Best judgment assessment and no res judicata in tax proceedings where notice compliance and fresh material governed later years.

Failure to comply fully with a notice requiring production of account books can justify a best judgment assessment under section 23(4), even where the assessee produced books for the relevant year, because the Income-tax Officer may require earlier years' books to verify the return. Prior acceptance of an explanation for loss of books does not operate as res judicata or estoppel in later income-tax years; it may be departed from where the earlier acceptance was not reached after due enquiry or where fresh material supports a different view. A challenge to the estimated quantum raises no question of law unless it was properly raised before the Tribunal and in the reference application.

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Issues: (i) whether failure to produce account books called for under notice under section 22(4) attracted a best judgment assessment under section 23(4) despite production of books for the relevant year; (ii) whether the earlier acceptance of the assessee's explanation of loss of books operated as res judicata or estoppel in later assessment years; and (iii) whether the challenge to the quantum of assessment raised any question of law.

Issue (i): whether failure to produce account books called for under notice under section 22(4) attracted a best judgment assessment under section 23(4) despite production of books for the relevant year.

Analysis: Section 23(4) was held to apply where the assessee failed to comply with all the terms of the notice issued under section 22(4), and a partial default was treated as sufficient to attract the provision. The requirement under section 22(4) was that of the Income-tax Officer, not of the assessee, and the Officer was entitled to require production of the previous years' books to test the return.

Conclusion: The assessment under section 23(4) was validly made and the contention of the assessee failed.

Issue (ii): whether the earlier acceptance of the assessee's explanation of loss of books operated as res judicata or estoppel in later assessment years.

Analysis: The doctrine of res judicata or estoppel by record was held not to apply to income-tax proceedings. A previous finding could be departed from only where it was not reached after due enquiry, was arbitrary, or fresh facts had emerged justifying a different conclusion. On the facts, the earlier acceptance of the explanation did not bind the authorities because the prior decision was not shown to have been reached after due enquiry and the later record disclosed material supporting the contrary finding.

Conclusion: The earlier finding did not operate as res judicata or estoppel, and the Income-tax Officer was not barred from rejecting the explanation in the later year.

Issue (iii): whether the challenge to the quantum of assessment raised any question of law.

Analysis: The grievance as to the estimated income was not raised in the reference application or in the application under section 66(2), and it had not been argued before the Tribunal. Since it did not arise from the Tribunal's order on the facts found, no question of law arose for reference.

Conclusion: The challenge to the quantum was not entertainable as a question of law.

Final Conclusion: The application failed in view of the assessee's non-compliance with the notice, the inapplicability of res judicata in income-tax proceedings, and the absence of any referable question of law on the alleged excessiveness of the assessment.

Ratio Decidendi: In income-tax proceedings, failure to comply with any term of a notice under section 22(4) can attract a best judgment assessment under section 23(4), and prior year findings do not bind later assessments by res judicata, though they may be departed from only on proper grounds and fresh material.

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