Per Dr. Balasubramanian, Vice President - The excess profits tax assessment of this assessee for the chargeable accounting period ending 30-9-1943 year of assessment 1944-45 was reopened by the Excess Profits Tax Officer (EPTO) consequent to a disallowance of a sum of Rs. 3,35,938 in the income-tax assessment. This latter sum was assessed to income-tax also in a reassessment. Rejecting the assessees objection, the EPTO completed the fresh assessment and demanded the extra tax payable. Before the Commissioner (Appeals), the assessee challenged the validity of the assessment itself and the addition of Rs. 6,35,938 to the profits liable to excess profit tax. The Commissioner (Appeals) decided the matter against the assessee on both the points. Hence, the appeal before the Tribunal.
2. Before the Tribunal, elaborate grounds of appeal were taken dealing with the reopening as well as quantum of reassessment. An additional ground was raised that the conditions necessary for the issue of a notice under action 15 of the Excess Profits Tax Act, 1940 (the EPT Act) were absent in the assessees case. The notice was issued after a lapse of about 35 years from the relevant accounting year. The income-tax reassessment having been completed by about 15-2-1954 and no proceedings for excess profit tax reassessment having been started for more than two decades, the reopening was illegal and inequitable. After hearing the objections of the learned counsel for the department, the additional ground was admitted. The additional ground went to the root of the matter and factual submissions of the department with regard to this ground were necessary to mete out justice. It was found that the question of long delay was taken up even before the EPTO.
3. Both the original income-tax assessment under section 23(3) of the Indian Income-tax Act, 1922 (the 1922 Act) and the excess profits tax assessment under section 14(1) of the Act were made on 31-7-1945. On 25-3-1949 the income-tax assessment was reopened. The excess profit tax assessment consequential to the same was also reopened on the same day under section 15(1). Reopening the income-tax assessment a second time, a reassessment under section 23(3) read with section 34 of the 1922 Act was made on 15-2-1954 resulting in an addition to the total income of Rs. 6,35,938. This order went up to the Tribunal on appeal. The Tribunals order upholding the addition of Rs. 6,35,938 was passed on 3-12-1962. No reference application having been filed, this reassessment 1954 has become final. The EPTO reopened the excess profit tax assessment under section 15 to give effect to the addition made to the income-tax assessment of Rs. 6,35,938 on 22-7-1976, i.e. exactly 22 years after this income-tax reassessment was made. The reopened excess profit tax proceedings were concluded by making an assessment under section 15(1) on 21-6-1978-24 year after the reassessment for income-tax was made and at least 16 years after the Tribunals order confirming the income-tax additions was passed.
4. Nothing the inordinate delay in starting the excess profit tax proceedings of 22 years which was claimed to be fatal to the legality of the proceedings themselves apart from the abuse of power it involved, the Tribunal thought that the department might as well have a valid reasons for the long delay. For the assessment year 1943-44, where a similar question was involved, the Tribunal had remitted the matter for reconsideration by the lower authorities. This took place as early as on 19-3-1976. The learned counsel for the department requested that in order to ascertain the reasons for the delay for the assessment year 1944-45, the matter be reminded to the EPTO. The matter remanded to the EPTO for 1943-44 for reconsideration had not been disposed of by the EPTO even at the time of this hearing in 1982. We were not, therefore, inclined to pass a remand order for this year. We, however, adjourned the case to give the departmental counsel sufficient time to ascertain and submit the reasons for the inordinate delay in completing the excess profit tax reassessment proceedings. An interim order was passed for this purpose on 2-12-1982. The learned counsel for the department submitted the departments explanation for the delay in the following term [extracted from the latter of the 1st ITO (Assessment), dated 25-2-1983] :
'On going through the excess profit tax records, it appears that for the assessment year 1944-45, income-tax assessment was reopened under section 34 of the Indian Income-tax Act, 1922, which ultimately resulted in an addition of Rs. 6,35,938 being rate difference disallowed by the ITO. This addition was deleted (upheld) by the AAC but finally the ITAT restored the ITOs order and confirmed the addition. The reassessment proceedings were initiated after the income-tax order became final in view of the ITAT confirming the addition in income-tax assessments. Probably, this was the reason for delay in reopening the assessment. Further, it is submitted that the concerned Officer Shri T. L. Nilakantan is no longer available for giving his comments as he has retired from the Government service.'
It was pointed out that the delay was due to reasons beyond the control of the concerned officials.
5. The parties were heard on the appeal. The learned counsel for the department pointed out that the income-tax order was reopened and a reassessment was made. An addition made on account of a rate difference unexplained by the assessee was upheld by the first appellant authority and was confirmed by the Tribunal. The excess profit tax reassessment proceedings were initiated after the income-tax order became final and the department was sure that after Tribunals order the assessee did not pursue the matter further in the High Court or the Supreme Court. The reopening was delayed on account of the above. The learned counsel pointed out that the Act is a very old legislation; there is practically no excess profit tax circle working; the excess profit tax matters that arose were dealt by the ITOs unacquainted with the Act, some of them even recruited long after the Act became inoperative. The ITO in charge or the file at the relevant time is not available to give any comments. He has retired from the Government service. The matter was of vital importance to the revenue. But as it sometimes happens, due to change in law, change in officers, excess of work for the department etc., unavoidable delay occurred in starting the excess profit tax proceedings.
6. The delay in the excess profit tax reassessment, according to the learned counsel, was on account of bona fide administrative reasons. The Government should not suffer on account of defaults of its employees especially those beyond their control. This is an important aspect of the sovereignty of the Government itself and has more serious implications in its unexceptionable taxing power. Wherever chance of delay exist and the delay would be averse to the interest of the citizen, time limits are provided. Where the interest of the citizen is not affect adversely, time limits are neither necessary nor provided. Nor time limit for making an excess profit tax reassessment is provided by law. The proceedings were not, therefore, illegal. To important a limitation where none in provided, would really be legislating in a manner the Legislature itself has declined to do. The learned counsel pointed out that the reassessment in income-tax has been upheld even by the Tribunal. The assessee has not filed a reference application. The reassessment to excess profit tax was, therefore, a mandatory consequence. Under no provision of the 1922 Act or the EPT Act or the general law can the assessee escape from a mandatory reassessment to excess profit tax. On merits, there is no inequity. With the law clear as to taxability, even under normal circumstances one cannot take advantage of technicalities. To do so in a case where no limitation is provided would, according to the learned counsel, be unjustified. Reference is made to Ram Kishan Baldeo Prasad v. CIT : 65ITR491(All) CIT v. Rupsa Rice Mills  65 ITR 328 and Swastik Oil Mills Ltd. v. H. P. MUNSHI  21 STC 383. In Lalta Prasad Goneka v. CIT : 122ITR399(Bom) , the Bombay High Court held that an order of penalty is not vulnerable merely on account of delay.
7. For the assessee the assessment is challenged both on the question of law and on the ground of inequity. That even in cases where no limitation is provided, inordinate delay results in illegality finds support from the decisions of the Allahabad High Court in Mohd. Atiq v. ITO : 46ITR452(All) , Bisheshwar Lal v. ITO : 75ITR698(All) and ITO v. Bishewar Lal v. ITO : 76ITR653(All) The Bombay High Court in Chimanram Moti Lal (P.) Ltd. v. CIT : 140ITR809(Bom) , considered all the cases and held that unexplained delay would invalidate a levy. Though that decision related to penalty, the rates would apply to the present situation as well. On merit, it is pointed out that the mere absence of a limitation period would not justify making a reassessment at any time the officer liked. The persons who knew the facts are no more. The condition of the assessee has changed substantially. Great prejudice is caused to the assessee since nobody alive in the company could appreciate the situation or give a proper defence. Even in the excess profit tax proceedings, the assessee could show that the original addition in the income-tax assessment was not justified in law and the reassessment to excess profit tax should not be proceeded with. In fact for the assessment year 1943-44, the matter is still pending. This according to the learned counsel, lent support to his view that the excess profit tax assessment was different from the income-tax assessment and an excess profit tax reassessment would be automatic. Making a reassessment after an unreasonable period of delay prejudiced the assessee gravely.
8. On a consideration of the facts, we hold that a reassessment is not justified in the present case. The income-tax reassessment was made as early as in 1954. The excess profit tax proceedings were started 22 years later and completed only 24 years after the reassessment. On the very day the income-tax reassessment was made, the consequential reassessment to excess profit tax could also have been completed and the extra tax demanded. The ITO was not a stranger to the proceedings and knew that a consequential reassessment to excess profit tax had to be made. On an earlier occasion when when the income-tax assessment was reopened, the excess profit tax reassessment was also made on the very same day. Was there a reasonable cause justifying unduly delayed starting of the proceedings and making the reassessment The reasons given by the department is that they waited for the income-tax assessment to become final. If this reason was accepted, that would cut down the delay to 16 years-an equally long period. We see no reason why in view of the usual delay income-tax appellate proceedings take, the ITO should have even waited for the income-tax assessment to become final. The excess profit tax reassessment should have been made immediately and the tax collected so as to safeguard it from any possible difficulty for the assessee to pay it. The delay is inordinate. The reason given by the ITO does not justify it. It is also mentioned that the concerned ITO having left service on retirement, the full details cannot be obtained. Even this is not an acceptable explanation. If a single ITOs retirement disables the department from giving a reason for the delay, how much prejudice should the disappearance of all its employees cause to the assessee Over 22 years and even 16 years the entire shareholders financial position, staff members, etc., of the company undergo an great change. It is also settled that where a delay is to be explained, every component of the period of delay should be explained. A general explanation as to departmental difficulties and the harm done to the State by inadvertent defaults of its officers would not be sufficient explanation for the delay. We have, therefore, no hesitation in holding that the delay in making the assessment proceedings is inordinate and there is no satisfactory explanation for it from the revenue. The reasons given could at best explain a few months, if not days of the period.
9. We also hold that apart from the strict legal validity or otherwise of the reassessment, the delay has caused substantial prejudice to the assessee and injustice to him. There is authority for the proposition - Indian woollen Textile Mills v. CEPT that that excess profit tax proceedings are different from income-tax proceedings. The computation of the chargeable profits for the purposes of excess profit tax has to be made on the basis of the provisions in |Schedule I. Schedule I gives a separate calculation for excess profit tax and it is not a verbatim reproduction of the income-tax assessment order. It is true that the second proviso to clause (1) of the Schedule, as vehemently contended by the learned counsel for the department, takes in, as it were the income-tax profit as relevant for excess profit tax purposes. Even so there are several other provisions in the Schedule which could make a difference in the actual figure. If any acceptable or justified modification income-tax figure of assessment were proper such as in the case of a rectification, the same could be relevant for excess profit tax purposes. Even thought, therefore, the basis of excess profit tax profit calculation is the income-tax profit a separate process is involved in the for which the ITO should adopt and with regard to which the assessee could bargain at the time of making the excess profit tax assessment. In fact in the case of income-tax assessment for the year under appeal, the Tribunal upheld the addition but the penalty levied was cancelled on a fresh reappraisal of the facts. It is such a reappraisal which made the Tribunal remit the matter for the assessment year 1943-44 to the authorities below. The assessees claim, therefore, that on account of the long delay, people who would have clarified the position in detail at the time of the reassessment to excess profit tax were not available and this has caused prejudice to him, cannot altogether be brushed aside.
10. In Chimanram Motilal (P.) Ltd.s case (supra), the Bombay High Court considered the question at length and expressed their concurrence with the following observations of the Kerala High Court in Krishna Bhatta v. Agrl. ITO  132 ITR 21 :
'It it could be found on the facts and circumstances of the case that there is unreasonable delay in initiating proceedings for the imposition of penalty, such proceedings would be bad in law. The long delay by itself may prima facie be unreasonable but if, in such a case, there is an explanation for the delay, that explanation has to be considered. But if thereby no explanation at all and the authority acts under the impression that, in the absence of a period of limitation in the Act, it is open to it exercise its power after any number of years, that would be an unsustainable approach. If in such a case of Court finds that such exercise has been beyond reasonable time and there is no scope for an examination of the explanation, the action would be bad ....' (p. 21)
Their Lordships also held that the two issues to be decided are whether the delay was inordinate and whether there was any explanation tendered by the revenue explaining the inordinate delay. For the reasons set out at length above, we decide the matter against the department holding that the inordinate delay has not been explained at all. The assessee must succeed on this ground alone.
11. The assessees learned counsel has raised an alternative ground that as was done for the assessment year 1943-44, the matter should at best be remitted to the authorities below. Since we accept the main arguments advanced by the assessee, the alternative ground is not considered. The other grounds of appeal regarding the reopening on merits are also not, therefore, considered.
12. The appeal is allowed.