COMMISSIONER OF INCOME TAX BOMBAY CITY I BOMBAY Vs. NARSEE NAGSEE AND CO BOMBAY
SUPREME COURT OF INDIA (FROM: BOMBAY)
COMMISSIONER OF INCOME TAX, BOMBAY CITY, I, BOMBAY
NARSEE NAGSEE AND COMPANY,BOMBAY
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(1.)THIS is an appeal against the judgment and order of the High Court of Bombay passed in Income Tax Reference No. 31 of 1956. The appellant is the Commissioner of Income-tax and the respondent is a firm carrying on business in Bombay and the question for decision arises under the Business Profits Tax Act (Act XXI of 1947) hereinafter referred to as the Act.
(2.)THE assessment relates to the year of assessment 1949-50 and the chargeable accounting period was from November 13, 194 7/10/1948. On 12/01/1953, the Income-tax Officer 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 21/01/1953. THE respondent filed a return under protest. THE assessment was completed by the Income-tax Officer on 30/11/1953. 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. THE Income-tax Officer 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 law :
(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 S. 11(1) of the Business Profits Tax Act on 12-1-1953 in respect of the chargeable accounting period 13-11-1947 to 31-10-1948 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 validly made?"
THE High 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. THE Income-tax Appellate 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.
It is submitted by the appellant that though Ss. 11 and 14 may have to be read together, they apply to different sets of circumstances; S. 11 applies to a case where the Income-tax Officer requires any person whom he believes to be engaged in any business to which the Act applies or to have been so engaged during any chargeable accounting period and calls upon him to furnish a return with respect to such chargeable accounting period; and S. 14 applies to a case where, in consequence of definite information possessed by him, the Income-tax Officer discovers in regard to any chargeable accounting period that the profits of any business have escaped assessment. In other words S. 11 applies to original assessments after the first notice calling upon an assessee to make a return in regard to the profits of any chargeable accounting period and S. 14 applies where such notice was issued and it either ended in no assessment at all or there was under-assessment etc. According to the argument of the appellant therefore there is no period of limitation prescribed by the Act for the first notice to furnish a return in regard to any chargeable accounting period but if such notice was given and a return was made and for any reason whatsoever the profits were not assessed or were under-assessed etc. then S. 14 comes into operation and notice has to be served within four years of the end of the chargeable accounting period in question.
(3.)THE provisions of the Act which arise for consideration are Ss. 2, 4, 5, 11 and 14. S. 2 is the definition section; S. 4 the charging section and S. 5 deals with the applicability of the Act. S. 11 provides for the "Issue of notice for assessment" and S. 14 is headed "profits escaping assessment". S. 2(2) defines accounting period and S. 2(4) chargeable, accounting period. S. 4 provides that in respect of any business to which the Act applies there shall be charged, levied and paid on the amount of taxable profit during any chargeable accounting period a tax equal to sixteen and two-third per cent, of the taxable profits, which in later years was fixed at a lower figure by the Finance Acts of 1948 and 1949. Under S. 5 the Act applies to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax under S. 4(1) (b) (i) and (ii) or sub-cl. (c) of that sub-section. Sections 11(1) and 14 of the Act may now be quoted :
Section 11(1) "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, to be otherwise liable to pay business profits tax, to furnish within such period, not being less then 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 S. 6."
Section 14. "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 S. 11 and he 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."
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