JUDGMENT
R.L. Narasimham, C.J. and B.N. Jha, J.
1. The following question has been referred to this Court under Section 66(1) of the Indian Income-tax Act, 1922 by the Appellate Tribunal:
Whether on the facts and circumstances of the case any portion of the sum of Rs. 35,012 in respect of which debit notes were received by the assessee could have been legally allowed as a deduction in the personal assessment of the assessee?
2. The assessee is an individual who carried on business of mica as a sole proprietor upto the 29th April, 1957. From the 30th April, 1957, this business of the assessee was taken over (including the assets and liabilities) by a firm in which the assessee had one-third share. When the assessee was carrying on business as the sole proprietor he had supplied mica to several foreign customers before 30th April 1954 and had received 85 per cent, of the sale proceeds through letters of credit. The balance of 15 per cent, was shown in the accounts as due to him from the foreign buyers. But the debit notes were received in 1959, i.e. after he had ceased to carry on business as an individual. He, however, claimed deduction in respect of the debit notes for the assessment year 1960-61 for which the relevant accounting year is the calendar year 1959.
3. As admittedly the assessee was not carrying on any business as an individual during the relevant accounting year he could not possibly claim the benefit of Section 24(2)(ii) of the
Indian Income-Tax Act, 1922, as rightly pointed out by the Appellate Assistant Commissioner. Moreover, the firm took over both the assets and liabilities of the assessee from 30th April 1957 and the debit notes could, therefore, have been claimed only by that firm. The assessee’s claim has thus no legal force. The Appellate Tribunal seems to be fully conscious of this legal position, because in paragraph 3 of its order dated the 26th June, 1964, it observes: “Since the assessee’s sole business was transferred to the firm as a going concern it was the firm which should have claimed deduction of the sum of Rs. 35,012.” Having thus correctly applied the principle of law, the Tribunal, however, thought that the decision of the Assistant Commissioner in respect of a similar loss for the year 1959-60 may justify allowing such deduction for the year 1960-61 also. Here, the Tribunal has committed a serious error. There can be no question of res judicata in
Income-tax proceedings (see Dwarkadas Kesardeo Morarka v. Commissioner of Income-Tax Central Bombay 44 I.T.R. 529 and Commissioner of Income-Tax, Madras v. Mr. P. Firm, Muar 56 I.T.R. 67). If the Appellate Assistant Commissioner, by an erroneous application of law allowed deduction for a similar loss in the year 1959-60, that cannot be taken as the basis for allowing deduction for the year in dispute, if the claim is not legally tenable. As the Tribunal has rightly not challenged the legal position taken by the Department it is not necessary to discuss this point at length. Nor can Section 24(2)(ii) of the Income-Tax Act come to the aid of the assessee. The deduction could have been claimed only by the firm which took over the assets and liabilities of the petitioner assessee.
4. For these reasons, we answer the question in the negative and hold that the sum of Rs. 35,012/- or any portion thereof in respect of which debit notes were received by the assessee could not have been legally allowed as a deduction in the personal assessment of the assessee. There will be no order for costs, because there has been no appearance for the other side.