Res judicata does not strictly bar later income-tax reassessment, and older accounts may be called for in deduction enquiries.

Under the Income-tax Act, 1922, a prior assessment finding is not barred by strict res judicata in a later assessment year, because income-tax proceedings are not civil adjudications in the ordinary sense; however, an earlier factual acceptance cannot be displaced arbitrarily and reconsideration requires fresh material. The three-year restriction on calling for accounts applies in the special context of best-judgment assessment, not to a normal enquiry into the truth of a deduction claim. In such an enquiry, older accounts may be sought and non-production may justify an adverse inference under ordinary evidentiary principles.

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Issues: (i) Whether an income-tax authority is barred by res judicata or estoppel from re-opening in a later assessment year a question previously decided on the ownership of amounts standing in the names of female members of the assessee family; (ii) whether the Income-tax Officer could require production of accounts relating to a period beyond three years and draw an adverse inference from their non-production in an enquiry not amounting to a best-judgment assessment.

Issue (i): Whether an income-tax authority is barred by res judicata or estoppel from re-opening in a later assessment year a question previously decided on the ownership of amounts standing in the names of female members of the assessee family.

Analysis: The assessment authority, while acting judicially for income-tax purposes, is not a court in the strict sense. The statutory scheme, especially the limited deeming provision in Section 37 of the Income-tax Act, 1922, does not convert an assessment proceeding into a civil adjudication attracting the ordinary doctrine of res judicata. A prior acceptance of a factual basis in one year does not, by itself, forever preclude reconsideration in a subsequent year. At the same time, the authority cannot arbitrarily discard an earlier finding without fresh material; if new facts emerge, reconsideration is permissible.

Conclusion: The doctrine of res judicata does not strictly apply to the assessment authority, but reopening a concluded factual basis requires fresh facts; the contention of an absolute bar fails.

Issue (ii): Whether the Income-tax Officer could require production of accounts relating to a period beyond three years and draw an adverse inference from their non-production in an enquiry not amounting to a best-judgment assessment.

Analysis: The three-year restriction in the proviso to Section 22(4) of the Income-tax Act, 1922 was read as controlling the special situation where the officer proceeds to a best-judgment assessment under Section 23(4). Where, instead, the officer is conducting an enquiry into the truth of a deduction claim and is not making a best-judgment assessment, the officer may require relevant evidence, including older accounts, under the wider powers conferred by the Act. In such an enquiry, non-production of books may justify an adverse inference under the ordinary evidentiary rule reflected in Section 114 of the Evidence Act.

Conclusion: The Income-tax Officer was entitled to call for the accounts in the enquiry and to draw an adverse inference from their non-production.

Final Conclusion: The challenge to the reopening of the deduction claim and to the inference drawn from non-production of earlier books failed, and the assessment order was sustained.

Ratio Decidendi: A prior income-tax assessment finding is not barred from reconsideration in a later year by res judicata, and in an enquiry into a deduction claim the officer may require relevant evidence beyond three years and draw an adverse inference from its non-production, provided the case is not one governed by the special best-judgment restriction.

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