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

2. The assessment relates to the year of assessmentand the chargeable accounting period was from November 13, 1947 to October 31, 1948. On January 12, 1953, theOfficer issued a notice on the respondent under S. 11(1) of the Act in respect of the abovementioned chargeable accounting period which was served on the respondent on January 21, 1953. The respondent filed a return under protest. The assessment was completed by theOfficer on November 30, 1953.Against this order the respondent took an appeal to the Appellate Assistant Commissioner on the ground that the respondent was not liable to Business Profits Tax because it was beyond the period of four years limitation under S. 14 of the Act. This plea was upheld by the Appellate Assistant Commissioner. TheOfficer then appealed the Appellate Tribunal and it confirmed the order of the Appellate Assistant Commissioner. At the instance of the appellant a case was stated to the High Court of Bombay on the following two questions of lawax Officer had jurisdiction to assess the assessee firm under the Business Profits Tax Act by issue of a notice under S. 11(1) of the Business Profits Tax Act onin respect of the chargeable accounting period48 without having recourse to S. 14 of the Business Profits Tax Act?(2)If the answer to Question No. 1 is in the negative whether the B. P. T. assessment could be considered to have been validlyHigh Court modified the first question by deleting the words "without having recourse to S. 14 of the Business Profits Tax Act" and answered both the questions in the negative. TheAppellate Tribunal had held that as under S. 14 of the Act the period of limitation commenced from the end of the chargeable accounting period in question the notice under S. 11(1) had to be issued before that period. The High Court did not accept this view. It held that both Ss. 11 and 14 had to be read together and the mention of four years in S. 14 was an important indication of the period of limitation in regard to the issue of notice under S. 11 also and further if profits which escaped assessment as in the present case, could only be taxed within four years of the end of the chargeable accounting period because of S. 14 of the Act,then inferentially the escape of assessment must be at sometime anterior to the period mentioned in S. 14 and as on the facts of the present case the notice had been issued four years after the close of the chargeable accounting period the notice under S. 11 was not valid. Against this order the appellant has come in appeal to this Court on a certificate, of the High Court.

Reasoning:
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.