FALSHAW J. - These are two references under section 66(1) of the Income-tax Act, one being made on behalf of the Commissioner of Income-tax and the other on behalf of the assessee firm, Messrs. Mathura Pershad and Co., New Delhi.
The reference made on behalf of the Commissioner relates to the chargeable accounting periods ending the 31st of March, 1947, and the 31st of March, 1948, and that on behalf of the assessee to the following chargeable accounting period ending the 31st March, 1949. The income of the assessee for the periods in question had not been assessed by the Income-tax Officer for the Purpose of the Business Profits Tax Act and in relation to the chargeable accounting periods ending the 31st of March, 1947, and the 31st of March, 1948, a notice was issued under section 11(1) of the Business Profits Tax Act by the Income-tax Officer on the 28th of March, 1953, and served on the assessee on the 30th of March, 1953. Regarding the third year, ending the 31st of March, 1949, notice was issued by the Income-tax Officer on the 27th of March, 1953.
On the facts, the assessments carried out in pursuance of these notices were challenged by the assessee on the ground that they were barred by time and it was ultimately found by the Income-tax Appellate Tribunal that while the assessment in relation to the third of the years was within time the assessments relating to the two earlier years were barred by time. In these circumstances, this question has been referred to the court at the instance of the Commissioner, 'whether on these facts and in the circumstances of the case the business profits tax assessments on the assessee in respect of the chargeable accounting periods ending March 31, 1947, and March 31, 1948, were barred by time.' The question referred on behalf of the assessee in the other reference is, 'whether on the facts and in the circumstances of the case the business profits tax proceedings initiated - vide notice dated March 27, 1953, issued under section 11(1) of the business Profits Tax Act - were valid.'
In both cases the decision of the Appellate Tribunal was based on a decision of the Bombay High Court in Commissioner of Income-tax v. Narsee Nagsee & Co.
During the pendency of these references, an appeal against the decision of the Bombay High Court in Commissioner of Income-tax v. Narsee Nagsee & Co. has been decided by the Supreme Court and the appeal against the decision of the Bombay High Court was dismissed by a majority of two to one.
I shall first set out the relevant provisions of sections 11 and 14 of the Business Profits Tax Act. Section 11(1) reads :
'The Income-tax Officer may, for the purposes of this Act, require any person whom he believes to be engaged in any business to which this Act applies, or to have been so engaged during any chargeable accounting period, or to be otherwise liable to pay business profits tax, to furnish within such period, not being less than forty-five days from the date of the service of the notice, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) with respect to any chargeable accounting period specified in the notice the profits and taxable profits of the business or the amount of deficiency, if any, available for relief under section 6.'
Section 14 reads :
'If, in consequence of definite information which has come into his possession, the Income-tax Officer discovers that profits of any chargeable accounting period chargeable to business profits tax have escaped assessment, or have been under-assessed, or have been the subject of excessive relief, he may at any time within four years of the end of the chargeable accounting period in question serve on the person liable to such tax a notice containing all or any of the requirements which may be included in a notice under section 11, and may proceed to assess or reassess the amount of such profits liable to business profits tax, and the provisions of this Act shall, so far as may be, apply as if the notice were a notice issued under that section.'
The facts in the case before the Supreme Court were that in connection with the assessment year 1949-50 of the assessee company for which the chargeable accounting period was from the 13th of November, 1947, to the 31st October, 1948, the Income-tax Officer issued a notice to the assessee under section 11(1) of the Act on the 12th of January, 1953, the notice being served on the assessee on the 21st of January, 1953. The assessee furnished a return under protest and appealed against the assessment to the Appellate Assistant Commissioner on the ground that the company was not liable to business profits tax because it was beyond the period of four years limitation under section 14. This plea was upheld by the Appellate Assistant Commissioner and subsequently by the Appellate Tribunal which referred the following questions to the Bombay High Court :
'(1) Whether the Income-tax Officer had jurisdiction to assess the assessee firm under the Business Profits Tax Act by issue of a notice under section 11(1) of the Business Profits Tax Act on 12th January, 1953, in respect of the chargeable accounting period 13th November, 1947, to 31st October, 1948, without having recourse to section 14 of the Business Profits Tax Act ?
(2) If the answer to question No. 1 is in the negative, whether the business profits tax assessments could be considered to have been validly made ?'
The High Court modified the first question by deleting the words 'without having recourse to section 14 of the Business Profits Tax Act and answered both questions in the negative. The decision of the High Court was based on the conclusion that sections 11 and 14 had to be read together and the mention of four years in section 14 was an important indication of the period of limitation in regard to the issue of notice under section 11, and further if profits which escaped assessment, as in that case, could only be taxed within four years of the end of the chargeable accounting period because of section 14 of the Act, then inferentially the escape of assessment must be at some time anterior to the period mentioned in section 14 and as on the facts of the case the notice had been issued four years after the close of the chargeable period the notice under section 11 was not valid.
From the judgment, it is clear that the case argued on behalf of the assessee before the Supreme Court was that the view of the Bombay High Court was Correct and that a notice issued in terms of section 11(1) could not be validly issued under section 14 unless it was within four years of the end of the chargeable accounting period in respect of which the notice was issued, while on the other hand, the case argued on behalf of the Commissioner of Income-tax was that the two sections were quite separate and that there was no period of limitation fixed for a notice under section 11(1). This view was in fact accepted by Hidayatullah J. who wrote a dissenting judgment, but the view of the Bombay High Court was upheld by Kapur and S. K. Das JJ. These learned judges held that the provisions of the Business Profits Tax Act had to be construed on the same lines as similarly worded provisions of the Income-tax Act and that income-tax escapes assessment just as much in a case where the process of assessment has not been initiated as it does in a case where there has been an assessment.
An attempt was made to argue on behalf of the assessee that the decision of the Supreme Court did not go so far as to say that an assessment based on a notice issued within four years of the end of chargeable accounting period was within time, but, in my mind, there can be no doubt that the only reason that this was not said in so many words is that this case under consideration was one where the notice was issued after the expiry of four years, and the case of a notice issued within four years was not directly under consideration. It seems, however, quite clear to me that this conclusion necessarily follows from the decision which amounts to holding that a period of four years is fixed by section 14 for a notice under section 11(1) and I am therefore of the opinion that the assessments to business profits tax in relation to the chargeable accounting periods ending the 31st of March, 1947, and the 31st of March, 1948, were rightly held to be barred by time and the assessment relating to the period ending the 31st of March, 1949, was within time since the notice was issued before the end of March, 1953. I would accordingly answer the question propounded in the reference on behalf of the Commissioner in the negative and the question propounded in the reference at the instance of the assessee in the affirmative. Since each of the parties has obtained the decision in its favour on these connected matters, I would order that they should bear their own costs in these references.
G. D. KHOSLA C.J. - I agree.
Questions answered accordingly.