order too the Income‑tax Department filed no appeal. We come now to the assessment out of which the present appeal arises. During the assessment for the year 1954‑55 a sum of Rs. 2,56,026 was found to have been invested by the respondent the source of which was not shown and on being questioned the respondent repeated the plea that this was out of the sum of Rs. 6,90,000 which he had brought from India. The Income‑tax Officer went exhaustively into the question as to whether money was brought from India and reached a finding against the respondent. He also stated in the order that according to his, local enquiry the respondent "had made a huge amount of extra margin of profit besides what has been shown in the account books". He assessed the income of the respondent at Rs. 2,22,

599. An appeal was filed direct from the order of the Income‑tax officer to the Appellate Tribunal. The Tribunal was of the opinion that in view of the failure of the Income‑tax Department to file appeals against the orders of the Appellate Assistant Commissioner for the years 1950‑51 and 1952‑53 it was not reasonable to re‑open the question whether the respondent had in fact brought this money from India. The Tribunal said: "Undoubtedly a different conclusion can be arrived at if the facts are found to have been different than those recorded or fresh facts emerge which throw a new light on the situation. We are informed by Mr. Wahiduzzaman at the time of hearing that the home chest account was no longer available as owing to frequent change of residences this book has been lost. We are of the opinion that it would be unreasonable on our part in the facts of the case to hold that the matter relating to assessee's having brought from Calcutta a large sum of money is still open at this time for fresh investigation." The reference to the home chest account in this order is due to the fact that according to the case of the respondent he was keeping the money he had brought from India in a chest and not in any bank and he had produced no account relating to this home chest before the Income‑tax Officer in the 1954‑55 assessment. The Tribunal found however that even accepting this plea of the respondent there was still a sum of Rs. 87,000 which was unaccounted for. The Tribunal remanded the case to the Income tax Officer for making a fresh assessment in the light of their findings. The Tribunal made no reference to the "huge amount of extra margin of profit" which appeared in the order of the Income‑tax Officer. After the remand the Income‑tax Officer was to regard the finding as to the bringing of Rs. 6,90,000 as final and was to make a fresh assessment after considering questions relating to the unexplained amount of Rs.87,

000. The Income‑tax Commissioner was not satisfied with the finding of the Tribunal that it was not proper under the circum stances to re‑open the question as to the bringing of money from India by the respondent and he applied for a reference of the questions of law arising out of the order of the Tribunal to the High Court. The following question was then referred to the High Court :‑ "In view of the facts and circumstances of the case whether the Tribunal was justified in holding that the assessee having brought into Pakistan a large sum of money amounting to Rs. 6,90,000 is not open to a fresh investigation on the principle of res judicata?" The High Court has answered this question in favour of the respondent. It has held that the principle of res judicata is not applicable to the decisions of the Income‑tax Authorities, but this is subject to the limitation that there will be a finality and certainty in all litigation and on this principle an earlier decision on the same question cannot in the absence of fresh evidence be reopened if the decision is not arbitrary or perverse and is arrived at after due inquiry. On behalf of the Income‑tax Commissioner it has been urged before us that there is no such exception to the inapplicability of the rule of res judicata to decisions of Income‑tax Authorities as has been found by the High Court. It is further urged that even if the principle of res judicata be applicable to any extent the order of the Appellate Assistant Commissioner which is said to have barred inquiry was not such as would prevent the re‑opening of the matter. It is also contended that the decision of the Appellate Assistant Commissioner with respect to 1950‑51 related to the amount in question in that year and could not bar an enquiry with respect to amounts in dispute in subsequent years. It will be proper before proceeding to consider the law on the point involved, to examine the decision which is pleaded as a bar. The question before the Appellate Assistant Commissioner was whether a sum of Rs.8,676 came out of a sum of Rs. 6,90,000 which the respondent alleged he had brought from India. The evidence produced before the Income‑tax Officer consisted only of two certificates from accountants of what the Income‑tax Officer described as "two small and obscure banks one of which was in liquidation". It will be proper to reproduce here the relevant portion of the order of the Income‑tax Officer. It runs : "The assessee was asked to state the source of money which he deposited with this firm. It is stated by him that he brought about Rs.6,00,000 from Calcutta and the deposit with this firm was made out of the money brought from Calcutta. Assessee was asked to produce evidence to prove that he had Rs.6,00,000 in India and the money was actually transferred from India to Pakistan. But no account, evidence or any Bank pass books could be produced in support of the alleged fund in India and transfer of money from Calcutta to Pakistan. He merely produced two certificates from the accountants of two small and obscure banks of Calcutta one of which is now in liquidation, to the effect that the assessee had several lacs of rupees with these two banks in August 1947. These certificates are not from the Chief Officers of the Banks. Supporting Bank pass‑books could not also be produced in support of these two certificates and no accounts could be produced to show how and when the money was transferred to Pakistan and how and where the money was kept in Pakistan after the alleged transfer of the money from Calcutta. The home chest accounts could not also be shown to me. The explanation regarding the sources of money deposited with t4,e firms' accounts cannot therefore be accepted." The Appellate Assistant Commissioner dealt with the matter thus: "From the records I find that at the time of assessment of 1949‑50 the appellant filed a written statement on 28‑3‑1953 stating that on the eve of Partition of India the , appellant had Bank balance of Rs. 6,72,326‑4‑9 and while he came to Pakistan he brought Rs.6,90,000 out of which Rs. 6,72,326‑4‑9 represent Bank deposits and balance was obtained by selling his house hold furniture and Motor cars and in his letter filed on 7‑12‑53 the appellant stated that the amount was removed from Calcutta after Partition and the same was credited to personal account of the appellant in 1948. The order sheet of 1949‑50 further shows that home tababil account was produced before the I. T. O. who checked the same but did not find any satisfactory explanation for Rs. 7,674 only. Thus from the previous records it appears that the appellant stated in writing that he brought from Calcutta Rs. 6,90,000 in 1948 and not Rs. 6 lacs as stated by the I. T. O. The order sheet of 1949‑50 shows that home chest account was produced before the I. T. O. and from the order in the order sheet of 1949‑50 it further appears that on examination of home chest account the I. T. O. was then satisfied about the bringing of Rs. 6,72,326‑4‑

9. The Bank certificates show that the appellant had current accounts with National Bank of Bengal Limited, 4, Synagogue Street, Calcutta and that he had credit balance of Rs. 4,87,000 on 11th August 1947, and another certificate shows that the appellant had deposits of Rs. 1,85,326‑4‑9 in his credit on 11th August 1947, in Sterling Bank Ltd., Bhawaipur branch and that these two certificates were signed by the accountants of the same Banks. The same certificates contain the seals of the two respective banks. The appellant also has produced a certificate from Notary Public dated 16‑7‑55 certifying that he compared the original certificates granted by the National Bank of Bengal Ltd. with the accounts of the same bank and found to be true. From the Bank certificates and the certificate from the Notary Public it is clear that the appellant had amount of Rs. 6,72,326‑4‑9 in the two Banks in Calcutta before Partition. The learned pleader for the appellant submits that this huge account was brought by the appellant before March 1948 by unofficial channel which was also stated before the

1. T. O. at the time of assessment in question and also at the time of assessment of earlier years. In the absence of any other deposits evidence to prove that these certificates were false, in my view

1. T. O. had no material to say that the appellant had no such amount of Rs. 8,676 and as he states that the amount was brought in 1948 through unofficial channel for which no evidence can be given by him and as the I. T. O. had nothing in the records from which he can say that this amount was earned by the appellant in Pakistan, from any known source I think I. T. O. was not justified to include the amount as income from undisclosed source only because the appellant could not prove how he transferred the money from India to Pakistan." As already observed the evidence produced in the case consisted only of two certificates signed by the accountants of the two banks, that is, the National Bank of Bengal Ltd., and the Sterling Bank Limited to the effect that the respondent had in those banks on the 11th August 1947, a deposit of a total sum of Rs. 6,72,326‑4‑

9. The respondent had orally pleaded that he had brought the sum of Rs. 6,90,000 by. unofficial channels. He had claimed that the sum which he brought was kept in a home chest and the order sheet in respect of assessment proceedings for the year 1949‑50 showed t: chest account was produced before the Income‑tax Officer. This is all the material that was before the Appellate Assistant Commissioner for coining to a finding that a sum of Rs. 6,90,000 had been brought by the respondent from Calcutta. As to the small difference between Rs. 5,90,000 and Rs. 6,72,326‑4‑9 it may be explained that in the assessment proceedings for 1949‑50 this amount the respondent had claimed as having been obtained by the sale of his cars etc., though this fact does not appear in the order of the Appellate Assistant Commissioner. Now the first observation to be made is that no copies of any accounts from the two banks had been placed before the Income tax Authorities. No explanation was offered as to why instead of copies of accounts certificates from accountants were produced. Assuming, however, that the certificates were genuine and could be relied upon for proof of deposit in those banks on the 11th August 1947, there was no proof as to withdrawal of these sums from the two banks. Even the dates of withdrawal were not stated. The Income‑tax, Officer had said that the two banks were small and obscure and one of them was in liquidation. The Appellate Assistant Commissioner did not contradict these statements and yet made no reference to them as if they were irrelevant. The Appellate Assistant Commissioner did not consider that the non‑production of any entry relating to with drawal would itself be presumptive proof that there had been no withdrawal. There was nothing said either in the statement of the respondent or in the arguments before the Income‑tax Officer or the Appellate Assistant Commissioner as to why proof of withdrawal in the form of a copy of account was not furnished. With respect to the bringing of money into Pakistan there was nothing, but the word of the respondent. The plea on his behalf was that this amount he had kept in a home chest. No accounts of this home chest were produced before the Income‑tax Officer or Appellate Assistant Commissioner and no explanation for such non‑production was given. The Appellate Assistant Commissioner referred to the fact that the order sheet of the 1949‑50 assessment showed production of some account of the home chest, but did not deal with the non‑production of this account in the assessment year with which he was dealing. The Income‑tax Officer had said in his order that this account had not been produced. No effort was made by the Appellate Assistant Commissioner to find out why the money was kept in a home chest. The respondent offered no explanation as to why it was not kept in a bank. The Appellate Assistant Commissioner did not enquire whether the respondent had in fact any bank account. Had he made such enquiries he would have found as was found by the Income‑tax Officer while dealing with the assessment for 1954‑55, that the respondent had accounts in three banks of one of which he was a Vice‑Chairman. He would similarly have found if he had made proper enquiries that the respondent had obtained over‑drafts for the payment of money which he owed for the import of textile goods and was paying interest on the over‑drafts while according to him a large amount of money was lying in his chest. The Appellate Assistant Commissioner had merely on the basis of two certificates thought fit to accept firstly secondly that it was withdrawn ; thirdly that it had been brought into Pakistan and fourthly that it was kept in a chest. Having examined the decision of the Appellate Assistant Commissioner we proceed to consider the principle applicable for determining the bar which may be created by a previous decision of an Income‑tax Authority. Where there is no statutory provision barring reopening of a matter the applicability of the principle of res judicata depends on the necessity of giving finality to litigation and the injustice of vexing a person twice in respect of the same matter and these being only general considera tions relating to administration of justice with no technical and defined limits the applicability of res judicata in such cases will be governed by considerations arising with respect to the particular statute under which a matter has been determined the dominant consideration always being that the cause of justice be advanced. The principle of res judicata can be applied with strictness to cases before Courts or before Judicial Tribunals where there are before the Court or Tribunal two contesting parties each trying to substantiate its own case. It cannot however b applied with the same strictness to decisions of Income‑to Authorities. The Income‑tax Officer is not a Tribunal that decide a question between the Income‑tax Commissioner and the assessee. The Income‑tax Commissioner does not lead evidence before the Income‑tax Officer and no appeal lies from the order of the Income‑tax Officer at the instance of the Income‑tax Commissioner, the right of appeal being vested in the assessee only. The position of the Income‑tax Officer is that of an agent of the Income‑tax Commissioner or an officer authorised by the Income‑tax Commissioner to determine the amount of tax payable. The assessee files a return as to his liability to pay tax and the Income‑tax Officer on behalf of the Income‑tax Commissioner either accepts the return or rejects it wholly or partly. The acceptance of an explanation or plea or statement of accounts by the Income‑tax Officer though in one sense a decision, is more like an acceptance by the Income‑tax Officer of the plea taken up by the assessee, or an admission that the plea is correct. It is true that so far as the order of the Appellate Assistant Commissioner is concerned there is a right of appeal in the Income‑tax Commissioner, but the foundation of the proceedings is the order of the Income‑tax Officer. The provision in section 34 which permits the Income‑tax Officer himself to reopen an assessment when some income has escaped assessment, etc. also supports the conclusion that the position of the Income‑tax Officer is not that of Judicial Tribunal deciding a matter between two contending parties, but rather that of a person acting on behalf of the department who is charged with the duty of seeing that persons pay the amount of income‑tax to which they are in fact liable. Under the circumstances the ends of justice will be served by confining the bar of res judicata in relation to decisions of Income‑tax Authorities to cases where the decision is not clearly open to some objection. It should be a decision which is reached after proper enquiry, which is such as could reasonably have been reached on the material before the authority, and which does not suffer from such a defect as would render it liable to be set aside under section 100, C. P: C: in second appeal if it was a decision of a civil Court. Also a matter can always be re‑opened on the ground that fresh evidence having a material bearing on the point decided is available. Reverting to the facts of the present case it is hardly possible to contend that the conclusion reached by the Appellate Assistant` Commissioner who decided the assessment for the year 1950‑51 could be reached by a person acting reasonably. We have already made observations as to the defects in the order of the Appellate Assistant Commissioner. Apart from other objections the simple defect that he did not consider the total absence of any proof of withdrawal of the amount from the banks is sufficient to vitiate his finding. He said nothing as to why the account relating to withdrawal was not produced and before him the respondent` himself had given no explanation as to why this was not done. Obviously there was a missing link in the evidence and in fact it was a case of a finding on no evidence. No person acting reasonably could have reached the decision that he reached. We will now consider what the situation was before the Income‑tax Appellate Tribunal when it said that it was not reasonable to re‑open the finding of the Appellate Assistant Commissioner. They had before them the previous records containing the orders of the Income‑tax Officer as well as the Appellate Assistant Commissioner. The defects in the order of the Appellate Assistant Commissioner should have been clear to the Appellate Tribunal. But before the Appellate Tribunal there were even further facts. There was before them the order of the Income‑tax Officer under appeal in which the matter had been exhaustively dealt with. The Income‑tax Officer had said (i) that the assessee produced no evidence to show that these amounts were withdrawn from the banks ; (ii) that the Sterling Bank Limited had suspended all its activities in 1948 ; (iii) that the assessee was taking the plea that he kept the money in a home chest whereas he had accounts in three banks (a) Lloyds Bank Limited, Dacca ; (b) East Pakistan Provincial Co‑operative Bank, Dacca ; and (c) Imperial Bank Limited, Dacca; he was himself the Vice‑Chairman of the East Pakistan Provincial Co‑operative Bank and had been connected all along with banking business ; and he had from 1950‑51 to 1953‑54 imported textiles for which he had secured an over‑draft from the Central Bank of India, Ltd., Dacca, for a sum of Rs. 1,11;927 and for this sum he had paid interest even for 1950‑51 financial year. The Income‑tax Officer had also referred to the fact that according to his "local inquiry the respondent had a huge margin of profits which did not appear in his account books". Yet, the whole reasoning of the Tribunal is contained in the extract already reproduced. Orally before them a plea had been taken that the account book of the home chest had been lost which plea the Appellate Tribunal thought fit to accept although the plea had not been taken before the Income‑tax Officer or the Appellate Assistant Commissioner. Even if the additional reasoning of the Income‑tax Officer in the assessment year of 1954‑55 was not there the order of the Appellate Assistant Commissioner of 1950‑51 could not in the circumstances have constituted a bar, but the situation was even stronger against the respondent in view of what had been said in the order under appeal. There was even a reference to a huge margin of profit to which the Income‑tax Tribunal did not advert. A further point to be noticed is this. The order of the Appellate Assistant Commissioner does not record a positive finding that the amount of Rs. 6,90,000 was, brought into Pakistan. His finding is contained in the last portion of the extract from his order which begins with the words "in the absence of any other deposits". In the first sentence of this portion , the Appellate Assistant Commissioner simply says that the Income‑tax Officer had no material before him for a negative finding as to the amount of Rs. 6,72,326‑4‑

9. In the next sentence all that is said is that the appellant had a source to bring the amount of Rs. 8,676 and there is nothing in the records showing that the amount was earned in Pakistan. There is no proper finding here that the respondent brought Rs. 6,90,000 from Calcutta. In accordance with the principle of res judicata only that part of a finding becomes res judicata which is essential for sustaining the order. Even from this point of view the order of the Appellate Assistant Commissioner was no bar to further inquiry. We find that there were no good grounds for Income‑tax Appellate Tribunal refusing to re‑open the question of bringing of Rs. 6,90,000 from Calcutta. We accept this appeal and setting aside the order of the High Court answer the question referred in the negative. There is no order as to costs. A. H. Appeal accepted.