Daulatpur Jute Mills Ltd.
Income Tax Officer and ors.,
High Court Division
(Special Original Jurisdiction)
Salahuddin Ahmed J
A Hye Choudhury J
Daulatpur Jute Mills Ltd………Petitioner
Income Tax Officer and ors……………Respondent
July 3rd, 1970.
Cases Referred To:
Nagina Silk Mills Ltd 15 DLR (SC) 181; PLD 1963 (SC) 322; the Secretary of State for India in Council vs. Hindustan Co-operative Insurance Society Ltd. 35 CWN 794.
Md. Nurul Huq and Mohammad Hassan — For the petitioner.
AM Khan Chowdhury, Assistant Advocate General—For the Respondent.
Petition Nos. 527 and 530 of 1963.
Salahuddin Ahmed J: The Rules Nisi issued in these two petitions have been heard one after another, and as common questions of fact and law were involved in them, they are now disposed of under one judgment.
2. Petitioner in Petition No 527 in Daulatpur Jute Mills Limited, Khulna and the “chargeable accounting period” in respect of which the impugned tax under the Business Profits Tax has been levied is 1.7.54 to 30.6.55. A notice was issued upon the petitioner under section 11 of the Business Profits Tax Act, 1947 (Act No XXI of 1947), hereinafter called the Act, on 26.6.62 and on the same day an order of assessment was made. The petitioner having felt aggrieved by the order went up to the Income Tax Tribunal, Dacca Branch, Dacca on appeal and the Tribunal having held that the impugned order of assessment had been made beyond the period of limitation, allowed the appeal on 13.12.63 and set aside the order of assessment.
3. Petitioner in Petition No 530 is M/s Company Ltd. Kushtia and the “chargeable accounting periods” are (1) 1.7.54 to 30.6.55 and (2) 1.7.55 to 30.6.56 in respect of which the petitioner was assessed to tax under the Act on 30.5.61 and 20.6.62 respectively. The notices under section 11 of the Act that preceded the impugned orders of assessment are dated the 31.5.61 and 20.6.62 respectively. On appeal by the petitioner the Income Tax Appellate Tribunal, Dacca Branch, Dacca, by its order dated 20.12.62 allowed the appeal and set aside the two impugned orders of assessment dated 31.5.61 and 30.6.62.
4. In the meantime section 34 of the Income Tax Act, which had been accepted by section 19 of the Act as a part of the Act in the year 1957, was amended and two new sub-sections, namely, (2B) and (2D) were added to section 34 of the Income Tax Act whereby period of limitation was extended in certain cases of escaped assessment and the competent authority was enabled to start proceedings for assessment or re-assessment under section 34 of the Income Tax Act from the stage next preceding the stage at which annulment, etc took place and that without the issue of a fresh notice or furnishing of a fresh return, etc. These amendments were considered by the Supreme Court in the case of Nagina Silk Mills Ltd 15 DLR (SC) 181; PLD 1963 (SC) 322 and it was held that the extended period of limitation provided for in the said sub-section (2B) of section 34 did not operate retrospectively.
5. In the year 1966 sub-section (B) of the Income Tax Act was amended, and not only was the period of limitation further amended but also the section was made to operate retrospectively.
6. As a result of these amendments the Income Tax Authorities served notices afresh in both the cases, and passed fresh orders of assessment. In Petition No 527 a fresh notice dated 19.12.63 was issued upon the petitioner asking him to produce relevant papers with a view to assess him afresh under the Business Profits Tax Act in respect of the aforesaid chargeable accounting period 1.7.54 to 30.6.55.
7. Similarly, in Petition No. 530 fresh notices bearing the same date, namely, 26.12.62 were issued upon the petitioner in respect of the two chargeable accounting periods, namely, 1.7.54 to 30.6.55 and 1.7.55 to 30.6.56 asking him to produce the relevant papers with a view to re-assess him in respect of the said two periods.
8. Mr. Nurul Huq, learned Advocate appearing on behalf of the petitioners in two petitions, has contended that the subsequent amendments made in section 34 of the Income Tax Act extending the period of limitation for the purpose of assessing or re-assessing an escaped income are not applicable to the case of assessment or reassessment of escaped profits under the Business Profits Tax Act.
9. In order to appreciate this contention it is necessary to state that prior to the introduction of section 19 of the Business Profits Tax Act section 14 of the Act prescribed the period of limitation in the case of profits escaping assessment to be “at any time within four years of the end of the chargeable accounting period in question. The chargeable accounting period as defined in section 2(4) of the Act as so far is relevant for our purpose is as follows:
(a) “any accounting period falling wholly within the term beginning on first day of April, 1946, and ending on the thirty-first day of March 1958,” where any accounting period falls partly within and partly without the said term, such part of that accounting period as falls within the said terms.”
10. In the year 1957 the original section 19 of the Act was substituted by the present section. The substituted section 19 is as follows:
“19. (1) The provisions of section 4A, 4B, 10, 13, 24B, 29, 34, 36 to 44C (inclusive) 45 to 48 (inclusive) 49E, 49F, 50, 54, 61 to 63 (inclusive), and 65 to 67 A (inclusive) of the Income Tax Act, 1922, shall apply with such notifications, if any, as may be prescribed, as if the said provisions were provisions of this Act and referred to business profits tax instead of to income tax, and every officer exercising powers under the said provisions in regard to income tax may exercise the like powers under this Act in regard to business profits tax as he exercises in relation to income tax under the said Act:
Provided that references in the said provisions to the assessee shall be construed as reference to a person to whose business this Act applies.
(2) any reference in this Act to the Income Tax Act, 1922, shall, in relation to the profits of any chargeable accounting period and to the state of affairs and all the circumstances necessary to determent the charge to business profits tax, mean the said Act as in force in the relevant period:
Provided that whatever be the relevant period, references to section 46 of the said Act shall be deemed to include reference to sub-sections (8), (9) and (10) of that section.”
11. On the relevant date section 34 of the Income Tax Act prescribed the period of limitation for assessment in the case of escaped income thus: “at any time within four years of the end of the assessment year.” Subsequently, on 30.6.63, as we have already noticed briefly, sub-section (2B), and some time in the year 1964 sub-section (2d) were added to section 34 of the Income Tax Act. The two new sub-sections are as follows:
(2B) “Notwithstanding anything in sub-sections (i) and (2) limiting the time within which any notice may be issued or any assessment or re-assessment made or any action taken such notice may be issued, assessment or reassessment made or action taken as respects the assessment (including re-assessment) or any year ending at any time between the thirty-first day of March, 1955 and the thirtieth day of June, 1959 (both days inclusive) on or before the thirty-first day of December, 1964.
“(2D) where an assessment or re-assessment or any order has been annulled, set aside, cancelled or modified the competent authority may start the proceedings from the stage next preceding the stage at which such annulment, setting aside, cancellation or modification took place and nothing contained in this Act shall render necessary the re-issue of any notice which had already been issued or the re-furnishing or re-filing of any return, statement, or other particulars which had already been furnished or filed as the case may be.”
In the year 1966 sub-section (2B) was amended and since then it stands as follows:
“(2B) Notwithstanding anything in sub-sections (1) and (2) limiting the time within which any notice may be issued or any assessment or re-assessment made or any action taken, such notice may be issued, assessment or reassessment made or action taken as respects the assessment (including re-assessment) for any year ending at any time between the thirty-first day of March, 1955 and the thirtieth day of June, 1961 (both days inclusive) on or before the thirtieth day of June, 1968.”
12. It is thus quite obvious that for the purpose of assessment under the Income Tax Act in respect of an income escaping assessment in respect of the period mentioned in sub-section (2B) the extended period of limitation is available to the Income Tax authorities for assessing or re-assessing as the case may be.
13. The question, however, that we are called upon to consider is whether the subsequent amendments of section 34 of the Income Tax Act apply to the case of escaped assessment under the Business Profits Tax Act. Our answer to this question is, no. In the case of legislation by reference the principle that appears well settled is that the adopting Act will retain the shape of the adopted provision irrespective of a subsequent amendment in the adopted Act concerning the adopted provision. In the case of the Secretary of State for India in Council vs. Hindustan Co-operative Insurance Society Ltd. 35 CWN 794, the Privy Council has very lucidly explained the principle. In the case under report certain provisions of the Land Acquisition Act (I of 1894) has been adopted in the Calcutta Improvement (Appeals) Act (XVIII of 1911), and a similar question arose as to whether certain adopted provisions of the Land Acquisition Act which were amended by Act XII of 1921 applied to a case under the said Calcutta Improvement Act. In regard to the incorporation of the adopted provision their Lordships observed as follows:
“Their Lordships regard the Local Act (i.e. the Calcutta Improvement (Appeals) Act 1911) as doing nothing more than incorporating certain provisions from an existing Act, and for convenience of drafting doing so by reference to that Act, instead of setting out for itself at length the provisions which it was desired to adopt.
In this country it is accepted that, where a statute is incorporated by reference into a second statute ……………as applicable in India as it is in this country.
It seems to be no less logical to hold that where certain provisions for an existing Act have been incorporated into a subsequent Act, no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed to be incorporated in it, at all events if it is possible for the subsequent Act to function effectually without the addition.”
These were among other reasons with which the Privy Council repelled the contention that the adopted provision along with the subsequent amendment therein would apply in the case of the adopting Act.
14. In the case of Eastern Federal Union Insurance Company vs. Commissioner of Income Tax 1966 Taxation, Vol. 14, Pak 211, a contention exactly similar to the one before us and which concerned the period of limitation in the case of an assessment under the Business Profits Tax Act came up for consideration and the Division Bench of the West Pakistan High Court held :
“As already pointed out, since the petitioners acquired vested rights in respect of the Business Profits Tax Assessment for the chargeable accounting period ending 31st December, 1952 are inoperative in law”.
The Court further observed that “there was no difference in principle between repeal and amendment and section 6 of the General Clauses Act is applicable to the case before the Court. Furthermore, under the provision of law the repeal did affect any right, privilege, obligation or liability accrued under any enactment so repealed”. While respectfully adopting the reasons in the aforesaid two cases under report we may add that neither the amending Act, 1963, which first introduced sub-section (2B) to section 34 of the Income Tax Act for the amending Acts of 1964 and 1966 which further amended the said sub-section gave any indication whatsoever that the amendments would equally apply into a case under the Act. On the contrary section 19 of the Business Profit Tax Act makes it clear that the provisions of section 34 shall apply “with such modifications, if any, as may be prescribed, as if the said provisions were provisions of this Act and referred to business profits tax instead of to income tax”. Section 2(15) of the Act has defined “prescribed” to mean “prescribed by rules made under this Act.”
15. It is common ground that section 34 of the Income Tax Act as adopted in the Business Profits Tax Act has not been modified by any Rules made under the Business Profits Tax Act. The respondents have not disputed the proposition that if the benefit of the subsequent amendment in section 34 is not available in respect of the Business Profits Tax Act the impugned orders passed against the petitioners are beyond the period of limitation prescribed under the Business Profits Tax Act. Adopting the line of reasoning set out in the aforesaid Nagina Silk Mills Ltd. case we find that the impugned notices in the case of the petitioners in both the petitions having been issued long after the period of limitation, are illegal.
16. On behalf of the respondent it has been contended that the petitions are premature inasmuch as the matters have not preferred beyond the stage of notice, and no assessment orders have yet been passed. We do not find any substance in this contention. If the proposed assessments are barred by limitation, the notices themselves are illegal and there is no justifiable reason for troubling the petitioners by continuing futile proceedings against them.
17. We accordingly, make the Rules in both the petitions absolute and declare the impugned notice and all proceedings thereunder as without lawful authority and of no legal effect. Having regard to the facts and circumstances of the case we make no order as to costs.
Source: 1972, (HCD)