1963 PLP 709 (PTD)

For the two subsequent assessment years 1950‑51 and 1952‑53 there were cash credits to the extent of Rs. 8,676 in the account year 1950‑51 and Rs. 105,908 in the account year 1952‑

53. When the assessee was asked to explain this amount he again pleaded that the source was the money brought from Calcutta amounting to Rs. 6,90,000 supported by the two bank certificates. But the Income‑tax Officer rejected the story of money brought from India in the absence of bank pass‑books and evidence as to how money was transferred and evidence of home chest account to support that money was kept all along at home and not in any bank in Pakistan. So, the two unexplained cash credits were accordingly assessed as income from undisclosed source, namely, Rs. 8,676 to the assessment year 1950‑51 and Rs. 105,908 to the assessment year 1952‑

53. In appeal the Appellate Assistant Commissioner deleted the additions holding that the assessee had Rs. 6,71,326 in the two banks of Calcutta before the independence and in support of the Appellate Assistant Commissioner's acceptance of the money transferred from India, he found that the home chest account was produced before the Income‑tax Officer at the time of assessment in the year 1949‑50 which was examined by the Income‑tax Officer who on being satisfied treated the difference between bank's figures of Rs. 6,72,326‑4‑9 and the appellant's statement of money brought from Calcutta being Rs. 6,90,000 as the income from undisclosed source. The appellant also produced before the Appellate Assistant Commissioner at the time of hearing of the appeal for the assessment year 1950‑51 a certificate from the Notary Public dated 16th July 1955, certifying that the certificate granted by the National Bank of Bengal and the accounts of the bank were compared and found to be correct. Considering all these materials the Appellate Assistant Com missioner deleted the additions of Rs. 8,676 from the assessment year 1950‑51 and Rs. 1,05,908 from the assessment year 1952‑53 holding that the appellant had Rs. 6,72,326 in the two Calcutta banks before Independence which amount he brought to Pakistan before March, 1948 through unofficial channel out of which money the investment was made in the account year ending on the 31st March 1952 for the assessment year 1952‑

53. In the assessment year 1953‑54 the notice under section 22(2) not having been complied with, the assessment under section 23(4) was made but it was set aside by the Appellate Assistant Com missioner on the 10th August 1958. So the position is this that the question of cash credit being treated as income from undisclosed source for the assessment years 1949‑50 and 1953‑54 is still not decided but it has been decided for the years 1950‑51 and 1952‑53 by the Appellate Assistant Commissioner against which there was no further appeal to the Tribunal by the Department which had accepted the decision of the two years. In the assessment year 1954‑55, which is under reference, the Income‑tax Officer found the balance of Rs. 2,56,026 as income partly from business, partly from house property, directors' remuneration and partly from undisclosed source. The amount of income from undisclosed source thus stood at (R s. 2,56,026‑Rs. 20,817=)Rs. 2,35,209 according to the Income-tax Officer for the year 1954‑

55. In view of the department's acceptance of the story of money brought from India for the assessment years 1950‑51 and 1952‑53 the Tribunal came to the conclusion that it would be unreasonable on the part of the Tribunal on the facts of the case to hold that the matter relating to the assessee's having brought into Pakistan a large sum of money is still open at this stage for fresh investigation. Therefore, the Tribunal set aside the assessment and directed that fresh assessment be made after subjecting the case to scrutiny in the light of the statement of credits and debits filed by the assessee as also by the Income‑tax Officer before the Tribunal in course of hearing of the appeal; "A copy of the statement is forwarded herewith to the Income‑tax Officer for carrying on the investigation and making a fresh lucidly worded assessment. The appeal is accordingly allowed in part." Against this decision the Commissioner of Income‑tax asked for reference on the point of law formulated in the letter of reference. It is contended on behalf of the Commissioner of Income‑tax, by Mr. A. F. M. Mesbahuddin, the learned Advocate that the principle of res judicata is not applicable to the decisions of the Income‑tax Authorities. The assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and the decisions given in an assessment for an earlier year are not binding either on the assessee or the Department in a subsequent year. His second contention is that even if the principle of res judicata applies it will not apply in the present case because the decision of the Appellate Assistant Commissioner in appeal against the assessment years 1950‑51 and 1952‑53 was based on the assessment by the Income‑tax Officer in the assessment year 19-9‑50 and when that assessment has been set aside by the Appellate Assistant Commissioner, the bottom of the decision of the Appellate Assistant Commissioner in appeal against the assessment of years 1950‑51 and 1951‑52 was knocked out and as such, it cannot operate as res judicata and everything is now open to the Income‑tax Authority to reconsider the whole matter afresh. As to the first point it is true that as a general rule the principle of res judicata is not applicable to the decisions of Income‑tax Authorities. But this rule is subject to limitation, and the limitation is that there should be finality and certainty in all litigations including litigation arising out of the Income‑tax Act. On that principle an earlier decision on the same question cannot, in the absence of fresh materials, be re‑opened if that decision is not arbitrary or perverse and is arrived at after due inquiry. In other words though res judicata as defined in the Code of Civil Procedure is not applicable, the principle underlying res judicata is applicable in all cases including the Income‑tax cases. Therefore,) as a general principle it cannot be said that principle of res judicatal is not applicable in income‑tax cases in any circumstances. If there) are fresh materials in the subsequent years which prove that on account of suppression of those materials which were not available' then to the Income‑tax Authorities, the assessee escaped income of a particular year the Income‑tax Officer can re‑open the self same question in assessment of that particular year with reference to the fresh materials, otherwise the provision of section 34 of the Income‑tax Act which provides for fresh assessment of the income‑tax of an assessee on account of the year already assessed would be defeated. But the question is where there is no fresh material or disclosure of any new facts or it is not found that the previous assessment was perverse or arbitrary can it be said that the Income‑tax Authority is entitled to re‑open the same question over again? We are of the opinion that the Income‑tax Authority cannot do that and the principle of res judicata will come into operation in such a case. In the present case it appears from the letter of reference as well as from the judgment of the Appellate Tribunal that there was no fresh material to enable the Income‑tax Authority' to re‑open the same question already decided by the Appellate Assistant Commissioner in connection with the previous assessment years 1951‑52 and 1952‑

53. There is a further limitation to the general rule that the principle of res judicata is not applicable to the decision of Income‑tax Authority, namely, that the effect of revising a decision in a subsequent year should not lead to injustice and the Court t must always be anxious to avoid injustice to the assessee. For instance, if the Income‑tax Officer is allowed to re‑open the self same question already decided, the assessee will be deprived of the benefit which he has already obtained on account of the decision of the Appellate Assistant Commissioner and he will be further deprived of the benefit of that decision that will follow in subsequent years. If the Court is of opinion that departing from earlier decision will lead to the injustice or denial of justice, the Court may prevent the Income‑tax Authority from doing something which would be unjust and inequitable. These limitations to the general rule are not only applicable to the Income‑tax Authority, strictly so called, but also the Income‑tax Appellate Tribunal, for, though, the Appellate Tribunal is not included in the class of Income‑tax Authorities in the Act, it is a part of the machinery for collection of income‑tax, and in support of our view we can refer to the decision of the Madras High Court in the case of T. M. M. Sankaralinga Nadar & Bros' v. Commissioner of Income‑tax, Madras (A I R 1930 Mad. 209) and of the Bombay High Court in the case of H. A. Shah & Co. v. Commissioner of Income‑tax and Excess Profits Tax, Bombay City ((1956) 30 I T R 618) referred to in the letter of reference. Now coming to the second contention of the learned Advocate for the appellant, the Commissioner of Income‑tax, East Pakistan, it is no doubt true that the Appellate Assistant Commissioner, at the time of hearing of the appeal against the assessment years 1950‑5ll and 1952‑53 referred to the statement of the Income‑tax Officer in his order of assessment for the year 1949‑50 which was ultimately set aside on appeal. But the Appellate Assistant Commissioner has not based his findings only on what the Income‑tax Officer has stated in the order of assess ment of the year 1949‑

50. From the judgment of the Appellate Assistant Commissioner it appears that the Appellate Assistant Commissioner not only set aside the assessment order of the Income‑tax Officer in the assessment years 1950‑51 and 1952‑53 but also scrutinised all material evidence produced before it as well as before the Income‑tax Officer at the time of assessment for the assessment years 1950‑51 and 1952‑53 and after due inquiry and consideration of those materials the Appellate Assistant Commissioner found that the appellant had an amount of Rs. 6,72,326‑4‑9 pies in the two banks in Calcutta before Partition, vide page 27 of the paper book line about 1.5. There fore, we cannot accept also the second contention of Mr. Mesbahuddin, the learned Advocate for the Commissioner of Income‑tax. The result, therefore is that we answer the question referred to us in the affirmative. Considering the facts and circumstances of this case we pass no order as to costs in this reference. M. R. KHAN, J.‑I agree with My Lord, the Chief Justice. Question answered in the affirmative.