Final income-tax assessment not reopened in liquidation absent fraud; insolvency court cannot re-examine a duly determined tax liability.

An income-tax assessment that had attained finality without appeal, and had been made under the statutory procedure for non-filing of return and non-production of accounts, was treated as binding in liquidation proceedings. The tax liability was held to stand on a different footing from an ordinary judgment debt, so the insolvency court could not reopen or re-examine it merely because insolvency had intervened. Interference was recognised only where the assessment was vitiated by fraud, and no fraud was alleged. The assessment therefore remained payable and could not be reopened in liquidation.

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Issues: Whether an income-tax assessment, once final against the assessee, could be reopened or re-examined in liquidation or insolvency proceedings, and whether any interference was permissible in the absence of fraud.

Analysis: The assessment had become final because no appeal had been taken against it and it had been made under the statutory procedure applicable when the return was not filed and accounts were not produced. The Court held that a tax assessment stands on a different footing from an ordinary judgment debt, and that the insolvency court should not enlarge the scope of interference with a liability that has already been finally determined under the special income-tax machinery. The Court also accepted that interference in such a case would be justified only where the assessment is vitiated by fraud, and no such allegation existed here.

Conclusion: The assessment could not be reopened in the liquidation proceedings, and the claim of the Income-tax Officer remained payable.

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