Final income-tax assessment cannot usually be reopened in winding-up proceedings absent fraud or other exceptional grounds.

An income-tax assessment that has become final is not ordinarily open to re-examination in liquidation or insolvency proceedings merely because the company later enters winding up. The court distinguished an income-tax assessment from an ordinary judgment debt and treated the assessment as binding unless exceptional circumstances, such as fraud, justify interference. The absence of audited accounts or a later claim of loss was insufficient to displace the assessed liability, especially where the assessee had failed to file the required return and had not appealed the assessment order. The tax claim therefore remained a provable debt on the basis of the assessment.

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Issues: Whether an income-tax assessment, which had become final against the assessee, could be reopened or re-examined in liquidation or insolvency proceedings so as to dispute the provable debt claimed by the Income-tax Officer.

Analysis: The liquidation court was held to be governed by the principles applicable in insolvency when dealing with provable debts, but the Court drew a distinction between a judgment debt and an income-tax assessment. An assessment made under the special procedure of the Income-tax Act was not to be treated as open to general reconsideration merely because the company later entered liquidation. The Court followed the view that interference with a final assessment is justified, if at all, only in exceptional circumstances such as fraud. The absence of audited accounts or a later assertion of loss did not furnish a sufficient basis to reopen the assessment, particularly when the assessee itself had failed to file the required return and no appeal had been taken against the assessment order.

Conclusion: The assessment could not be reopened in the winding-up proceedings, and the tax claim remained provable as assessed.

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