THE COMMISSIONER 0]' INCOME TAX, BOMBAY CITY I, BOMBAY vs. M/S. NARSEE NAGSEE AND CO., BOMBAY.

CIVIL APPEAL No. 319/1958Supreme Court[1960] 3 S.C.R. 98806 May 1960Bench: 3 JudgesAuthor: S.K. DAS, J.L. KAPUR, M. HIDAYATULLAH39 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s. Narsee Nagsee and Co., a firm doing business in Bombay, was served with a notice under Section 11(1) of the Business Profits Tax Act, 1947, on January 21, 1953, for the chargeable accounting period November 13, 1947, to October 31, 1948. The assessee filed a return under protest, contending that the notice was barred by limitation under Section 14 of the Act, as it was issued beyond the four-year period. The Income-tax Officer completed the assessment, which was then appealed by the assessee to the Appellate Assistant Commissioner, who upheld the limitation plea. The Income-tax Appellate Tribunal confirmed this order. The High Court of Bombay, on a reference, also answered two questions of law in the negative, holding that the notice under Section 11(1) could not be issued beyond the four-year period specified in Section 14.

What did the Supreme Court hold?

The Supreme Court, by a majority (S. K. Das and Kapur, JJ., with Hidayatullah, J., dissenting), held that the words 'profits escaping assessment' in Section 14 of the Business Profits Tax Act, 1947, apply to both situations: where a notice was received but resulted in no assessment, under-assessment, or excessive relief, and where no notice was issued, leading to no assessment. The majority ruled that Sections 11 and 14 of the Act must be read together, and a notice under Section 11 cannot be issued to an assessee beyond the four-year period specified in Section 14. The reasoning was that if profits escaping assessment are to be taxed within four years under Section 14, then the notice initiating such assessment must also be within that timeframe. Therefore, the notice issued in this case, beyond four years from the end of the chargeable accounting period, was not valid. The appeal was dismissed, with the majority judgment affirming the High Court's decision. Hidayatullah, J., in his dissenting opinion, argued that Section 11 applies to cases with no prior assessment and has no time limit, while Section 14 applies to reopened assessments where profits have escaped, with a four-year limit. He believed that reading Section 11 as having a four-year limit would render Section 14 otiose.

What were the issues?

1. Whether the Income-tax Officer had jurisdiction to assess the assessee firm under the Business Profits Tax Act, 1947, by issuing a notice under Section 11(1) on January 12, 1953, for the chargeable accounting period November 13, 1947, to October 31, 1948, without having recourse to Section 14 of the Act? 2. If the answer to Question 1 is in the negative, whether the Business Profits Tax assessment could be considered to have been validly made? Assessee's arguments: The assessee argued that the notice under Section 11(1) was barred by the four-year limitation period prescribed in Section 14 of the Business Profits Tax Act, 1947. They contended that Section 11 and Section 14 must be read together, and a notice under Section 11 cannot be issued beyond the period specified in Section 14. The assessee relied on the High Court's reasoning that if profits escaping assessment can only be taxed within four years under Section 14, then the notice for such assessment must also be issued within that period. Revenue's arguments: The appellant (Commissioner of Income-tax) submitted that although Sections 11 and 14 may need to be read together, they apply to different circumstances. Section 11 applies when the Income-tax Officer requires a person believed to be engaged in business to furnish a return, while Section 14 applies when, based on definite information, the officer discovers that profits have escaped assessment. The revenue argued that Section 11 is for initial assessments and has no time limit, whereas Section 14 is for reopening assessments where profits have escaped. They distinguished the case from precedents relied upon by the assessee.

Which sections of the Income-tax Act were involved?

Section 11(1),Section 14,Section 13,Section 15,Section 22(2),Section 34(1)

AI-generated summary — verify with the full judgment below

Jai i<aur v. Sher Singh Das Gttpta J. Ig60 May 6. 988 SUPREME COURT REPORTS [1960] dJ.ughters in posses~ion, would not become full owners under s.

14.

We do not think it would be proper to consider these questions in the present suit in this haphazard manner when on the all-important question of possession, the appellants themselves do not wish to say whether the mother was in possession actually or constructively, whether the danghters' possession was merely permissive, or whether the daughters were in independent possession, on their own behalf. These and other questions of fact, and the questions of law that have to be considered in deciding a claim by tho first appellant or the other two appellants under s. 14 of the Hindu Succession Act, should properly be considered in any suit that they may bring in future, if so advised. We express no opinion on any of these questions.

For the reasons which have been mentioned earlier, we hold that the High Court rightly decreed the snit in favonr of the plaintiffs in respect of the non- ancestral property also, and dismiss the appeal. In the circumstances of the case, we order that the parties will bear their

The order continues below.

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