Satish Chandra, C.J.
1. The interesting questions of law which arise for our consideration in this reference under the Indian I.T. Act are :
'(1) Whether the regular assessment under the Business Profits Tax Act is required to be made within four years of the end of the chargeable accounting period and
(2) If not, whether the making of such an assessment after 20 years was making it within a reasonable time ?'
2. The Tribunal answered the first question in the affirmative and the second in the negative. Hence, this reference at the instance of the CIT.
3. In respect of various chargeable accounting periods ranging from 1st April, 1946, to 31st March, 1949, the ITO issued a notice under Section 11 of the Business Profits Tax Act, 1947, within a year, and so were provisional assessments made under Section 13 of the Act, the details whereof are as under. The regular assessments were, however, made nearly 20 years later on 30th December, 1969, for all these periods. The tax demand created by the provisional and the regular assessments is also indicated below.
Chargeable accounting period
Date of service of notice
Date of provisional assessmentorder
Amount of tax
Date of regular assessment order
Amount of tax
(a) 1-4-46 to 31-12-48
within a year
(b) 1-1-47 to 31-3-47
(c) 1-4-47 to 31-12-47
(d) 1-4-48 to 31-12-48
(e) 1-1-49 to 31-1-49
4. It is apparent that the tax demand was considerably increased by the regular assessment.
5. The assessee went up in appeal. The submission that the regular assessment made after 20 years was illegal was repelled on the ground that no period of limitation has been prescribed for it.
6. The other submission that the profits of Smith Stanistreet & Co. Ltd., should not be added to the profits of the assessee-company was accepted and the Business Profits Tax Officer was directed to recompute the chargeable profits on that basis.
7. The assessee took the matter to the Tribunal. The Tribunal held that the regular assessment under Section 12 has to be made within four years of the end of the chargeable accounting period. In the alternative, it was held that 20 years was an unreasonably long period. The department has failed to justify the delay. The regular assessments were hence quashed.
8. In CIT v. Narsee Nagsee & Co. : 40ITR307(SC) , the Supreme Court by majority held that the notice under Section 11(1) of the Act ought to be issued within the financial year commencing next after the expiry of the accounting period. This conclusion was reached by a process ot construction of Sections 11(1) and 14 of the Act read with Section 50 of the Indian I.T. Act as adaptedby the Business Profits Tax Rules. Section 11(1) did not prescribe any period of limitation for issuing the notice with a view to bring the chargeable profits to tax under the Business Profits Tax Act. Section 14, which covered escaped assessments provided a limit of 4 years. The Supreme Court held that since Section 14 extended to cases where no notice had been issued under Section 11(1) and consequently no assessment had at all been made, it would be anomalous that for a notice under Section 14 there should be a limit of four years while there should be none for a notice under Section 11. The majority opinion of the Supreme Court was also influenced by the fact that the modified Section 50 of the Indian I.T. Act as applied by the Business Profits Tax Rules provided that a claim to any refund of tax under the Act shall be allowed only if it is made within four years from the last day of the financial year commencing next after the expiry of the accounting period. Their Lordships held (p. 317) :
'If the contention of the appellant is correct then this section will be wholly otiose where the assessment is levied after say 10 years from the end of the chargeable accounting period because by no method of calculation will a refund of tax in that circumstance be claimable under Section 50. This furnishes a key to when a notice under Section 11(1) has to be given. It must be given within the financial year which commences next after the expiry of the accounting period or the previous year which is by itself or includes the chargeable accounting period in question.'
9. In this passage, the court emphasised that if the assessment is levied, after, say, ten years, no refund can be claimed. This observation tends to show that the assessment must be made prior to the expiry of the time fixed by the rules for claiming refund. In other words, the assessment itself must be made within four years.
10. According to this Supreme Court authority, the position is that the notice under Section 11(1) must be issued within one year of the end of the chargeable accounting period and the assessment must be made within four years thereof.
11. Learned counsel for the revenue stressed many aspects which were virtually the reproduction of the minority opinion expressed by Hidayatullah J. in the aforesaid case. Since the majority decision is binding, it is unnecessary to dilate upon those various aspects.
12. In this view, it is unnecessary to deal with the question whether the making of the regular assessment after 20 years was within reasonable time. In view of the answer to the first question, this question, which in the reference is split into two questions, has become merely academic.
13. We, therefore, answer the first question in the affirmative, in favour of the assesses and against the department and the other question isreturned unanswered. In the circumstances, the parties will bear their own costs.