TMI Blog1956 (9) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... 47. The notice was served on 21st January, 1953. A return under the Business Profits Tax Act was filed by the assessee firm under protest, saying that the business profits tax assessment to be made in pursuance of the notice would be invalid in view of section 14 of the Business Profits Tax Act. This protest was overruled by the Income-tax Officer and he completed the assessment under section 12(1) on 30th November, 1953. 3. The assessee firm appealed to the Appellate Assistant Commissioner, who held that the business profits tax assessment levied by the Income-tax Officer is invalid under section 14(1) of the Business Profits Tax Act. The Income-tax Officer thereupon appealed to the Appellate Tribunal which agreed with the Appellate Assistant Commissioner and dismissed the appeal for the reasons recorded by it in its order, a copy of which is annexure ' A ' and forms part of the case. 4. Out of the facts stated above the only questions of law that, therefore, arise out of the Tribunal's order are : (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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer discovers that profits of any chargeable accounting period chargeable to business profits tax have escaped assessment, or have been under-assessed, 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. The question that arises is what is meant by the words profits have escaped assessment. 4. As far as we can make out, the scheme of the Act is that the notice under section 11 in respect of a chargeable accounting period should be issued before the commencement of the next chargeable accounting period. If no such notice is issued, profits would be considered to have escaped assessment and action has to be taken under section 14 of the Act. If, however, a notice is issued before the commencement of the next chargeable accounting period, it cannot be said that profits have escaped assessment even though the business profits tax assessment may not have been made. In such a case a fresh notice under section 14 of the Act is not necessary after the commencement of the next chargeable acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Income-tax Officer on the 17th February, 1953. On the 12th January, 1953, the Income-tax Officer issued a notice under section 11(1) of the Business Profits Tax Act, 1947, against the assessee company in respect of the chargeable accounting period 13th November, 1947, to 31st October, 1948. The assessee company filed a return under protest. The protest was overruled by the Income-tax Officer and he completed the assessment. On appeal by the assessee company, the Appellate Assistant Commissioner held that the assessment was invalid in view of section 14(1) of the Business Profits Tax Act. The Income-tax Officer appealed to the Appellate Tribunal and the Appellate Tribunal took the same view as the Appellate Assistant Commissioner. The Commissioner of Income-tax has now come on this reference. Section 11(1) which deals with the issue of notice for assessment under the Business Profits Tax Act, 1947, provides : The Income-tax Officer may, for the purposes of this Act, require any person whom be 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 22(2) of the Income-tax Act by reason of the language used by the Legislature a notice has to be issued before the close of the assessment year and if a notice is not issued, then the assessment would be bad if the Income-tax Officer wishes to assess the assessee to tax under that section. If the notice is not issued within time, then resort would have to be made to the provisions of section 34 of the Income-tax Act. But it is pointed out that under section 11 there is no obligation to make a return as there is under section 22 of the Income-tax Act or by reason of the public notice under sub-section (1), and therefore there being no obligation to make a return, the obligation to make a return only arises when a notice is served by the Income-tax Officer under section 11, and therefore it is said that the scheme of section 22 of the Income-tax Act and the scheme of section 11 of the Business Profits Tax Act are entirely different and section 11 must be construed in the light of the language used by the Legislature in that section and not in the light of the provisions of section 22 of the Income-tax Act and the authorities which are based upon the language used in that se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t some point of time anterior to the period of four years mentioned in section 14. Now, it is well settled that income escapes assessment when the process of assessment has not been initiated with regard to the taxing of that income. The liability having arisen by reason of the charging section, the next stage under the taxing statute is to assess that income to tax or to quantify the tax which that income is liable to bear, and if for any reason the income has not been assessed to tax then that income has escaped assessment. In one sense it may be said that as soon as the liability arises and there is no assessment, the income has escaped assessment because no proceedings have been taken for the purpose of assessing that income to tax, and the Legislature under section 14 has provided that when income has escaped assessment that income should not be brought to tax four years after the end of the chargeable accounting period. According to Mr. Joshi, if the liability arises, then proceedings can be initiated under section 11 at any time and it is not necessary to characterise the income which has not been brought to tax as income which has escaped assessment. Mr. Joshi says that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and decide the larger question as to what is the proper period of time within which the notice must be issued under section 11. We wish to confine our decision to the facts of this case, and on the facts of this case the most significant and salient fact is that the notice has been issued four years after the close of the chargeable accounting period, and as that notice is beyond the time mentioned in section 14, in our opinion the notice is not a valid notice under section 11. We may also point out that, although the Legislature has not imposed any limitation of time with regard to the issue of a notice under section 11 and although as a canon of construction it may be said that if the Legislature has not imposed any limitation it is not for the Court to restrict the power conferred by the Legislature upon the Income-tax Officer, it is well settled that if statutory powers are conferred upon an authority, the Court must hold that those statutory powers must be exercised reasonably, and in our opinion if statutory power is conferred upon the Income-tax Officer to issue a notice for the purpose of assessment under section 11, that power must be exercised reasonably, and looking t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of fact it was Act XXI of 1947. It was a statute which preceded the amendment of the Excess Profits Tax Act. Therefore, while the Legislature in the Business Profits Tax Act kept a limit of time under section 14, that very Legislature in an analogous legislation removed the limitation of time which originally was found in section 15 of the Excess Profits Tax Act. In our opinion, this clearly indicates that, as far as the Business Profits Tax Act was concerned, the Legislature was anxious that business profits should not be brought to tax at any point of time without any limitation and that some protection should be given to the assessee, and the protection should be that after the lapse of a certain period of time the profits should not be liable to tax if the Taxing Authorities were not diligent enough to take necessary proceedings. Whichever way one looks at it, the position is not free from difficulty. But as this is a taxing statute, if we can reconcile section 11 and section 14 and reconcile it in a manner which is beneficial to the subject, then it is our duty to do so. We do not and cannot accept the argument of Mr. Joshi that we must construe section 11 independently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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