P L D 1969 Karachi 454 (PLP)

(a) Business Profits Tax Act (XXI of 1947), Ss. 2(11)(i)(a) & 11(1) read with Income‑tax Act (XI of 1922), S. 22(2)‑Word "Previous"‑Definition‑‑Words "previous year" in S. 22(2) of Income‑tax Act, 1922‑Refer to chargeable accounting period immediately preceding taxing year and restrict period of time, within which notice can be given under S. 22(2), to one year next after accounting year‑No period of time fixed for giving notice under S. 11(1) of Business Profits Tax Act, 1947‑ Two Acts have different fields of operation‑Provisions of one section (of one Act) cannot be used to defeat those of another section (of another Act). The words "next preceding the year" in the definition of the word "previous" make it clear that the words "previous year" which appear in subsection (2) of section 22 of the Income‑tax Act, 1922, refer to the chargeable accounting period which preceded immediately before the taxing year. The defini tion, therefore, does not support the interpretation placed on it, but, on the contrary, shows that the words "the previous year" understood with the help of the definition, restrict the period of time within which notice can be given under subsection (2) of Section 22 of Vie Income‑tax Act, 1922 to one year next after the accounting year. As against this restriction, the language of section 11 has been widened by the addition of word "any" used before the words "chargeable accounting period", and by the words "specified in the notice". No period of time had been fixed for giving notice under subsec tion (1) of section 11 of the Business Profits Tax Act, 1947, and the analogy of subsection (2) of section 22 of the Income‑tax Act, 1922 is not correct. The period of time of one year within which a notice is to be given under subsection (2) of section 22 of the Income‑tax Act, 1922 is the result of the language of that subsection, and that it is not correct to import the larger argument of the schemes of the two Acts, in derogation of obvious linguistic differences. The two Acts have different fields of operation. The Business Profits Tax Act, 1947 comes into operation after the income‑tax Act, 1922, has operated‑not before and not even simultaneously. One Act is not an enlargement of the other, and should not be treated as an addendum to the other. Since they are separate Acts, their differences should not he smothered to suit a preconceived desirability of conformity to one standard. Moreover, uniformity is not the same thing as harmony. There is harmony if the diverse provisions of the two Acts can work without conflicting with one another. So long as this consonance is existing, the provisions of one section cannot be used to defeat those of another. Muhammad Sher Khan v. Raja Seth Swami Dayal 1922 L R 49 1 A 60 ref. (b) Business Profits Tax Act (XXI of 1947), Ss. 11(1) & 19 read with Income‑tax Act (XI of 1922), S. 34‑Notice under S. 34, Income‑tax Act‑Not a pre‑requisite for giving a notice under S. 11(1), Business Profits Tax Act‑[Commissioner of Income‑tax, Bombay v. Narsee Nagsee & Co. (1960) 401 T R 307 dissented from]. Commissioner of Income‑tax v. Pirojbai N. Contractor (1937) 5 I T R 338; State of Bihar v. Sir Kameshwar Singh (1952) 27 I T R 382; Chatturam Holiram Ltd. v. Commissioner of Income‑tax, Bihar and Orissa (1952) 27 I T R 709; Maharaj Kumar Kamal Singh v. Commissioner of Income‑tax (1959) 35 1 T R 1; Maharajadhiraj Sir Kameshwar Singh v. State of Bihar (1957) 37 I T R 388 and Commissioner of Income‑tax, East Pakistan v. Hossen Kasam Dada, Karachi P L D 1961 S C 375 ref. Commissioner of Income‑tax, Bombay v. Narsee Nngsee & Co. (1960) 40 I T R 307 dissented from. Ali Athar for Applicant. JUDGMENT (2) Whether in the facts and circumstances of the case, the Tribunal, relying on the Central Board of Revenue's Notifica tion dated 4th July 1958, was right in holding that the Business Profits Tax Assessment for the chargeable accounting period ending on 31st March 1958, could be made up to 31st March 1963."

2. At the commencement of arguments. Mr. Ali Athar informed us that he did not wish to press the second question for being answered.

3. With respect to the first question, he gave us the facts which form the background of this reference. According to him, this reference relates to the Chargeable Accounting Period which began from the 1st of July 1957 and ended on the 31st of March 1958. Notice for submitting the returns was given to the applicant on the 19th of August 1959, that is to say, after the end of the financial year that followed the Chargeable Accounting Period, but before the expiry of four years after the end of the Chargeable Accounting Period. In response to that notice, returns were submitted by the applicant on the 12th of October 1959 and the applicant was assessed to Business Profits Tax on the 27th of March 1963.

4. The applicant made a direct appeal to the Income‑tax Appellate Tribunal and raised the point that tax was charged illegally, inasmuch as no notice under section 34 of the Income‑tax Act, 1922 read with section 19 of the Business Profits Tax Act of 1947, was given. We are not concerned, as explained above, with any other contentions that were raised before the Income‑tax Appellate Tribunal in connection with the second question.

5. Confining ourselves to the above‑noted objection, we find that the Income‑tax Appellate Tribunal rejected the contention on the ground that, according to it, a notice under subsection (1) of section 11 of the Business Profits Tax Act, 1947 could be given at any time, because no period of limitation is mentioned in that provision. It was argued before it that a notice under subsection (2) of section 22 of the Income‑tax Act, 1922 cannot be given after the tax year expired; therefore on the same analogy a notice given under subsection (1) of section 11 of the Business Profits Tax Act, 1947 after the end of the financial year, would be invalid. In this view of the legal situation, it was contended, the applicant could not be assessed to Business Profits Tax in the absence of a notice under section 34 of the Income‑tax Act, 1922, which was made applicable to the Business Profits Tax by virtue of section 19 of the Business Profits Tax Act, 1947. The Tribunal has repelled this argument relying on the judgments in Commissioner of Income‑tax, East Pakistan v. Hossen Kasam Dada (P L D 1961 S C 375) and the Commissioner of Income‑tax, Bombay City v. Narsee Nagsee & Co. ((1957) 31 I T R 1964), wherein it was held that a notice under subsection (1) of section 11 was competent after the Chargeable Accounting Period. Their Lordships have held that a notice beyond the period of four years would, however, be invalid.

6. Mr. Ali Athar has criticised the above view of the Income‑tax Appellate Tribunal by contending that it was wrong to say that there was any difference between section 22 of the Income‑tax Act and section 11 of the Business Profits Tax Act, with respect to the period of time in which a notice may be given for returns to be submitted. Counsel said that no period of limitation is mentioned in section 11 of the Business Profits Tax Act, 1947, but on the analogy that under the Income‑tax Act, 1922, a notice under section 22 is considered invalid if given after one year of the end of the accounting year, we should hold that a notice under section 11 of the: Business Profits Tax Act, 1947 can only be given within one year after the Chargeable Accounting Period. We have, therefore, compared section 22 of the Income‑tax Act, 1922 and section 11 of the Business Profits Tax Act, 1947. The relevant parts of those sections are subsection (2) of section 22 and subsection (1) of section

11. In subsection (2) of section 22, the words are:‑ "during the previous year." Their effect is that a notice under the subsection can be valid only if given within the immediately following year. This cannot be said of subsection (1) of section 11, because in that provision the corresponding words are: "any chargeable accounting period specified in the notice." The words "any" and "specified in the notice" are important and should be taken in consideration in contrast to definite article "the" and the words "previous year" which have been used in subsection (2) of section

22. Mr. Ali Athar referred to the definition of the expression "previous year" given in section 2(11) of the Income‑tax Act, 1922, and argued that the definition could lead to the conclusion that the expression "previous year" and the expression "any chargeable accounting period" have the same effect. The relevant part of the definition to be found in sub‑clause (i) (a) of clause (11) of section 2, is as follows:‑ " `previous' means‑ (1) (a) the twelve months ending on the thirtieth day of June next preceding the year for which the assessment is to be made . . . . .". We feel that the words "next preceding the year" in the above definition make it clear that the words "previous year" which appear in subsection (2) of section 22 of the Income‑tax Act, refer to the Chargeable Accounting Period which preceded immediately before the taxing year. The definition, therefore, to our minds, does not support the interpretation placed on it by Mr. Ali Athar, but, on the contrary, shows that the words "the previous year" understood with the help of the definition, A restrict the period of time within which notice can be given under subsection (2) of section 22 of the Income‑tax Act, 1922 to one year next after the accounting year. As against this restriction, the language of section 11 has been widened by the addition of the word "any" used before the words "Chargeable Accounting Period", and by the words "specified in the notice". We are, therefore, of opinion that no period of time has been fixed for giving notice under subsection (1) of section 11 of the Business Profits Tax Act, 1947 and that the analogy of subsection (2) of section 22 of the Income‑tax Act, 1922, is not correct.

7. Mr. Ali Athar said that the schemes of the Income‑tax Act, 1922 and the Business Profits Tax Act, 1947, were similar, therefore, the same period of limitation should be applied to section 22(2) and section 11(1); but gave no specific reasons for this conclusion. In the above view of the situation, we think that the period of time of one year within which a notice is to be given under subsection (2) of section 22 of the Income‑tax Act; 1922 is the result of the language of that subsection, and that it is not correct to import the larger argument of the schemes of the two Acts, in derogation of obvious linguistic differences. We may add by way of clarification that the two Acts have different fields of operation. The Business Profits Tax Act, 1947 comes into operation after the income‑tax Act, 1922 has operated‑not before and not even simultaneously. One Act is not an enlargement of the other, and should not be treated as an addendum to the other. Since they are separate Acts, Their differences should not be smothered to suit a preconceive desirability of conformity to one standard. Moreover, uniformity is not the same thing as harmony. There is harmony if the diverse provisions of the two Acts can work without conflicting with one another. So long as this consonance is existing, the provisions of one section cannot be used to defeat those of another‑See Muhammad Sher Khan v. Raja Seth Swami Dayal (1922 L R 49 I A 60). "When‑ (i) income or profits or gains chargeable to income‑tax have escaped assessment in any financial year, or (ii) have been under‑assessed, or (iii) have been assessed at too low a rate, or (iv) have been the subject of excessive relief under the law." In anyone of these circumstances, the Income‑tax Officer could assess tax within 8 years if there was concealment of the particulars of income, or deliberate submission of inaccurate particulars thereof, and that he could do so within 4 years in any other case. The facts of the present case, according to counsel, fell within the residuary category referred to by the words "in any other case;" therefore, in this case assessment could be made under section 34 of the Income‑tax Act, 1922, within 4 years of the end of the financial year. The purpose, according to counsel of advancing this argument was that in this case the facts constitute the first set of circumstances which can be described as escapement of assessment; and escapement of assessment, according to counsel, carried the implication that neither notice within the tax year following the Chargeable Accounting Period was given by the Income‑tax Officer under subsection (1) of section 11 of the Business Profits Tax Act, 1947, nor did the assessee submit a return of his own accord.

9. Since the foundation of counsel's argument was the meaning which he ascribed to the expression "escaping assessment". We insisted on knowing from counsel as to how he could restrict meaning of the expression to absence of notice, and absence of submission of returns. Counsel's reply was that if this restriction was not imposed, then it would be possible to assess Business Profits Tax under subsection (1) of section 11 even when notice was not at all given, and that section 34 of the Income‑tax Act, 1922, would become redundant. We, however, find this argument to be unsound because escapement from assessment can take place even after notice is given under subsection (1) of section 11 of the Business Profits Tax Act, 1947. This can happen if, for instance, the assessment made after notice is later on found to be invalid, or no assessment at all is made after notice. References to such circumstances can be found in Commissioner of Income‑tax v. Pirojbai N. Contractor ((1937) 5 I T R 338), The State of Bihar v. Sir Kameshwar Singh ((1952) 27 I T R 382), Chatturam Holiram Ltd. v. Commissioner of Income‑tax, Bihar and Orissa ((1952) 27I T R 709), Maharaj Kumar Kamal Singh v. Commissioner of Income‑tax ((1959) 35 I T R 1) and Maharajadhiraj Sir Kameshwar Singh v. State of Bihar ((1957) 37 I T R 388). These circumstances constitute instances in which section 34 of the Income‑tax Act can be invoked by the Income‑tax Officer even after notice was given for submission of returns under subsection (1) of section 11 of the Business Profits Tax Act, 1947.

10. Mr. Ali Athar requested us to refer in this order to the judgment of the Supreme Court of India reported in Commissioner of Income‑tax Bombay v. Narsee Nagsee & Co. ((1960) 40 I T R 307), because he relied on the following observations which appear in it "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 1948‑49." Before proceeding to analyse the above observation, we may mention that Mr. Ali Athar has not explained the reasoning of the judgment nor even paid attention to the simultaneous presence of the two diametrically opposite views which have been expressed in that case. He did not even analyse the argument that is contained in the above passage, and said that he could do no better than bring the passage to our notice.

11. In order to appreciate the above quotation, it is necessary to point out that the questions which were referred by the Income‑tax Appellate Tribunal in that case had undergone a modification owing to the order of the High Court of Bombay, with the result that the problem before the Supreme Court of India was substantially different from the problem which is before us. The Income‑tax Appellate Tribunal had originally referred the following two questions:‑ "(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 January 12, 1953, in respect of the Chargeable Accounting Period November 13, 1 947 to October 31, 1948, without having recourse to section 14 of the Business Profits Tax Act? (2) If the answer to question No. L is in the negative whether the business profits tax assessment could be considered to have been validly made?" The above questions are inter-dependant. The High Court of Bombay modified the first question by deleting the words "without having recourse to section 14 of the Business Profits Tax Act". This deletion brought about a vital change in comparison with the question which we have to answer. The point for decision, therefore, was not whether a notice under section 34 of the Income‑tax Act, 1922 was necessary before issuing a notice under section 11(1) of the Business Profits Tax Act, 1947, or not. Moreover, the negative nature of the observation is indicated by the words "it is not an unreasonable inference" and "no difficulty would arise", which occur in the latter part of the quotation. The positive argument is contained in its first part. With utmost respect, we feel that the logic of that reasoning is not clear to us, because the mere fact that assessment is to be in respect of a financial year does not necessarily lead to the conclusion that notice for the Chargeable Accounting Period must issue in the financial year following that period. May be that it was owing to this absence of logical compulsion that the negative aspect was emphasised.

12. The above‑quoted passage occurs in the majority judgment which was delivered by Kapur, J. He held that notice under section 11(1) could be given within one year of the Chargeable Accounting Period. The real reason for adopting that mode of thought was the hardship which might otherwise result, certain incongruities which might be created, and inconsistency with Rule

50. Counsel did not refer to those reasons, and did not adopt them, perhaps because they have been very ably answered in the minority judgment which was delivered by Hidayatullah, J. in support of his view that there was no time limit at all, not even of 4 years, for notice under section 11(1) of the Business Profits Tax Act, 1947. Counsel preferred simply to refer to the above‑quoted passage owing to the weight which it carries as a part of the majority judgment. Since the other arguments which enrich the judgments have not been addressed to us, and since counsel for the respondent had no opportunity of meeting them while making his submissions, we should not discuss them here merely because the above‑quoted passage occurs in the majority judgment of the case. On the contrary, we assume that Mr. Ali Athar who knew them desired to abandon them.

13. Mr. Nusrat, counsel for the respondent, referred to the Commissioner of Income‑tax, East Pakistan v. Messrs. Hossera Kasam Dada, Karaehi. In that case also, assessment was made on a notice which was given under section 11(1) of the Business Profits Tax Act, 1947 after four years of the end of the Chargeable Accounting Period, and was set aside by the Income‑tax Appellate Tribunal on the ground of limitation. The High Court of East Pakistan confirmed the view on reference and adopted the reasoning of Chagla, C. J. of the High Court of Bombay in Commissioner of Income‑tax v. Messrs Narsee Nagsee & Co. The view of the High Court was challenged before the Supreme Court, who dismissed the appeal.

14. The main contention, if not the only, one, which was advanced on behalf of the Commissioner of Income‑tax was that‑ . "a tax escapes assessment only in a case where no assessment has been made after initiation of proceedings. In a case where no assessment has at all been initiated, there can be no question at all of any profits chargeable to the tax escaping assessment. Thus since section 11 does not prescribe any period of limitation, the High Court was. in error in reading into it something which was not there." The Supreme Court has repelled the contention on the ground that ‑ "Section 14 of the Business Profits Tax Act, 1947 (and now section 34 of. the Income‑tax Act, 1922 read with section 19 of the Business Profits Tax Act, 1947), negatives the contention put forward on behalf of the Commissioner of income‑tax that the words 'escaped' assessment' can refer only to a case where assessment had in fact been initiated but for some reason or other no tax was levied, although the tax was leviable."

15. Mr. Ali Athar did not contend that there is any difference between section 14 of the Business Profits Tax Act, 1947 and section 34 of the Income‑tax Act, 1922, but took the stand that the expression `escaped assessment' means that proceedings for assessment were initiated by notice to the assessee or by submission of returns by the assessee, because if there was do such initiation, then it would be a misnomer, if not a misconception, to talk of `escaped assessment'. If there was not even initiation of assessment proceedings, there could be no escapement from assessment. When pressed to explain why escapement front assessment cannot be said to have taken place without initiation of assessment proceedings, he said that assessment must at least have become due before an assessee can be said to have escaped it, and that it cannot be said to have become due unless at least there was a time limit anterior to the time at which action is taken for remedying it. Since the remedied action can be taken under section 34 of the Income‑tax Act, 1922 read with section 19 of the Business Profits Tax Act, 1947 within four years from the Chargeable Accounting Period, the time limit for assessment under section 11(1) of the Business Profits Tax Act, 1947, must be less than four years. How much less cannot be determined with the help of this argument; therefore, on the analogy of the Income‑tax Act, 1922, that period may be taken to be one year.

16. The above argument of counsel is open to several objections. Firstly, the reason for using the analogy of the Income‑tax Act, 1922, is illogical. It amounts to saying that a defective argument should be made to work by importing an idea from another statute in order merely to cover up the defect. Secondly, section 34 of the Income‑tax Act, 1922, which has been indirectly inserted in the Business Profits Tax Act, 1947, by virtue of section 19 of the latter Act, restricts the period of time within which reassessment or assessment, as the case may be, that is made under that section to an over all period of eight years in certain circumstances, and four years in other circumstances, but does not prescribe the limit of one year at all. The case now before us admittedly falls within the residuary circumstances; therefore, the limit of four years is relevant to it. Thirdly, though the ideas of assessment, whether actual or due, and escapement from such assessment are implicit in the expression; escaped assessment', yet it is not ascertained that the two phases should be separated by any length of time. Escapement and the availability of remedy for escapement may be simultaneous. Fourthly, the Supreme Court has held in Commissioner of Income‑tax, East Pakistan v. Hossen Kassim Dada, with reference to section 11(1) read with former section 14 of the Business Profits Tax Act, 1947 that the period of limitation for making assessment under section 11(1) was four years. We feet with respect that the question of eight years did not arise in that case, because in section 14 no such period of time was prescribed. In section 34, which is the substitute of section 14, two periods of time are prescribed; therefore, we are perhaps justified in concluding that in view of section 34, two periods of time are conceivable, but the limit of one year is not inferable at all. For construing section 11, we cannot do better than quote from the judgment of their Lordships as follows:‑ "No liability to pay the tax is created by this section, for, as already stated, the charging section is section 4 and the tax is to be levied under that section, but subject to the provisions of the Act. It may be that whilst laying down the procedure it was not considered necessary by the Legislature to prescribe any limitation. Apart from this, it may equally well be that the Legislature did not feel the necessity of fixing any period during which the assessment could be initiated in view of the fact that by a subsequent section, namely, section 14, it was proposing to fix a time limit within which profits, which have escaped assessment, may be made liable to the tax,"

17. Lastly, let us point out that strictly speaking the question relates only to the validity of a notice given under section 11(1) of the Business Profits Tax Act, 1947 without first giving a notice under section 34 of the Income‑tax Act, 1922 read with section 19 of the latter Act. The implicit contention is that a valid notice could not be given in this case under section 11(1) of the Business Profits Tax Act, 1947 after one year of the Chargeable Accounting Period, without first giving a notice under section 34 of the Income‑tax Act, 1922 read with section 19 of the Business Profits Tax Act, 1947. In other words, it is contended that two separate notices under the law (i.e. sections 11 and 34) are necessary. No contention is to be found in the question that proceedings under section 11 cannot be taken after the lapse of a certain period of time from the end of the Chargeable Accounting Period. On the contrary, a contention is raised that notice under section 34 is a prerequisite in such circumstances for giving a notice under section

11. With respect, we feel that neither the Income‑tax Appellate Tribunal has laid down such n proposition, nor is the contention itself correct.

18. For the above reasons, our answer to the first question is in the negative. S. Q. Reference answered in the negative.