Bad-debt claims in income tax can be revisited where fresh material supports a later factual finding of irrecoverability.

In income-tax proceedings, res judicata does not strictly apply, but an assessing authority should not depart from an earlier view on the same claim without fresh facts or material. Here, the bad-debt claim was re-examined on later material, including account notes and hearing the assessee, and the Commissioner found the debts had become bad many years before the accounting year. Because that finding was supported by evidence and the issue was one of fact, the court found no illegality in the changed conclusion and upheld the disallowance against the assessee.

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Issues: Whether, in income-tax proceedings, the authorities were justified in disallowing a bad-debt claim for the assessment year 1935-36 on the footing that the debts had become bad long before the accounting year, notwithstanding that in the earlier year the same claim had been rejected as premature because the debts had not then become bad.

Analysis: The principle of res judicata does not apply to income-tax proceedings, but an assessing authority should not arbitrarily depart from an earlier determination on the same matter unless fresh facts or material are brought before it. On the second occasion, the claim was thoroughly examined, the assessee and his advocate were heard, account notes were produced, and the Commissioner found on that material that the debts were old and had become bad many years earlier. There was nothing to show that this material had been before the authorities in the earlier year. Since the question whether a debt had become bad long before was one of fact and the later finding was supported by evidence, the Court saw no illegality in the changed conclusion.

Conclusion: The disallowance was held to be lawful, and the answer to the referred question was given in the affirmative, against the assessee and in favour of the Revenue.

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