TMI Blog1954 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ULAM HASAN., N. H. BHAGWATI., T. L. VENKATARAMA AYYAR JUDGMENT The judgment of the Court was delivered by VENKATARAMA AYYAR, J.---This is an appeal from the judgment of the High Court of Bombay on a reference under section 66(1) of the Indian Income-tax Act, and the question for determination is as to the validity of certain re-assessments made under section 15 of the Excess Profits Tax Act, which will hereafter be referred to as the Act. In proceedings for assessment of excess profits for the year 1941, the appellant company applied for relief under section 26(3) of the Act, which, so far as is material for the purpose of this appeal, runs as follows : " If on an application made to it through the Excess Profits Tax Officer the Central Board of Revenue is satisfied that the computation in accordance with the provisions of Schedule I of the profits of a business during any chargeable accounting period would be inequitable, owing to any of the following circumstances, namely----- (b) the provisions of buildings, plant or machinery which will not be required for the purposes of the business after the termination of the present hostilities ; The Central Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, in computing the profits of such chargeable accounting period,---such allowance to be inclusive of all depreciation allowable for excess profits tax purpose in respect of the assets in question." There were similar applications by the assessees for relief under section 26(3) of the Act for the accounting periods 1942 and 1943, and similar orders were passed by the Central Board of Revenue granting allowance respectively of Rs. 4,00,000 and Rs. 3,94,000. The war terminated on 31st March, 1946. In the course of enquiry into the assessable profits of the company for the chargeable accounting period ending 31st March, 1946, the Excess Profits Tax Officer found that the buildings, plant and machinery in respect of which relief had been granted under section 26(3) of the Act were being actually used by the assessees for the purposes of their business even after the termination of the hostilities. He therefore decided to take action under section 15 of the Act, and issued the requisite notices thereunder to them for reopening the assessments for the years 1941, 1942 and 1943. That was resisted by them on the ground that the facts discovered did not relate to the years of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject of excessive relief, he may at any time 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 13, and may proceed to assess or reassess the amount of such profits liable to excess 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." For this section to apply, two conditions must be satisfied : (1) the profits of any chargeable accounting period must have escaped assessment or must have been under-assessed, or must have been the subject of excessive relief ; and (2) that must have been discovered by the Excess Profits Tax Officer in consequence of definite information. There is no question that on the facts found, the first condition has been satisfied. The representations on which the appellant obtained relief under section 26(3) of the Act were that the buildings, plant and machinery would not be fit for use after the war. It was only on that ground that relief could be granted under that provision And when the appellant continued to use the machinery in business after the termination of the war, the very b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat which was previously unknown." It will therefore be correct to say that when a person comes to know of a fact of which he had no previous knowledge he discovers that, fact, whether his want of knowledge is due to its not having been in existence during the material period, or to its having been unknown to him even though it might have been in existence. The word thus being one of wide import, what meaning, it' bears in any particular enactment must depend on the context. We must accordingly examine what indications there are in the Act, which will show the precise connotation of the word " discovers " in section 15 of the Act. That section is, it should be emphasised, not a charging section, but a machinery section. And a machinery section should be so construed as to effectuate the charging sections. Section 15 is intended to vest in the Excess Profits Tax Officer a power to amend the assessment, when it is found that the relief granted is in excess of what the law allows. One of the sections under which relief could be granted under the Act is section 26(3), and therefore section 15 must be so interpreted as to confer a power on the Excess Profits Tax Officer to revise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till 1933, in, which year he obtained a decree declaring the marriage null and void on the ground of her incapacity. From 1921 to 1932 he had obtained reliefs under section 18(1) of the Finance Act under which a claimant is entitled to a deduction if he proves that " for the year of assessment he has his wife living with him or that his wife is solely maintained by him during the year of assessment." In 1934 the Inspector of Taxes made additional assessments in respect of the deductions made during the years 1928 to 1932 on the ground that the marriage having been declared void ab initio, Dale must be held to have " obtained a deduction not authorised by this Act " as provided in section 125 of the Income-Tax Act, 1918. It was held by Lawrence, J., that the additional assessments, were not justified under section 125, because the effect of a decree declareing marriage a nullity was not to wipe out the past and to undo what had been done, and that under section 18(1) of the Finance Act, the basis of relief was a de facto marriage. Then follow certain observations on which the appellant relies : "There is, however, another difficulty in the way of the Crown. In my opinion it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ray (H. M. Inspector of Taxes) v. Lord Penrhyn, where it was held that action under section 25 could be taken with reference to events which happened subsequently, those events having relation to the facts on which the assessments had been made. There, the assessee, who was the owner of a slate quarry had shown in his income-tax returns various amounts as paid to labourers, and those amounts had been allowed as business expenses. In fact, sums amounting to pound 5,201 had been misappropriated by the officers employed by him and had not been expended. The defalcations were subsequently discovered, and in 1934 the assessee realised that amount from his auditor and his insurer as damages for negligence. The Income-tax Inspector sought to revise the assessments from 1930 to 1933 by claiming that amount as wrongly deducted during those years, or in the alternative, to assess it as a business income in 1934. The Commissioner held that the assessments for 1930 to 1933 could not be reopened on the basis of the receipt in 1934, as that was an event subsequent to the period of assessment, one of the cases relied on by him in support of his conclusion being Dodworth v. Dak. Finlay, J., disagr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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