1. Under Section 66(1) of the Income-tax Act, 1922, the Income-tax Appellate Tribunal, Delhi, has referred the following questions of law for the opinion of this Court :
(i) Whether on the facts, and in the circumstances of this case, the original assessment order passed on 21 March 1953 was barred by time?
(ii) If the answer of the first question is in the affirmative, whether on the above facts and circumstances of the case, this plea of limitation was open to the assessee to be taken in the subsequent proceedings after the cancellation of the said assessment order and whether the reassessment order passed on 17 November 1954 is bad in law?
2. The facts of the case giving rise to the two. questions under reference are not in dispute. The petitioner is a private limited company carrying on the business of mining coal at Birsinghpur in district Shahadol, which formed a part of the erstwhile State of Vindhya Pradesh. Since the Company's income for the assessment year 1943-44 (account year 1942 43) had escaped assessment, a notice under Section 34, of the Income-tax Act (hereinafter referred to as the Act) was served on the petitioner on 15 March 1952, that is, a few days before the expiry of eight years from the close of the assessment year 1943-44. Subsequently, notices under Section 22(4) and 23(2) of the Act were also issued to the petitioner and the date notified to him for compliance was 9 October 1952, which was, at the petitioner's request, subsequently changed to 8 December 1952.
In the meantime, the petitioner moved the Nagpur High Court under Article 226 of the Constitution and secured on 25 November 1952 an interim writ of prohibition restraining the Income-tax Officer, A-Ward, Jabalpur, from proceeding further with the assessment. The prohibition was dissolved on 10 March 1953 when the writ petition itself was dismissed. Shri S. K. Roy, Income-tax Officer, Nagpur, who was present when that order was pronounced, sent a letter dated 18 March 1953 to say that the writ petition was dismissed and that the assessment should be completed immediately. On receipt of this information on 21 March 1953, the Income-tax Officer, A-Ward, Jabalpur, completed the assessment on the same day by estimating the net profits at Rs. 50,000/-. Since this assessment was made ex parte, the petitioner availed of the two remedies open to him.
It made an application under Section 27 of the Act for cancellation of the assessment on the ground that it was prevented by sufficient cause from complying with the notice under Section 22(4) of the Act. It also appealed against the assessment On 11 December 1953, the application under Section 27 ibidwas allowed and the assessment was cancelled. Thereupon, on 22 December 1953, the appeal was dismissed as infructuous. In due course, a fresh assessment in accordance with the provisions of Section 23 of the Act was made on 17 November 1954 and the taxable income was determined to be Rs. 45,000/-.
3. In the appeal filed before the Appellate Assistant Commissioner, the petitioner challenged the fresh assessment dated 17 November 1954 inter alia on the ground that it was bad in law because the original assessment dated 21 March 1953 was made out of time, that is, more than one year after the date of service of notice under Section 34 of the Act. The Appellate Assistant Commissioner did not accept the contention relating to the bar of limitation and dismissed the appeal. The Appellate Tribunal also took the same view and observed:
'At the outset an objection has been taken that since the original assessment, which was annulled under Section 27, was made on 21-3-1953 by which date the time limit laid down in that behalf in Section 34 had already expired, the re-assessment made on 17-11-1954 is unsustainable. This objection seems to us without any substance. It has to be remembered that the order that was passed by the Income-tax Officer on. 17-11-1954 was an order of reassessment. The second proviso to Sub-section (3) of Section 34 expressly lays down that the time within which any action under the Act may be taken or any order of assessment or re-assessment may be made shall not apply inter alia to a re-assessment made under Section 27. Assuming that the original order of assessment was made on a date which was beyond the time laid down in Section 34 in that respect, the assessee's remedy was to take an objection to that effect before the Appellate Assistant Commissioner on appeal against that assessment.
Since he did not do so, it is not now open to him in his appeal against the order of re-assessment made under Section 27 to say that the first order of assessment which stands annulled and is no longer effective was out of time. The delay in the making of the original order of assessment was occasioned by the assessee himself by taking the matter to the Nagpur High Court and obtaining an order of injunction on the Income-tax Officer. If he had taken such an objection before the Appellate Assistant Commissioner in his appeal against the original assessment, the Appellate Assistant Commissioner would have had to go into the question and come to a conclusion whether or not the period for which the injunction on the Income-tax Officer was operative was or was not liable to be excluded in computing the time within which that assessment had to be made. As the matter stands at present, there is a proper and valid order of re-assessment made under Section 27 and to such an order no time limit is applicable as is expressly provided in the second proviso to Sub-section (3) of Section 34 referred to above. We would, therefore, overrule this objection.'
4. Since Section 34 of the Act has been amended from time to time, it is necessary to set out the relevant provisions of that section relating to limitation, which admittedly govern this case. Sub-section (3) of the Section as it stood prior to the amending Act 25 of 1953 was as under:
'No order of assessment under Section 23 to which Clause (c) of Sub-section (1) of Section 28 applies or of assessment or re-assessment in cases falling within Clause (a) of Sub-section (1) of this section shall be made after the expiry of eight years, and no order of assessment or le-assessment in any other case shall be made after the expiry of fouryears, from the end of the year in which the income, profits or gains were first assessable:Provided that where a notice under Sub-section (1) has been issued within the time therein limited, the assessment or re-assessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if such period exceeds the period of eight years or four years, as the case may be:
Provided further that nothing contained in this sub-section shall apply to a re-assessment made under Section 27 or in pursuance of an order under Section 31, Section 33, Section 33A, Section 33B, Section 66 or Section 66A'. It is clear from the first proviso to Sub-section (3) reproduced above that, in the instant case, the assessment could be made only within one year of the date of service of notice on the petitioner (15 March 1952). It was, however, made on 21 March 1953.
5. On behalf of the Department, it is contended that since the original assessment was cancelled and a fresh assessment was made under the provisions of Section 27 of the Act, the second proviso to Sub-section (3) of Section 34 was attracted. That the Income-tax Officer purported to make a fresh assessment under section 27 ibid is obvious; The point is whether, in the circumstances of the case, he could validly do so. In our opinion, a fresh assessment under Section 27 must follow the cancellation of a valid original assessment.
If the original assessment itself way without jurisdiction in the sense that the income assessed could not be taxed, its cancellation can have no meaning or legal effect and it would not give jurisdiction to make a fresh assessment. The reason is this. The second proviso does no more than merely remove the time limits in certain specified cases falling within, the principal part of Sub-section (3). In order to attract the proviso, it must be established not only that the case is one specified in the proviso but also that other requirements of the principal part of Sub-section (3) are fulfilled.
6. Section 34 of the Act empowers the Income-tax Officer to tax the income which has escaped assessment or was under-assessed in the relevant assessment year. Time limits are, however, imposed on the exercise of that power. If the Income-tax Officer does not satisfy these time limits, no assessment can be made under the section: Debaprasanna Mukherji v. Commissioner of Income-tax, West Bengal. : 20ITR293(Cal) , Muhamad Hussain. Nachiar Ammal v. Commr. of Income-tax, Madras : 29ITR848(Mad) and Commr. of Income-tax v. D. V. Ghurye : 31ITR683(Bom) .
7. In the instant case, the assessment had to be made within 8 years of 31 March 1944 with the further extension of one year from the date of service of the contemplated notice, even if that year exceeded the period of 8 years. That was the extreme limit of time in which the income derived in the year 1942-43 could be brought within the purview of the power to tax escaped income. As shown, the original assessment dated 21 March 1953 was made even beyond the extended time limit. That being so, it must be regarded as invalid.
8. It is, however, urged that the petitioner itself moved the High Court under Article 226 of the Constitution to secure an interim writ of prohibition and had thereby disabled the Income-tax Officer from proceeding with the assessment and, therefore, the limitation prescribed for completing the assessment should be regarded as extended by the time during which he could not act. In our opinion, equitable considerations cannot be imported for the purposeof extending limitation in a taxing Act. Rowlatt, J.observed in Cape Brandy Syndicate v. Inland Revenue Commissioners, (1921) 1 K.B. 64.
'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is (o be implied. One can only look fairly at the language used.'
In other words, the tax-payer has a right to stand upon the words used in the taxing Act whatevermight be consequence. Further, when specific provisions of statute exist, there is no room for invoking the aid of the general, principles of equity, justice andgood conscience. We may add that the present case is not covered by Section 29 of the Limitation Act, which applies to special Acts. However hard it may appear to the Department, we are clearly of the viewthat the time prescribed for making the original assessment cannot be regarded as extended because of thewrit of prohibition issued in this case.
9. Since the original assessment dated 21 March 1953 could not be validly made, the fresh assessment dated 17 November 1954 must be regarded as bad in law.
10. The only other question for our consideration is whether the plea of limitation was open to the petitioner even though it had not raised it in proceedings relating to the original assessment or the fresh assessment under Section 27 of the Act. As we have indicated earlier, it is a pure question of law which does not involve any further investigation into facts. It is also one going to the root of the matter. In our opinion, it was open to the petitioner to raise the question in the successive appeals filed by it. In this connection, we may refer to Byramji and Co.v. Commissioner of Income-tax, C.P. and U.P. where the High Court interfered with the discretion of the Appellate Tribunal in declining to entertain a similar question of law as an additional ground of appeal.
11. Our answer to the questions referred to us are these. The original assessment dated 12 March 1953 was barred by time. That being so, the fresh assessment dated 17 November 1954 is bad in law. In the circumstances of this case, it was open to the petitioner to raise the plea of limitation even though that plea had not been raised before the Income-tax Officer in proceedings relating to the Original assessment or the fresh assessment under Section 27 of the Act.
12. Before we part with this case, we must observe that when the limitation was running out, the Department could and should have brought that fact to the notice of the High Court and obtain a suitable modification of the writ of prohibition to enable it to carry on and complete the assessment within the prescribed time.
13. In the circumstances of this case, we directthe parties to bear their own costs of this reference.