Case: The Commissioner Of Income Tax,Bombay City 1, Bombay Vs. M/S. Narsee Nagsee And Co., Bombay

four years from the end of the chargeable accounting period in question.20. It was argued for the appellant that S. 11(1) construed according to the plain meaning of the words used therein applies to original assessments and S. 14 to assessments in which notice was given but due to any cause whatsoever the proceedings resulted in no assessment or in underassessment. He referred to the words "require any person whom he believes to be engaged in any business.....or to have been engaged during any chargeable accounting period or to be otherwise liable", and submitted that these words mean that if an Income-tax Officer has such belief in regard to a person who is engaged in any business or was engaged in any business during any chargeable accounting period in question he can issue a notice at any time without limitation of time requiring a return to be filed etc. In support counsel for the appellant relied upon two judgments; Gokuldas Ratanji Mandavia v. Commissioner of Income-tax, 1959 AC 114 which was an appeal from East Africa and on Telu Ram Jain and Co. v. Commissioner of Income-tax, 1955-27 ITR 94 : (AIR 1955 Punj 58) a case decided by the Punjab High Court. In the former case a notice was issued to the assessee under S. 59 (1) of the East African Income Tax (Management) Act, 1952 which provided:"The Commissioner may, by notice in writing, required any person to furnish him within a reasonable time, not being less than thirty days from the date of service of such notice with a return of income......"Sections 71(1) and 72 provided:"S. 71(1). The Commissioner shall proceed to assess every person chargeable with tax as soon as may be after the expiration of the time allowed to such person for the delivery of his return.......""S. 72. Where it appears to the Commissioner that any person liable to tax has not been assessed.....the Commissioner may......assess such person and such amount......as, according to his judgment, ought to have been charged....."The notice requiring the assessee to furnish returns of his income for the years of assessment 1943-53 was issued but no return was filed and assessment was made under S. 72 of the East African Act for the years 1943-51. The assessee contended that S. 72 did not apply until the machinery under S. 71 had been put into operation and that the assessments were ultra vires and void because they were made before the time allowed by S. 71. It was held that S. 71 applied to all original assessments and S. 72 with reopening of cases which had been settled under a normal procedure. Accepting the contention of the assessee Lord Somervell of Harrow observed:-"If the power to make an assessment under section 72 applies to the making of an original assessment their Lordships are unable to imply a term restricting it to back cases or making it ultra vires to operate it at any time. One would expect an opportunity to make a return to be a condition precedent to assessment. This is supported by the provisions for personal allowances in Part VI of the Act. If respondent is right any person can be assessed without having any such opportunity. There would be two concurrent jurisdictions one providing reasonable protection for the taxpayer and the other providing no protection quoad the original assessment, apart from a right to appeal. Such a construction seems to their Lordships inconsistent with the general and mandatory provisions of S. 71. That section is providing how all original assessments are to be made."The language of these sections 59 (1), 71 and 72 is different from that of Ss. 11 and 14 of the Act. Section 72 was held not applicable because there would be two concurrent jurisdictions one providing reasonable protection for the taxpayer and the other providing no protection which would be contrary to the provisions of S. 71. According to the Privy Council it was necessary to restrict the words of S. 72 to cases in which the machinery of S. 59(1) having been operated no assessment resulted. The words of S. 14 are entirely different. It applies to cases of profits escaping assessment and the words "escaping assessment" have already been interpreted under S. 34 of the Income-tax Act and there is no reason why the same words occurring in a statute which is in pari materia should be given a different meaning in the two Acts. Further the difficulty which the Privy Council felt in regard to there being two jurisdictions, one giving protection to the assessee and the other not giving such protection ,does not exist in the present case because the process of assessment under S. 14 of the Act is exactly the same as it is where notice is given under S. 11(1) of the Act and all the advantages which an assessee would have under S. 11(1) are available to him under S. 14.21. The Punjab case to which our attention has been drawn was a case under the Excess Profits Tax Act and it was held that because of the removal of the limitation clause in S. 15 of that Act assessments were not hit by any period of limitation and a further observation not necessary for the decision of the case was made that even otherwise the language of S. 13 of that Act was wide and there was no substance in the contention that after the assessment period a notice under S. 13 of that Act could not be issued and that the only notice which could be given was one under S. 15.22. In view of the construction we have placed on S. 14 of the Act on the words "profits escaping assessment" that they apply to assessments where notice has been given and has resulted in no assessment and where due to inadvertence, oversight or other circumstances no notice was given, it is difficult to interpret S. 11 in the manner contended for by the appellant.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]e provisions of the Act which arise for consideration are Ss. 2, 4, 5, 11 and 14. Section 2 is the definition section; S. 4 the charging section and S. 5 deals with the applicability of the Act.These sections lead to the conclusion that every business to which the Act applies is liable to the risk of being assessed to Business Profits Tax and it is well settled that income escapes assessment when the process of assessment has not been initiated as also in a case where it has resulted in no assessment after completion of the process of assessment. In our opinion the High Court was right when it held that Ss. 11 and 14 of the Act have to be read together.All these cases show that the words "escaping assessment" apply equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee and therefore there was no assessment of his income. It is also clear from the language of S. 14 of the Act that when a notice is issued under that section all the requirements of the notice under S. 11 apply and theOfficer has to proceed in the manner as if the notice was issued under S. 11. Therefore any advantage or relief which was available to the assessee under S. 11 as to allowable deductions, deficiency etc. would be equally available, if the notice is issued under. S. 14.As the tax under the Act is charged, levied and paid on the taxable profits of a chargeable accounting period but assessment is in respect of the financial year in which the Act operates it is not an unreasonable inference that notice for the chargeable accounting period must issue in the financial year following that period. No difficulty would arise in regard to accounting periods which coincide with previous years i.e.,9. For these years the notice will issue in the following chargeable accounting period which again will be the financial year in which the Act would be operative. But the question is how the proviso to S. 2 (4) added by the Finance Act of 1948 would affect this rule. Taking a calendar year 1946 as the accounting period, for the financial yearthe chargeable accounting period would be the nine months period from April 1, 1946 to December 31, 1946, and notice under S. 11(1) of the Act must issue in the financial year because the tax is leviable and assessment is made for the year beginning April 1, 1947 when the Act came into force and remained operative during the yearAfter the Finance Act of 1948 the accounting year, if it was a calendar year, became divided into two parts and both were assessable in the assessment year beginning with April 1, 1948, and therefore notice had to be given in the financial yearSimilarly in the financial yearnotice would have to be given in that year for the preceding chargeable accounting period. In this view of the matter the contention that there is no provision in S. 11(1) of the Act as to the chargeable accounting period as there is for the previous year in S. 22 (2) of theThe modified S. 50, as introduced into the Act by the rules, means this that the refund, if any, can only be allowed within four years of the financial year which commences after the expiry of the accounting period which itself constitutes the chargeable accounting period or includes in it the chargeable accounting period in respect of which the refund is claimed. 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 circumstances be claimable under S. 50. This furnishes a key to when a notice under S. 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. Section 48 of theAct, as amended and applied to the Act, does not affect the operation of S. 50 because the two sections have to be read together and the assessee must apply for the refund within the period specified by S.language of these sections 59 (1), 71 and 72 is different from that of Ss. 11 and 14 of the Act. Section 72 was held not applicable because there would be two concurrent jurisdictions one providing reasonable protection for the taxpayer and the other providing no protection which would be contrary to the provisions of S. 71. According to the Privy Council it was necessary to restrict the words of S. 72 to cases in which the machinery of S. 59(1) having been operated no assessment resulted. The words of S. 14 are entirely different. It applies to cases of profits escaping assessment and the words "escaping assessment" have already been interpreted under S. 34 of theAct and there is no reason why the same words occurring in a statute which is in pari materia should be given a different meaning in the two Acts. Further the difficulty which the Privy Council felt in regard to there being two jurisdictions, one giving protection to the assessee and the other not giving such protection ,does not exist in the present case because the process of assessment under S. 14 of the Act is exactly the same as it is where notice is given under S. 11(1) of the Act and all the advantages which an assessee would have under S. 11(1) are available to him under S. 14.21. The Punjab case to which our attention has been drawn was a case under the Excess Profits Tax Act and it was held that because of the removal of the limitation clause in S. 15 of that Act assessments were not hit by any period of limitation and a further observation not necessary for the decision of the case was made that even otherwise the language of S. 13 of that Act was wide and there was no substance in the contention that after the assessment period a notice under S. 13 of that Act could not be issued and that the only notice which could be given was one under S. 15.22. In view of the construction we have placed on S. 14 of the Act on the words "profits escaping assessment" that they apply to assessments where notice has been given and has resulted in no assessment and where due to inadvertence, oversight or other circumstances no notice was given, it is difficult to interpret S. 11 in the manner contended for by the appellant.