http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 25  

PETITIONER: THE COMMISSIONER OF INCOME TAX,BOMBAY CITY 1, BOMBAY

       Vs.

RESPONDENT: M/S.  NARSEE NAGSEE AND CO., BOMBAY.

DATE OF JUDGMENT: 06/05/1960

BENCH: KAPUR, J.L. BENCH: KAPUR, J.L. DAS, S.K. HIDAYATULLAH, M.

CITATION:  1960 AIR 1232  CITATOR INFO :  R          1964 SC 766  (9)  R          1968 SC 565  (9,32)  R          1977 SC 540  (9,11)

ACT: Business Profits Tax-Limitation for assessment-Notice under Business Profits Tax Act issued  beyond four years-Validity- "  Profits escaping assessment ", meaning of-Excess  Profits Tax  Act,  1940 (15 of 1940), ss.13,  15--Indian  Income-tax Act,1922 (II   of  1922),SS.  22(2),  34(1)-lncome  Tax  and Excess Profits Tax Amendment Act, 1947 (22 of 1947)-Business Profits Tax Act, 1947 (21 of 1947), SS. 11(1), 14-

HEADNOTE: The  assesses  firm which was doing business in  Bombay  was served with a notice on January 21, 1953, by the  Income-tax Officer  under  s. 11(1) of the Business  Profits  Tax  Act, 1947,  in respect of the chargeable accounting  period  from November  13, 1947, to October 31, 1948, calling upon it  to submit  its  return.   It filed  the  return  under  protest stating that the notice was barred under s. 14 of the Act as it was served beyond the period of four 989 years.   The  question  was whether in s. 11 of  the  Act  a limitation  corresponding to the limitation contained in  S. 14 must be necessarily read and whether in a case where  the profits were not brought to assessment because notice  under s.  11 was not issued in time, they must be deemed  to  have escaped  assessment and action could only be taken under  S. 14 within the time specified therein : Held  (per  S.  K. Das and  Kapur,  JJ.,  Hidayatullah,  J., dissenting),   (1)  that  the  words  "   profits   escaping assessment " in S. 14 of the Business Profits Tax Act, 1947, apply  equally to cases where a notice was received  by  the assessee but ‘resulted in no assessment, under-assessment or excessive  relief, and to cases where due to any  reason  no notice was issued to the assessee and therefore there was no assessment of his income; (2)that  ss. 11 and 14 Of the Act have to be  read  together and  that a notice under s. 11 cannot be issued  against  an assessee beyond the period of four years indicated in s. 14.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 25  

Kamal  Singh v. Commissioner of Income-tax, [1959] Supp.   1 S.C.R. 10 and Mahayajadhiraj Sir Kameshwar Singh v. State Of Bihar, [1960] 1 S.C.R. 332, relied on. Gokuldas  Ratanji  Mandavia v. Commissioner  of  Income-tax, [1959] A.C. 114, distinguished. Per Hidayatullah, J.-Section 11 of the Business Profits  Tax Act,  1947,  is confined to cases where there  has  been  no prior  assessment, while S. 14 is applicable to cases  where after  an  assessment there is discovery that  profits  have escaped assessment due to one reason or another.  The use of the  words " escaped assessment " in the context of the  Act has  reference  only  to  those cases  where  profits  of  a business  were brought to process once but for  some  reason some  profits escaped assessment or were  under-assessed  or received excessive relief.  For the subsequent and re-opened assessment  there  is  a limit of four years,  but  for  the assessment for the first time there is no limit.

JUDGMENT:  CIVIL APPELLATE JURISDICTION: Civil Appeal No. 319 of 1958.  Appeal from the judgment and order dated September 5,  1956,  of  the Bombay High Court in Income-tax Reference No. 31  of  1956.  H.   N. Sanyal, Additional Solicitor-General of India, K.   N.  Rajagopal Sastri and D. Gupta, for the appellant.  N.   A.  Palkhivala,  S.  N. Andley, J.  B.  Dadachanji  and  Rameshwar Nath, for the respondents.  N.   A.   Palkhivala,   S.  S.  Shukla   and   Mrs..   Eluri  Udayaratnam,  for the intervener (The Punjab  National  Bank  Ltd.)  128  990  1960.  May 6. The Judgment of S. K. Das and J.L. Kapur, JJ.,  was  delivered  by Kapur, J. Hidayatullah, J.,  delivered  a  separate Judgment.  KAPUR,  J.-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 21  of  1947),  hereinafter  referred to as the Act.  The assessment relates to the year of assessment 1949-50 and  the chargeable accounting period was from November 13, 1947,  to  October 31, 1948.  On January 12, 1953,  the  lncome-tax  Officer issued a notice on the respondent under s. 11(1)  of  the  Act  in  respect  of  the  above-mentioned   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  the  Income-tax  Officer  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  Commis-  sioner.   The  Income-tax  Officer  then  appealed  to   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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 25  

by  issue of a notice under Section 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 Section 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 ? "  991  The  High Court modified the first question by deleting  the  words "without having recourse to Section 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  wag 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,  992  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.  The 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.  Section 11 provides for  the  "  Issue of notice for assessment and s. 14 is headed " profits  escaping assessment Section 2 (2) defines accounting  period  and  s.  2(4)  chargeable  accounting  period.   Section   4  provides  that in respect of any business to which  the  Act  applies  there  shall  be charged, levied and  paid  on  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 25  

amount  of taxable profit during any  chargeable  accounting  period  a tax equal to sixteen and twothird percent  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  subcl.  (c) of that sub-section.  Sections 11(1) and  14  of  the Act may now be quoted :-  S.   11(1).  " The Income-tax Officer may, for the  purposes  of  this  Act,  require any person whom he  believes  to  be  enaged 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 pay business  profits  tax,  to  furnish  within such period, not being less than  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,  993  the profits (taxable profits) of the business or the  amount  of deficiency, if any, available for relief under section 6  S.   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 underassessed, 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 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 ".  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.  The  Act  and  the Indian Income-tax  Act  are  both  taxing  statutes  operating  on the same source., i.e.,  profits  of  business which is similarly defined in the two statutes.  If  the provisions relating to escaping of assessment in the two  statutes,  i.e., in s. 14 of the former and in s.  34(1)  of  the latter as it existed after the amendment of 1939, employ  the same language, they must receive the same interpretation  and  not  be construed differently.  Section  34(1)  of  the  Indian Income-tax Act as amended in 1939 provided:-  S. 34(1).  "If in consequence of definite information  which  has   come  into  his  possession  the  Income-tax   Officer  discovers  that  income,  profits  or  gains  chargeable  to  income-tax have escaped assessment in any year, or have been  under-assessed, or have  994  been assessed at too low a rate, or have been the subject of  excessive  relief under this Act the Incometax Officer  may,  in  any  case in which he has reason to  believe,  that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 25  

assessee  has  concealed the particulars of  his  income  or  deliberately  furnished inaccurate particulars  thereof,  at  any  time within eight years, and in any other case  at  any  time within four years of the end of that year, serve on the  person  liable to pay tax on such income, profits or  gains,  or,  in  the  case of a company, on  the  principal  officer  thereof, a notice containing all or any of the  requirements  which  may be included in a notice under sub-section (2)  of  section  22  and  may proceed to  assess  or  reassess  such  income,  profits  or gains and the provisions  of  this  Act  shall, so far as may be, apply accordingly as if the  notice  were a notice issued under that sub-section  The  words " escaping income " in the Indian Income-tax  Act  were  interpreted  as  being applicable to a  case  where  a  person received notice under s. 22(2) of the Income-tax  Act  but  the process ended in no assessment as to a  case  where  there was no assessment at all because no notice was  issued  under  s.  22(2) of the Income-tax Act; in other  words,  it  includes  cases  where  the process of  assessment  did  not  commence  because no notice was given under s. 22(2) of  the  Income-tax Act due to inadvertence, oversight, negligence or  any  other  cause  as  to cases  where  such  notice  proved  abortive   or  ineffective.   Both  are  cases  of   escaped  assessment:  Commissioner of Income-tax, Bombay v.  Pirojbai  N.   Contractor  (1).   In  this  Court  these  words   were  considered and interpreted in Kamal Singh v. Commissioner of  Income-tax (2 ). They were interpreted to comprise a case of  no  notice being given for the assessment and  notice  being  given  and resulting in no assessment.  Gajendragadkar,  J.,  observed-  We  see  no justification for holding that cases  of  income  escaping  assessment must always be cases where  income  has  not  been  assessed owing to inadvertence  or  oversight  or  owing to the fact that no return has been submitted.  In our  opinion, even in a case where a return has been submitted,  (1) [1937] 5 I.T.R. 338.  (2) [1959] Supp. 1 S.C.R. 10, 18, 19.  995  if the Income-tax Officer erroneously fails to tax a part of  assessable income, it is a case where the, said part of  the  income  has escaped assessment.  The appellant’s attempt  to  put  a very narrow and artificial limitation on the  meaning  of  the word ’ escape’ in section 34(1)(b) cannot  therefore  succeed ".  This  passage  was quoted with approval in another  case  by  this Court in Maharajadhiraj Sir Kameshwar Singh v. State of  Bihar (1) (per Hidayatullah, J.). Chatturam Horilram Ltd. v.  Commissioner of Income-tax(2) was a somewhat different case.  There  assessment proceedings had been taken but had  failed  to  result in a valid assessment owing to some lacuna  other  than  that attributable to the Assessing Authorities and  it  was  hold  to  be  a  case  of  chargeable  income  escaping  assessment  and not a case of mere nonassessment of  income-  tax.  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 the Income-  tax  Officer 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. II    as     to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 25  

allowable deductions, deficiency, etc., would be  equally  available, if the notice is issued under s.  14.  The legislature has adopted the language of s. 34(1) of  the  Income-tax  Act in s. 14 of the Act and it must,  therefore,  be  considered  to  have adopted the  construction  of  that  section  applied  by the courts.  Secondly, this  Court  has  construed  the words " escaping assessment " as used  in  s.  34(1)  of  the Income-tax Act.  The same words in  the  same  context  as employed in s. 14 of the Act must have the  same  meaning.   It  was  submitted that in  the  present  case  a  different -meaning  (1) [1960] 1 S.C.R. 332.  (2) [1955] 2 S.C.R. 290.  996  should  be  given because although in s. 34  of  the  Indian  Income-tax Act and s. 14 of the Act, the word.,; "  escaping  assessment  " are used the language of s. 11(1) of  the  Act  and of s. 22(2) of the Indian Incometax Act is different in.  so  far  in the former the notice requires  an  assessee  to  furnish  a return of the income of the previous year and  in  the latter he has to furnish the particulars with respect to  any  chargeable  accounting  period of the  profits  of  the  business.   It becomes necessary, therefore, to examine  the  provisions  of  the  Act as  to  the  chargeable  accounting  periods  and other provisions relevant thereto.  In s.  2(2)  of the Act " Accounting period " in relation to any business  means  any  period which is or has been  determined  as  the  previous year for the purpose of the Indian Income-tax  Act.  Under  s.  2(4) of the Act Chargeable  accounting  period  "  means :-  (a)  " any accounting period falling wholly within the  term  beginning on the first day of April, 1946, and ending on the  thirty-first day of March, 1947;  (b)  where  any  accounting period falls partly  within  and  partly  without the said term, such part of that  accounting  period as falls within the said term ".  According to this definition, therefore, where the  previous  year  was  the financial year 1946-47  then  the  accounting  period  and  the  chargeable  accounting  period  would   be  coincident,  i.e.,  they would both be 1946-47; but  if  the  previous  year was the calendar year or the Diwali year  the  accounting periods of nine months in the former case,  i.e.,  April  1,  1946, to December 31, 1946, and 7 months  in  the  latter,  i.e., April 1, 1946, to November 1, 1946, would  be  the  chargeable accounting periods for the purposes  of  the  Act.   The extent of the periods will vary according to  the  determination of the previous year under the Incometax  Act.  It  might  be a full year or less which appears  to  be  the  reason for adopting the nomenclature which has been  adopted  in  the  Act  instead of the previous  year.   It  would  be  incongruous  to  call a period of less than a  year  as  the  previous  year.   For  the  chargeable  accounting   periods  mentioned  above the Business Profits Tax would be  charged,  levied and paid in the  997  financial year 1947-48 at the rate mentioned in s. 4 of  the  Act on every business falling under s. 5. But for all  these  periods  the  assessment year would be  the  financial  year  1947-48.   Keeping this in view we may now see what  changes  were  made by the Finance Act of 1948.  By that Act the  Act  was continued for another one year and for the figure " 1947  "  in the definition of chargeable accounting period  in  s.  2(4)(a)  the  figure  "  1948  "  was  substituted  and  the  following proviso was added:  "  Provided  that where an accounting  period  falls  partly

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 25  

before, and partly after, the end of March, 1947, so much of  that accounting period as falls before, and so much of  that  accounting  period as falls after, the end of  March,  1947,  shall be deemed each to be a separate chargeable  accounting  period ".  By  this proviso the accounting period or the previous  year  was  split  up  in  cases where it  was  not  the  preceding  financial  year  or 1947-48.  Thus the  calendar  year  1947  became  two chargeable accounting periods of 3 months and  9  months,  i.e., from January 1, 1947, to March 31, 1947,  and  April  1,  1947, to December 31, 1947, and  the  same  would  apply  to accounting period from Diwali to Diwali,  i.e.,  5  months  and  7 months.  In effect the whole  year’s  profits  thus  became chargeable to Business Profits Tax  instead  of  only of a part of the year as was the case for the financial  year 1947-48.  Other changes made by the Finance Act of 1948  were  in s. 4 where under s. 10 of the Finance Act the  rate  of  tax for the chargeable accounting. period up to the  end  of  March, 1947, remained at 16 2/3 per cent. -but  for  the  chargeable accounting period after that date was to be fixed  by  the Annual Finance Act and by s. 11(1) of that  Act  the  rate  was fixed at ten per cent.  Thus Business Profits  Tax  rates  also  were to be fixed by the Annual Finance  Act  as  were  the  Income-tax rates.  Then came the Finance  Act  of  1949 which continued the Act for another year and under s. 4  fixed  the  rate  chargeable in respect  of  any  chargeable  accounting period after March 31, 1948.  The Finance Act  of  1950 did not continue the Act and it thus came to  129  998  an  end except for liabilities which had already  arisen  or  accrued under the Act.  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., 1946-47, 1947-48 and  1945-49.   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 year  1947-  48 the 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 year 1947-48.  After  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  year  1948-49.  Similarly in the  financial  year  1949-50  notice 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 the Income-tax  Act  is not well-founded.  That  the  notion  of the previous year  or  the  accounting  period  is  as much applicable to the Act as to  the  Indian

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 25  

Income-tax  Act  is  shown by reference  to  Computation  of  Profits  Rules  in  the  Schedule to  the  Act.   There  the  computation  is  related  to the  accounting  periods.   The  previous year is shown applicable by reference to the  Rules  under the Act,  999  by  which some of the Rules of the Income-tax Act  are  made  applicable to the Act; and some of the sections of that  Act  are made applicable by s. 19 and by the Rules under the Act.  Amongst  the  Rules applicable is r. 8  which,  inter  alia,  related  to  allowances  under s. 10(2)(vi)  of  the  Indian  Income-tax  Act.  The first and the second provisos to  this  rule are as follows :-  "  Provided  that  if the  buildings,  machinery,  plant  or  furniture  have  been used by the assessee in  his  business  for  not less than two months during the previous year,  the  percentage  shall be increased proportionately according  to  the number of complete months of user by the assessee :  Provided  further  that in the case of  a  seasonal  factory  worked by the assessee during all the working seasons of the  previous  year, the percentage shall be increased as if  the  buildings,  machinery, plant, or furniture had been  in  use  throughout  the  period the assessee was the  owner  thereof  during the previous year ".  Both these provisos use the word previous year which is same  as the accounting year under the Act.  By r. 4(A) of the Rules made under the Act certain  sections  of  the  Indian  Income-tax  Act  have  been  adapted   with  modifications  therein  mentioned.  Of those s.  50  of  the  Income-tax  Act is one.  In the Act it has been  substituted  by the following:-  "  No  claim  to any refund of tax under the  Act  shall  be  allowed  unless it is made within four years from  the  last  day  of the financial year commencing next after the  expiry  of  the accounting period which constitutes or includes  the  chargeable  accounting period in respect of which the  claim  to such refund arises ".  All  these  sections show not only that  the  two  statutes,  i.e., the Act and the Indian Income-tax Act, have to be read  together  but also that the notion of the previous year  has  been inducted into the Act.  The 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  1000  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 circumstance 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 expire of the accounting period  or  the previous year which is by itself or includes the charge-  able  accounting  period  in question.  Section  48  of  the  Income-tax Act, 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.  50:  Adam  Haji  Dawood & Co. Ltd. v. Commissioner of Income-tax, Burma (1).  The language of s. 14 and particularly the words may proceed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 25  

to assess or reassess the amount of such profits to Business  Profits Tax " support the contention of the respondent  that  it applies to cases of no assessment due to notice not being  given  as to cases of no assessment after notice  was  given  and  proceedings proved ineffective.  The words "  assess  "  and  "reassess" do not mean the same thing and  signify  two  different  cases.  The former applies to cases  where  there  was  no assessment to tax due to notice not being given  and  the process has to commence with the issuing of such  notice  and  the  latter to cases where the  assessment  process  is  recommenced by issuing a second notice, the previous  notice  having  proved  abortive or resulting  in  under-assessment,  etc. Construing in this manner effect is given to the  words  " profits of any chargeable accounting period ......... have  escaped  assessment  " and it also avoids the  anomaly  that  some  cases where there was no assessment can be dealt  with  under one section with a time limit as under s. 14 but other  equally  clear cases of non-assessment are dealt with  under  s. 11  (1)  [1936]4 I T.R. 100 (Rang.).  1001  without  there  being  any  limitation  of  time.   If   the  contention  of the appellant is accepted then it would  come  to  this that it would depend upon the Incometax Officer  as  to  which  of the two sections he uses for the  purposes  of  assessment  and would lead to this absurdity that in a  case  of definite information of profits having escaped assessment  there will be a limitation of four years and in cases  where  there  is no such information but only belief there will  be  no such limitation.  If the words " profits escaping assessment " are  applicable  to   original  assessments,  i.e.,  where  the  process   of  assessment  did not commence, as also to  assessments  where  the  process of assessment was commenced but  proved  wholly  abortive  or  partially so, then s. 14 would apply  to  both  such  cases.   Thus construed s. II would  apply  to  normal  original   assessments  and  s.  14  to   profits   escaping  assessment  as construed above whether the assessment is  an  original assessment or is a re-assessment.  In  determining the scope of s. 14 of the Act reference  may  be  made  to  another  statute which  is  relevant  for  the  purpose, i.e., the Excess Profits Tax Act (Act XV of  1940),  ss. 13 and 15 of which are identical in language with ss. 11  and  14  of the Act.  Section 13 deals with the issue  of  a  notice  for  assessment  and s.  15  with  profits  escaping  assessment.   Before the Income Tax and Excess  Profits  Tax  (Amendment) Act, 1947 (Act 22 of 1947), there was a 5 years’  period  of limitation prescribed in s. 15 in  the  following  terms:  "  within five years of the end  of  the  chargeable  accounting period in question ". By the aforesaid  amendment  these words were deleted.  The Act, being Act 21 of 1947, as  well  as  the Amendment Act above referred to  were  enacted  about  the same time one after the other.   The  legislature  thought it necessary to remove the period of limitation  and  thereby made profits escaping assessment liable to  taxation  under  the  Excess  Profits Tax Act without  any  period  of  limitation  but  in  the  Act  the  legislature  thought  it  expedient  to  prescribe the period of  limitation  of  four  years in s. 14.  It cannot be said that this was  1002  without  any purpose and the argument that  prescribing  the  period of limitation in s. 14 of the Act was deliberate  and  was  intended  to prevent taxing under the  Act  of  profits  which had escaped assessment for four years from the end  of  the chargeable accounting period in question is not  without

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 25  

substance.  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   under-  assessment.   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 (1)  which  was  an  appeal  from  East  Africa  and  Telu  Ram  Jain  &  Co.  v.  Commissioner  of  Income-tax  (2 ), 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,  require  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  (1) [1959] A.C II4.        (2) [1955] 27 I.T.R. 94.  1003  person at 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  orginal  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  the  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 ss. 59(1), 71 and 72 is  differs  it

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 25  

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  1004  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  pair  material  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.  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.  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.  In  our opinion, the assessment which was sought to be  made  was  without  jurisdiction and the appeal  must,  therefore,  fail.  We accordingly dismiss the appeal with costs.  HIDAYATULLAH,  J.-The Commissioner of Incometax, Bombay  has  filed this appeal against the judgment and order of the High  Court   of  Bombay  dated  September  5,  1956,   with   the  certificate of the High  1005  Court  granted under s. 19 of the Business Profits Tax  Act,  1947 (hereinafter called the Act) read with s. 66(1) of  the  Indian Income-tax Act, 1922.  Messrs.  Narsee Nagsee &  Co.,  Bombay  (hereinafter referred to as the assessee firm),  are  the respondents.  The ssessee firm, at all material times, was doing business’  in  Bombay.  For the chargeable accounting period,  November  13,  1947,  to  October 31, 1948, a  notice  was  issued  on  January 12,1953, by the Incometax Officer under s. 11(1)  of  the Act calling upon the assessee firm to submit its return.  This  notice was served on the assessee firm on January  21,  1953, and it filed a return under protest, stating that  the  notice  was barred under s. 14 of the Act.  It may  be  men-  tioned  that the assessment for purposes of  income-tax  for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 25  

the  same  year  was completed on February  17,  1953.   The  objection of the assessee firm was overruled by the  Income-  tax Officer, who completed the assessment under s. 12(1)  of  the  Act  on  November 30, 1953.   The  assessee  firm  then  appealed to the Appellate Assistant Commissioner, who upheld  the objection that the notice was invalid under s. 14(1)  of  the Act.  On appeal taken by the Commissioner of Income-tax,  Bombay, the Appellate Tribunal concurred with the  Appellate  Assistant   Commissioner.    At   the   instance   of    the  Commissioner,  however,  the  Tribunal stated  a  case,  and  referred  two questions for the decision of the Bombay  High  Court which were as under:  "  (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 Section 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 section 14 of the Business Profits Tax Act ?  (2)  If  the  answer to question No. 1 is in  the  negative,  whether  the  Business  Profits  Tax  assessment  could   be  considered to have been validly made?  "  The  High Court modified the first question by deleting  its  last 12 words.  Both the questions were then answered by the  High Court in the negative.  The  130                              1006  Commissioner  of Income-tax obtained a certificate from  the  High Court, and filed this appeal.  Before dealing with the reasons given by the High Court  and  the Tribunal and considering arguments urged in this appeal,  it  will be convenient to reproduce ss. 11(1) and 14 of  the  Act:  "  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, or to be  otherwise  liable  to pay business profits tax,  to  furnish  within such period, not being less than 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 (the taxable profits) of the business or  the amount of deficiency, if any, available for relief under  section 6  Provided that the Income-tax Officer may, in his discretion,  extend the date for the delivery of the return.  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  section II, and 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."  The  Tribunal construe(] both these sections  together,  and  expressed the opinion that the notice under s. 11 in respect  of a chargeable accounting period should  1007

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 25  

issue  before  the  commencement  of  the  next   chargeable  accounting period, and that if the notice was not so issued,  profits  must be considered to have escaped assessment,  and  that  action  could only be taken under s.  14  within  four  years  of the close of the chargeable accounting  period  in  respect  of  which it was sought to tax the  assessee.   The  Tribunal,  therefore,  held that inasmuch as the  notice  in  this case was issued in January, 1953, more than four  years  after  October  31,  1948, when  the  chargeable  accounting  period  came to an end, the notice and  the  assessment.were  barred  by  time.  The Tribunal also pointed  out  that  the  intention of the legislature could be gathered from the fact  that  though  in  s. 15 of the Excess Profits  Tax  Act  the  limitation  of five years was deleted by Act 22 of  1947,  a  similar  amendment was not made in s. 14 of the  Act,  which  corresponds  to s. 15 of the Excess Profits Tax Act,  though  the  Act was passed at the same time being Act 21  of  1947.  Holding, therefore, that the profits which were not taxed at  all  and were never brought under assessment must be  deemed  to  have " escaped assessment " because notice under  s.  11  was  not  issued in time, the Tribunal was of  opinion  that  action could only be taken under s. 14 of the Act within the  time specified there.  The Bombay High Court did not  accept  that  the notice under s. 11 had to be given before the  end  of  the chargeable accounting period, but held that the  two  sections must be interpreted together, and observed :  "  Inasmuch  as section 11 does not indicate any  period  of  time with regard to the issue of a notice, would it or would  it  not  be  right  for us to import  into  section  11  the  consideration which led the Legislature to fix a  limitation  of time for the purpose of issuing a notice under section 14  ?  If we were not to do that we would arrive at this  rather  extraordinary  conclusion that the Legislature while  saving  the  subject from harassment of proceedings with  regard  to  escaped  assessment  or  under-assessment,  permitted   that  harassment  with  regard  to  the  very  initiation  of  the  proceedings after the lapse of four years.  It is  contended  that  the  period  of four years  mentioned  in  section  14  supplies an  1008  important  indication  for  what the  period  of  limitation  should  be  with regard to the is-,,tie of  a  notice  under  section 11.  If income which has escaped assessment can only  be taxed within four years by reason of section 14, then  it  must inferentially follow that income must escape assessment  at  some point of time anterior to the period of four  years  mentioned in section 14.  On  efects   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."  The  Commissioner  has contended that s. 11 deals  with  the  issuance  of a notice for the first time before  any  income  has  been returned or brought to tax.  The notice  under  s.  11, it is submitted next, is without any limit of time,  and  a  limitation  cannot  be  read into  a  section,  when  the  legislature  has  not  thought  it  fit  to  lay  it   down.  According  to the Commissioner, s. 14 deals with  "  escaped  assessment  ", which, under the scheme of the Act,  must  be  given  a  narrow  meaning as indicating  the  escapement  of  profits  from  tax either wholly or partly for  any  reason,  after  the process of assessment has taken  place.   Section  14, it is argued, operates after one set of proceedings  for  assessment  of tax have taken place, and applies only  where

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 25  

the profits either escape assessment, or are  under-assessed  or  excessive relief has been granted, while s. 11,  on  the  other hand, applies to all cases, where the assessee has not  been  called  upon  to file a return or has  not  filed  one  himself.   As  against this, the assessee  firm  adopts  the  reasons  given by the Tribunal and the High Court, and  adds  that  whereas under s. 14 some definite information must  be  possessed  by the Incometax Officer before he can issue  the  notice, the Incometax Officer has only to entertain a belief  that  business was carried on in the  chargeable  accounting  period  to enable him to serve the notice under s. 11.   The  assessee firm, therefore, contends that it would be open  to  the Income-tax Officer to ignore s. 14  1009  altogether and to issue a notice under s. 11 in a case  even  after  the expiry of a considerable time.  The  Commissioner  contends that the liability to pay tax arises under s. 4  of  the Act, and it remains till the liability is discharged  by  payment   of  tax,  and  the  legislature  has,   therefore,  advisedly left the power to the Income-tax Officer to assess  the  tax  where there has been no proceeding to  assess  it,  without  imposing any limit as to time.  Section 14, on  the  other  hand, has been so framed that persons  whose  profits  have  been brought to assessment once should not be  exposed  to a double peril, except within the stated period.  The  two  sections must be reconciled.   The  learned  Chief  Justice of the Bombay High Court, who delivered the judgment  of the Bench, stated that it was not an easy matter to  give  a rational meaning to them.  He, however, felt that  between  the two rival contentions, the argument of the assessee firm  was  the more reasonable, and that where  two  constructions  were  possible, one strict and the other beneficial  to  the  assessee,  the latter should be preferred if it was  equally  reasonable.  The scheme of the Act, in -so far as asking for a return  is  concerned,  is  entirely different from that of  the  Indian  Income-tax  Act.  Under the latter Act, a general notice  is  issued calling upon every assessee whose income exceeds  the  minimum which is exempt under the Income-tax Act, to file  a  return within the period stated in the notice.  The  Income-  tax  Officer  has  further power to issue a  notice  to  any  individual assessee during any assessment year calling for a  return of his income during the previous year.  An  assessee  under the Income-tax Act is, therefore, bound, if his income  is  liable to tax, to file a return whether it be in  answer  to  the  general notice or to the special notice  issued  to  him.  The assessee may even file a return voluntarily before  the  special  notice is issued to him.   Even  before  1939,  though  there was no general notice the distinction  between  the  previous  year and the assessment year  obtained.   The  notice  under s. 22 of the Indian Income-tax Act must  issue  before the  1010  close   of  the  assessment  year  and  cannot   be   issued  thereafter.  The  scheme  of the Business Profits Tax Act  is  different.  Business  profits follow the assessment of  income-tax,  and  are  payable for any chargeable accounting period in  which,  the assessee having carried on business, assessable  profits  have  resulted Under the Act, the Income-tax Officer, if  he  has  reason to believe that the assessee was engaged in  any  business  to  which  the Act applied, or  to  have  been  so  engaged  during  any chargeable accounting period or  to  be  otherwise liable to pay business profits tax, can call  upon  the  assessee  to furnish a return.  That is  s.  11.   Then

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 25  

comes  s. 14, which says that 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’, he may at any time within  four  years  from the end of the chargeable accounting period in question  serve on the person liable to such tax, a notice.  There  is  no compulsion to file a return except in answer to a  notice  issued  either  under s. 11 or s. 14.  There  is  no  period  comparable to the assessment year.  Mr. Palkhivala attempted  to bring in the conception of an ’ assessment year’ into the  Act  by  saying that the next chargeable  accounting  period  could  be taken to be the assessment year for  the  previous  chargeable  accounting period.  When it was pointed  out  to  him  that  where  the  chargeable  accounting  period  of  a  business ended, say, on March 15 every year the last charge-  able  accounting period would be compressed to 15  days,  he  had  no adequate answer.  The Tribunal also stated that  the  chargeable  accounting year was also the ’assessment  year’.  This  cannot  be  correct, because s. 11(1)  speaks  of  the  current  as well as the back chargeable accounting  periods,  as will be explained in detail later.  The question thus  is  whether  a  narrow meaning should be given to  the  words  "  profits  which  have escaped assessment " as  denoting  only  those profits which by reason of a prior notice under s.  11  were  sought to be assessed but had escaped assessment or  a  wide meaning to include those profits  1011  which  were  never sought to be assessed  or  brought  under  assessment by the issuance of a notice under S. 11.  The  question  is primarily one of construction of  the  two  sections of the Act.  Before dealing with it is necessary to  look  at the scheme of some of the basic provisions  of  the  Act.  The accounting period under the Act is equated to  the  previous year of the business for the purposes of the Indian  Income-tax Act, 1922.  The tax is laid on the taxable profit  s  of  the ’chargeable accounting period’,  which  means  an  accounting  period failing wholly within the term  beginning  on  the first day of April, 1946, and ending on the  thirty-  first  day  of March, 1949, or where any  accounting  period  falls  partly within and partly without the said term,  such  part as falls within the said term.  A proviso further  says  that  if  the  accounting period falls  partly  before,  and  partly after, the end of March, 1947, then the period before  and  the  period  after  shall  be  deemed  to  be  separate  chargeable  accounting periods.  Then comes s. 4,  which  is  the charging sections That section, omitting the  provisions  about exemptions which do not concern us, reads :  "  Subject  to the provisions of this Act, there  shall,  in  respect  of  any  business to which  this  Act  applies,  be  charged,  levied  and  paid on the  amount  of  the  taxable  profits during any chargeable accounting period, a tax (in ’  his Act referred to as ’business profits tax ’) which shall,  in respect of any chargeable accounting period ending on  or  before the 31st day of March, 1947, be equal to sixteen  and  two thirds per cent. of the taxable profits, and in  respect  of  any  chargeable accounting period beginning  after  that  date, be equal to such percentage of the taxable profits  as  may be fixed by the annual Finance Act.  Provided............... (omitted).  Section  5  deals  with the application of  the  Act.   That  section, omitting again the provisos that do not affect  the  present matter, provides :  "  This Act shall apply to every business of which any  part  of the profits made during the chargeable accounting  period

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 25  

is chargeable to income-tax by  1012  virtue of the provisions of sub-clause (i) or subclause (ii)  of  clause (b) of subsection (1) of section 4 of the  Indian  Income-tax Act, 1922, or of clause of that sub-section:  Provided..........  (omitted).  It will appear from these sections quoted that the  business  profits tax comes in the wake of the incometax.  That is  to  say,   the   assessability  to  profits  tax   follows   the  assessability to income-tax.  The tax is laid on the taxable  profits  accruing within a stated period which  may  include  not  more than four accounting periods corresponding  either  wholly  or partly to the previous year under the  Income-tax  Act.   The  chargeability  to  income-tax  is  a   condition  precedent to the chargeability to profits tax, but not every  business  which  pays income-tax necessarily  pays  business  profits tax.  The Act, however, does not prescribe a  period  comparable  to the assessment year under the Indian  Income-  tax  Act.   It does not lay down any term within  which  the  assessment should be completed.  The  short  question thus is whether in s. 11 of the  Act  a  limitation  corresponding to the limitation contained in  s.  14  must necessarily be read.  It seems to be agreed on  all  hands, and it was not denied at the Bar before us that if s.  11 is to be interpreted according to its own terms, then  no  such  limitation  can be read in it.  The Tribunal  and  the  High Court resort to s. 14 to do so.  It  is always a serious matter to read into a  section  what  the legislature has not chosen to put there.  As pointed out  by Lord Esher, M. B., in Curtis v. Stovin (1) :  It  is, no doubt, very easy for a judge to say that  lie  is  introducing words into an Act only by way of construing  it,  while be is really making a new Act  Such procedure is wholly out of place if the language of the  section  does  not  admit of any  extension.   The  question  invariably  is Dot what the legislature might have said,  or  might  be supposed to have intended to say, but what it  did  say.  This is more so in an  (1)  (1889) 22 Q.B.D. 513.  1013  Act  which  imposes a tax, and which cannot be added  to  or  subtracted  from  except  perhaps for  the  most  clear  and  compelling  reasons.  Bearing these principles,  which  have  received recognition on many an occasion, in mind, I address  myself to the task.  Under  the  scheme of the Act analysed above,  it  is  quite  clear that the liability to tax depends not on any action to  be taken tinder the Act to recover the tax, but it  attaches  itself  to the taxable profits when they have been  made  in  any  chargeable  accounting  period.   Once  this  liability  attaches, it can only be dissolved either by payment of  the  tax  or  by  the levy becoming impossible due  to  lapse  of  stated  time.  The Commissioner contends that the  liability  to pay the tax in the case of a business not brought to  tax  does not cease by reason of any passage of time.  It  ceases  only  when  by reason of an attempted assessment  once,  the  proceedings under s. 14 cannot be initiated again after  the  expiry  of  four  years  from  the  end  of  any  chargeable  accounting  period.   The  Commissioner  contends  that  the  phrase  " profits have escaped assessment" in s. 14 must  be  limited to those cases only.  For this purpose, reliance  is  placed upon a recent decision of the Privy Council in a case  from  Africa, Gokuldas Ratanji Mandavia v.  Commissioner  of  Incometax (1), which will be referred to in some detail.  The Income-tax authorities in Nairobi in that case wrote  on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 25  

May 26, 1953, asking Mandavia for information and a  deposit  of pound 2,000 and saying:  As  you do not appear at any time to have made a  return  of  total  income and claim for allowances, I am  sending  under  separate  cover forms covering years of assessment  1943  to  1953.   These should be completed and submitted to me  along  with  the  accounts of your professional activities  and  of  your   property  dealings  as  set  out  in  the   preceding  paragraphs ".  Mandavia  was at that time in England, and wrote on June  4,  asking for time till the end of July.  On June 15, 1953, the  Regional  Commissioner  wrote  to inform  him  that  he  was  proceeding  to assess him and impose penalties on the  basis  of such information as  (1)  [1959] A. C. 114.  1014  had been submitted.  These assessments were made on June 18,  but were dated June 26 apparently to give the taxpayer  more  time  in  which  to pay.  Under s. 59 of  the  East  African  Income Tax (Management) Act, 1952, it was provided:  " 59(1).  The commissioner may, by notice in writing require  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 and of such particulars  as  may be required for the purposes of this Act with respect to  the income upon which such person appears to be chargeable  Under the third sub-section of that section, a duty was laid  upon every person to give notice to the Commissioner  before  October 15 in the year following the year of income that  he  was  so  chargeable, where no notice had been  served  under  sub-s.  (1)  and no return had been  furnished  within  nine  months  of the close of the year of account.  Then  followed  two  sections, which need to be quoted partly.   Section  71  provided, inter alia:  "  (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.  "  The  section  provided by sub-s. (2) for cases  in  which  a  return was made which was (a) accepted and (b) not accepted,  and  by  sub-s. (3), for cases where no  return  was  filed.  Then  followed  s.  72  which  provided  (leaving  out   the  proviso):  "  Where  it  appears to the commissioner  that  any  person  liable to tax has not been assessed or has been assessed  at  a  less amount than that which ought to have  been  charged,  the  commissioner may, within the year of income  or  within  seven years after the expiration thereof, assess such person  at  such  amount or additional amount as, according  to  his  judgment, ought to have been charged, and the provisions  of  this  Act  as  to notice of  assessment,  appeal  and  other  proceedings under this Act shall apply to such assessment or  additional assessment and to the tax charged thereunder.  "  1015  Now,  the  Commissioner  in the  cited  case  justified  the  assessments  under s. 72, because it was contended that  the  assessments  were  ultra vires and void, in that  they  were  made before the " time allowed ". He relied upon the general  words of s. 72, and submitted that they covered even a  case  where a person was not assessed whether he had a notice  and  a "time allowed " under ss. 59 and 71 or not.  The, argument  on  behalf  of the taxpayer was that s. 72 only  dealt  with  cases   where  subsequent  information  led  either  to   an  assessment  after  a prior assessment or  to  an  additional  assessment  but  had no application to cases  in  which  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 25  

machinery of s. 59(1) had not been operated.  The  Privy Council accepted the contention of the  taxpayer.  It  held that before assessments could be made, the  "  time  allowed " had to elapse.  It, however, gave a narrow meaning  to the words as to assessing for the first time in s. 72, as  restricted  to " cases in which, the machinery of  s.  59(1)  having  been operated, no assessment has been made ".  Their  Lordships gave three reasons for this conclusion, which  may  be set out in their own words:  "  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  the  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 in-  consistent  with  the general and  mandatory  provisions  of  section  71.   That section is providing  how  all  original  assessments are to be made.  Section  72 deals, inter alia, with additional  assessments,  with   cases  in  which,  owing  presumably  to   subsequent  information, the Revenue desires to  1016  reopen what had apart from section 72 been settled.   Having  regard  to  the  wording of section 71  it  seems  to  their  Lordships  necessary to restrict the words as  to  assessing  for  the  first time in section 72 to cases  in  which,  the  machinery  of  section  59  (1)  having  been  operated,  no  assessment  has  been  made.   So far  as  the  taxpayer  is  concerned,   after  be  bad  made  his  return  or  had   an  opportunity of doing so, it was settled that be was under no  liability  to  tax for that  year.   Subsequent  information  leads  the Revenue to reopen the matter and decide  that  he  ought to be assessed.  Section 72 is dealing with the reopening of cases which  had  been settled under the normal procedure.  This explains  the  fact  that section 72 contains a prima facie  limitation  of  seven  years whereas section 71 contains no limitation.   On  the respondents’ arguments this seems inexplicable.  On  the  other argument it seems reasonable that there should after a  certain time be no reopening of what has been settled unless  there has been fraud or willful default.  The construction also gains support from the words ’ought to  have  been charged’, when they occur for the second time  in  section 72.  They there apply to ’ such amount’ as well as ’  such additional amount’.  "  The case, though it is easily distinguishable on the  ground  that  the African Act and the Act are not in  pari  material  shows  that by the compulsion of the language  employed  and  the scheme of taxation, a restricted meaning may have to  be  given to certain general words.  When such a claim is  made,  only  the statute under which the claim is made, can be  the  guide and not another not in pari material.  The decision is  also distinguishable on the ground that there a notice under  s.  59  (1)  was pending and the " time allowed  "  had  not  expired.  The assessee relies upon a decision of the Bombay High Court  in Commissioner of Income-tax v. P. N. Contractor (1), where  the  previous  year ended on March 3l,1934.  No  notice  was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 25  

served on the assessee under s.22(2)of the Indian Income-tax  Act during  (1) [1937] 5 I.T.R. 338.  1017  the  year of assessment.  Then a notice under s. 34  of  the  Income-tax Act was served on June 26, 1935.  It was held  by  Beaumont, C. J., and Rangnekar, J., that s. 34 of the Indian  Income-tax  Act  was wide enough to include those  cases  in  which there was no notice under s. 22 or a first assessment.  Beaumont,  C.  J., dissented from the  observations  of  Sir  George  Rankin  in are Lachhiram Basantlal (1)  made  obiter  that  "  income cannot be said to  have  escaped  assessment  except  in the case where an assessment has been made  which  does not include the income ", and observed :  "  Under s. 34 what must be escaped is assessment  and  that  means the whole process of assessment, which, in the case of  individuals,  starts with the service of a notice  under  s.  22(2).  The liability to assessment is a risk to which every  person in British India entitled to income is liable, and  I  cannot  see why the process of assessment has not been  just  as much escaped by a person who receives no notice under  s.  22(2) as by a person who receives such a notice which proves  in fact ineffective.  It seems to  me  that  a  person   who  receives no notice under s.   22(2) has escaped  assessment,  although, through no     fault  of his own, the  process  of  assessment has never been set in motion.  "  The  assessee also relied upon Commissioner  of  Income-tax,  Burma  v. Ved Nath Singh (2), where Roberts, C. J.,  Mya  Bu  and Dunkley, JJ., observed:  "  We  are of opinion that s. 34 is applicable to  cases  in  which  either  no assessment at all has been made  upon  the  person  who received the income, profits or gains liable  to  assessment,  or,  where an assessment has been made  in  the  course of the year, but some portion of the income,  profits  or  gains of such assessee for some reason or other has  not  been  included  in the order of assessment; such  income  is  income  which  has ’ escaped assessment’ in  the  year,  and  falls within the ambit of s. 34 of the Act.  "  These cases arose before the amendments of 1939 and in those  days there was no provision for a general  (1)  (1931)  I.L.R 58 Cal. 909, 912.  (2) [1940] 8 I.T. R. 222,  1018  notice such as is now issued under s. 22(1).  Even in  those  days,  the  return asked for the particulars  of  the  total  income  during the previous year.  Thus, at the end  of  the  assessment year it was not possible to issue a notice for  a  back  period beyond the previous year.  By the force  of  s.  22(2)  it  could be said at the end of any  assessment  year  that  in so far as the income of the corresponding  previous  year was concerned, it had escaped assessment.  The  logical  result  of this was that if no notice calling for  a  return  under  s. 22 was issued within the assessment year, then  s.  34  was the only means to get at the tax: See Rajendra  Nath  Mukerjee  v. Commissioner of Income-tax (1).  The scheme  of  the  Indian  Income-tax Act is entirely  different,  and  by  fixing  a time limit for the issuance of a notice  under  s.  22(2) makes it clear that in s. 34 of the Indian  Income-tax  Act  the  words "escaped assessment " ex facie  covered  all  cases  of  escaped assessment whether within  or  without  a  prior assessment.  The assessment there ’escapes’ when  once  the assessment year expires.  The cases under the  Incometax  Act which expound s. 34 are, thus, not in point.  The cases of this Court relied upon by the assessee also  do  not help.  In Kamal Singh v. Commissioner of Income-tax (2),

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 25  

it was held that the word " information " was wide enough to  include information as to the true and correct state of  the  law and the word " escaped " was wide enough to cover  cases  of  inadvertence or oversight on the part of  the  assessing  authorities.   In Commissioner of Income-tax v.  Ranchhoddas  Karsondas  (3),  the  respondent assessee  had  submitted  a  ’voluntary’  return  showing no taxable income’ and  it  was  held that the Income-tax Officer could not ignore the return  and  proceed  under  s.  34  of  the  Income-tax  Act.    In  Maharajadhiraj  Sir Kameshwar Singh v. State of  Bihar  (4),  the  income returned was not brought to tax and later  under  s. 26 of the Bihar Agricultural Income-tax Act, 1938, it was  sought  to be assessed.  Section 26 of that Act was held  to  cover  such  a case, and the language of  that  section  was  extremely wide.  These cases are hardly in point.  (1)  L R. (1933) 61 I.A. 10. (2)  [1959] Supp. 1 S.C.R. 10.  (3)  [1960] 1 S.C.R. 114.    (4)  [1960] 1 S.C.R. 332.  1019  We  are  thus thrown back upon the construction of  the  two  sections,  and  must find out where the  compulsion  of  the  language  employed and the general scheme of the  provisions  lead  to.   Before  doing  so, I  shall  discuss  one  other  extraneous consideration called in aid by both the  Tribunal  and  the High Court.  The Act followed the,  Excess  Profits  Tax Act, 1940, which provided for the levy of tax on  excess  profits made during the chargeable accounting periods within  the term beginning on the first day of September, 1939,  and  ending   on  the  thirty-first  day  of  March,  1941.    By  succeeding Finance Acts, the year 1941 was changed to  1942,  1943,  1944,  1945  and  1946.   Thereafter  came  the  Act.  Sections 13 and 15 of the Excess Profits Tax Act  correspond  respectively to ss. 11 and 14 of the Act with the difference  that  the limitation in s. 15 was five years.  By Act 21  of  1947  (which  immediately preceded the Act) this  period  of  limitation  was  removed, by  deleting  retrospectively  the  words  "  within  five years of the end  of  the  chargeable  accounting  period  in question" from s. 15  of  the  Excess  Profits  Tax  Act.   Thus, by the  amendment  there  was  no  limitation  for  bringing to tax profits which  had  escaped  assessment, and it was so held by Falshaw and Kapur, JJ., in  Telu foam Jain & Co. v. Commissioner of Income-tax (1).  Now, the Tribunal and the High Court reason that it was  the  simplest matter for the legislature to have ,deleted similar  Words from s. 14 of the Act, if the intention was to  create  no  limitation for the assessment of profits which  had  not  been   assessed  before.   The  fact  that  there   was   no  corresponding  change in the Act, it is said, shows that  no  first assessment or reassessment could be made after a lapse  of four years.  This  argument views the matter from one angle only.   There  is  another  side  to it which is  equally  plausible.   The  intention of the legislature in making the amendment in  the  Excess  Profits  Tax  Act was manifestly  to  make  the  tax  leviable   by  a  first  assess-(1)  rent  and  also  by   a  reassessment   without  any  limit  of  time.    After   the  amendment,  no limitation existed ,either in s. 13 or s.  15  of the Excess Profits Tax Act.  (1)  [1955] 27 I.T.R. 94.  1020  Such assessment or reassessment could be made at any time or  even  after  considerable time.  The  question  of  hardship  involved   in  calling  for  returns  after  the  lapse   of  considerable  time, which has weighed heavily with the  High  Court, did not seem to have distressed the legislature.   It  is  thus impossible to think that the legislature  left  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 25  

Act  untouched from a converse motive.  We must  not  forget  that  the  Act  was  then freshly  enacted,  and  the  first  chargeable  accounting  period  was  hardly  over  for   any  assesesee  and  every case of escaped assessment  or  under-  assessment was also well within the time prescribed by s. 14  of the Act.  There would hardly be any present need for such  a drastic provision to start with.  It might well have  been  thought  that there would not be cases in which  four  years  could  not be considered ample, except those cases  where  a  particular  business was never brought to tax at  all.   For  that,  it might equally have been thought that s. 11, as  is  contended   by  the  Commissioner,  was   sufficient.    The  amendment in s. 15 of the Excess Profits Tax Act might  have  been  advisedly made to reach even those cases where  though  the  profits  of  a  business  had  once  been  brought   to  assessment,  they needed to be re-assessed even  though  the  first assessment resulted in some tax or no tax.  For  those  cases  it might have been felt that the limit of five  years  ought to go.  If  this is as good an explanation of the intention  of  the  legislature in amending s. 15, then the reason given by  the  High  Court  is not the only explanation, and it  cannot  be  accepted.   If  the  intention of  the  legislature  can  be  gathered  in two different ways, it is sheer speculation  to  say  which  is the true intention.  As said earlier,  it  is  always  inadvisable  to go by a supposed  intention  of  the  legislature  and  construe the words of the statute  in  the  light  of  that supposed intention.  The intention  must  be  gathered  from  the  words  of  the  section  in  which  the  legislature has chosen to express its intention and not vice  versa.  I am accordingly of the view that this ground is not  valid.  The  High  Court  and the Tribunal read  s.  11(1)  somewhat  differently.  According to the Tribunal,  1021  the  notice under that section must issue before the end  of  the chargeable accounting period, and according to the  High  Court,  within  four  years from the end  thereof  There  is  nothing  in  the section which justifies any  of  these  two  readings.   Three  classes of persons are  there  mentioned.  They are (a) persons believed to be engaged in any business,  (b)  persons  believed  to  have  been  so  engaged  in  any  chargeable accounting period, and (c) persons believed to be  otherwise  liable  to business profits tax.  The  first  two  categories clearly show that whereas for the first  category  the  assessee  must be engaged in business in  the  year  of  notice,  for  the second category the notice  may  issue  in  respect of a back chargeable accounting period.  The words "  to  be  engaged " and " to have been so engaged  during  any  chargeable accounting period " cannot but refer to " current  "  and " back " chargeable accounting periods.   The  latter  words plainly refer to a ,back" period and the word " any  "  shows  that it need not be the " back "  period  immediately  preceding the " current " chargeable accounting period only.  Indeed,  it is possible to issue the notice under  s.  11(1)  after  March  31,  1949,  in  respect  of  the  very   first  chargeable  accounting  period  and  also  every  succeeding  period lying within the term beginning on April 1, 1946, and  ending on March 31, 1949.  If  this  be  the natural meaning of the  section  and  this  meaning  is  made more probable by the  residuary  category,  viz., persons otherwise liable to pay business profits  tax-  it  is an irresistible conclusion that no period  comparable  to  the assessment year under the Income-tax Act was  either  introduced or contemplated. The distinction between " back "

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 25  

chargeable  accounting  periods  and  "current"   chargeable  accounting periods also disappears.  Unless one can say when  or  after how much lapse of time profits escape  assessment,  s.  14 cannot be made applicable at all.  Section 4  of  the  Act  says that in respect of any business to which  the  Act  applies,  there  shall  be charged, levied and  paid  a  tax  referred to as the business profits tax.  The liability that  is incurred can only be discharged by payment of the tax and  the charging and levying  132  1022  are  duties  laid upon the Income-tax Officers  who  execute  them  by issuing a notice under s. 11 and by  assessing  and  demanding the tax.  For this purpose, any person believed to  be engaged in business to which the Act applies, or to  have  been so engaged or to be otherwise liable can be called upon  to make a return.  Of course, the proceedings thus initiated  may  or may not result in tax, but that is  another  matter.  This  is  the first operation of the Act  against  a  likely  taxpayer.   For this purpose, it is admitted, on all  hands,  there is no express limitation in s. 11(1) or elsewhere.  The  question  next is whether there is anything in  s.  14,  which  impliedly  imposes such a limitation.   That  section  deals  with " escaped assessment   under-assessment "  or  "  excessive  relief ". The last two categories ex facie  refer  to  an  assessment after a prior assessment.   The  question  thus is whether the words " escaped assessment ", refer also  to  an  assessment after a prior assessment,.   The  word  "  assessment  ",  was explained by the Judicial  Committee  in  Commissioner  of  Income-tax v. Khemchand  Ramdas  (1).   It  sometimes  means  the  computation  of  income  or  profits,  sometimes,  the determination of the amount of tax  payable,  and,  sometimes, the whole procedure laid down in  a  taxing  Act  for  imposing the liability on an assessee.  In  s.  14  where  the words " escaped assessment " are used,  it  means  that  there  was a determination of the amount  of  the  tax  payable but some profits escaped that process either  wholly  or partly.  Profits  cannot  be said. to have  escaped  assessment  when  there  are proceedings afoot and assessment is  being  made.  In  my  opinion,  they  cannot  be  said  to  have   escaped  assessment   when  they  are  exposed  to   assessment   and  assessment has yet to be done.  It is to be noticed that  s.  14  requires " definite information " in the  possession  of  the  Income-tax Officer and to " discovery " by him  of  the  fact  of  escaped  assessment as a  condition  precedent  to  action  under that section.  If under s. 4 the liability  to  tax exists and there is no limitation, and if under s. 11(1)  it can be  (II) (1938) L.R 65 I.A 236.  1023  enforced without any limit as to time, the profits cannot be  said  to  have  escaped  assessment  any  more  than   where  assessment proceedings are afoot and are not yet over.  This  is not a case where by the operation of some other period of  limitation the assessment proceedings can be said to be  out  of  reach  of  the Department.  If  the  profits  are  still  assessable  by  reason  of the charge under  s.  4  and  are  subject to the process under s. 11(1), there is no " escaped  assessment ". There are here no "back" periods which  cannot  be reached under s. 11 like the period prior to the previous  year  of  the  Income-tax  Act, for  which  only  s.  34  is  available.   All  chargeable accounting periods are  on  the  same footing, and s. 11 is wide enough to reach all of them.  Further, it is to be noticed that there is no time limit for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 25  

completing an assessment once begun.  Also, if profits which  have  never been processed can be dealt with both under  ss.  11  and 14 and both have the limit of 4 years, why have  two  sections, one depending on belief and the other on  definite  information  ?  We must look to some different  meaning  and  different  fields  of operation.  That can only  be  if  the  words " escaped assessment " are given a restricted  meaning  in s. 14.  In this view of the scheme of the Act and the clear words of  s. II (1), it seems difficult to put a limit of time because  one  is  contained in s. 14 in respect of  profits  escaping  assessment.   No doubt, both the sections must be  construed  harmoniously  ; but as was observed by Sir Lawrence  Jenkins  in  Mohammad  Sher  Khan  v.  Seth  Swami  Dayal  (1),   the  provisions of one section cannot be used to defeat those  of  another,  unless it is impossible to  effect  reconciliation  between  them.   Equally both sections must not be  made  to  operate  in  the same field.  In the Act with which  we  are  concerned,  reconciliation is only possible if the words  of  s.  11(1)  and s. 14 are given  meanings  without  importing  certain  implications from one into the other, and the  only  way   different  fields-can  be  found  is  to   read   them  differently.  The interpretation of the High Court, if I may  figuratively describe it, makes the two sections march  hand  in hand during the four  (1)  [1922] L.R. 49 I.A. 60.  1024  years  which ex facie could not have been intended,  as  one  section  depends  upon the entertainment of belief  and  the  other  section  requires definite information leading  to  a  positive discovery.  Read  in  this way, it is clear that s. 11  effectuates  the  assessment, levy and collection of tax from persons believed  to be liable, while s. 14 enables a reopening of cases where  after  an  assessment there is discovery that  profits  have  escaped assessment due to one reason or another.  The use of  the  words " escaped assessment" in the context of  the  Act  has  reference  only  to  those cases  where  profits  of  a  business  were brought to process once but for  some  reason  some  profits escaped assessment or were  under-assessed  or  received  excessive  relief.  The insistence  upon  definite  information  leading  to such a discovery before  action  is  taken  under  s. 14, also points in the same  direction.   "  Definite  information  "  denotes that  there  is  something  discovered  which can demonstrate the falsity  of  something  done   previously.   The  existence  of  belief  shows   the  possibility of there existing some profits which need to  be  taxed.   Whereas " definite information " points to a  state  of  affairs  in which though there was a processing  of  the  profits before, something definite having been found out the  result of that processing is discovered to be incorrect, the  word  " belief " in s. 11 shows that the Income-tax  Officer  is to embark upon a first enquiry as to whether the business  comes within the purview of the Act or not.  To  summarise, therefore, though it is possible to make  the  chargeable  accounting  period correspond to  the  ’previous  year’ under the Income-tax law, there is no method by  which  the conception of an assessment year can be brought in.   To  say  that s. 11 operates for full four years is to find  not  an " assessment year " but an " assessment period ".  During  the course of those four years, the tax would be  realisable  under s. 11, because the assessment period could not be said  to  be  over.   But then, there would be  no  room  for  the  operation  of  s.  14, particularly where  it  speaks  of  "  escaped  assessment ". During the whole of the  four  years,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 25  

there would never be any escaped assessment, and there would  be no further time available  1025  for  the operation of s. 14.  Even on this  reasoning,  some  meaning  other than what prevails under the  Income-tax  Act  will have to be given to the same words by the compulsion of  the language employed in ss. 11 and 14.  On the reasoning of  the High Court, the whole of the period of four years  would  be  the " assessment period ". It would begin at the end  of  the chargeable accounting period and end after the lapse  of  four years.  It would embrace all the chargeable  accounting  periods within reach.  But then, s. 14 also operates in  the  same  manner  and  for the  same  time.   This  construction  renders s. 14 otiose.  Nor  do  I think that there is any unreasonableness  in  the  construction, which I have indicated above.  The legislature  might  have  been  solicitous that  persons  who  have  been  subjected  to the process of assessment once should  not  be  exposed  to  a  second peril except  within  the  reasonable  period  of  four  years  from  the  end  of  the  chargeable  accounting  period;  but it did not view in  a  similar  way  those  persons  who  were never troubled  before  but  whose  liability  to pay tax remained unaltered.  The  motive  with  which limitation was introduced in one section cannot be the  motive for the Courts to introduce the same period in  quite  another  section.  To adopt the reasoning of the High  Court  would be to make no distinction between ss. 11 and 14 and to  render meaningless the fiction to be found in the last words  of  s.  14.  For profits which have never  been  brought  to  assessment,  there  would be two notices  possible  in  some  cases,  one under s. 11 (1) and the other under s.  14,  one  requiring only the entertainment of a belief as to a certain  state of things and the other requiring definite information  and  discovery that profits have escaped assessment.   These  two conditions cannot co-exist in the same case.  Harmonious  construction requires that there should arise no  impossible  situations.  Such situations are avoided if the operation of  s.  11  is confined to those cases where there has  been  no  prior  assessment and the operation of s. 14 to those  cases  where   after  a  prior  assessment  there  is  an   escaped  assessment,  under-assessment or excessive relief.  For  the  subsequent and reopened assessment there is a limit of  1026  four years, but for the assessment for the first time  there  is no limit.  I  have  looked  into the Rules framed under  the  Act.   No  doubt, R. 50 speaks of a period during which refunds can  be  claimed,  and  it  may be argued that this rule  has  to  be  interpreted in harmony with the Act.  If the Rule cannot  be  reconciled  with  the  Act, then the Rule  must  fail.   See  Maxwell  on  Interpretation of Statutes, 10th Edn.,  p.  51,  where the following passage occurs:  " If reconciliation is impossible, the subordinate provision  must give way, and probably the instrument would be  treated  as subordinate to the section."  See also Institute of Patent Agents v. Lockwood and Minister  of Health v. R: Ex parte Yaffe (2 ). The breakdown of R.  50  would  leave  into  operation R. 48, which  is  without  any  limitation  of  time, and refunds would be  available  under  that  Rule.  This argument receives great support  from  the  fact that under the Excess Profits Tax Act ss. 48 and 50  of  the Indian Income-tax Act, were brought in mutatis mutandis.  If,  as has been shown above, there is no limitation  either  under  s.  13 or s. 15 of the Excess Profits Tax Act  s.  50  will have to be applied to that Act without any limit as  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 25  

time.   It  appears  to  me that R.  50  is  not  framed  in  consonance  with the spirit underlying s. II, and if it  was  necessary  for me to say so, I would have been  disposed  to  thinking that being a Rule of the Board of Revenue, it would  have  to  give way, even though under the Act it has  to  be  read  as a part thereof.  This argument, therefore,  has  no  validity.  In my opinion, the answer to the first question should be in  the  affirmative.   In  view  of  this  answer,  the  second  question would not fall to be answered.  I would, therefore,  allow the appeal with costs here and below.  BY  COURT: In accordance with the judgment of the  majority,  the appeal is dismissed with costs.  Appeal dismissed.  (1)  [1894] A.C. 347, 360.  (2)  [1931] A.C. 494, 503.