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Issues Involved:
1. Jurisdiction of the Income-tax Officer to assess under the Business Profits Tax Act. 2. Validity of the business profits tax assessment. Issue-wise Detailed Analysis: 1. Jurisdiction of the Income-tax Officer to Assess Under the Business Profits Tax Act The primary issue was whether the Income-tax Officer had the jurisdiction to assess the assessee firm under the Business Profits Tax Act by issuing a notice under section 11(1) on January 12, 1953, for the chargeable accounting period from November 13, 1947, to October 31, 1948, without recourse to section 14 of the Act. The Tribunal noted that section 11(1) of the Business Profits Tax Act allows the Income-tax Officer to require any person engaged in business to furnish a return within a specified period. However, it does not specify when such a notice should be issued. In contrast, section 14 provides that if profits have escaped assessment, the Income-tax Officer may serve a notice within four years of the end of the chargeable accounting period. The Tribunal concluded that if no notice under section 11 is issued before the commencement of the next chargeable accounting period, the profits would be considered to have escaped assessment, necessitating action under section 14. Since the notice in this case was issued after the four-year period, it was deemed invalid. The High Court agreed with the Tribunal's interpretation, emphasizing that the Business Profits Tax Act must be construed as a whole. The Court highlighted that section 14 indicates the Legislature's intent to protect the assessee from indefinite apprehension regarding tax liability. The Court reasoned that if section 14 limits the time for taxing escaped profits to four years, it must inferentially follow that the Income-tax Officer should issue a notice under section 11 within this period. The Court held that issuing a notice four years after the chargeable accounting period is not reasonable and does not align with the statutory powers conferred upon the Income-tax Officer. Therefore, the Court answered the first question in the negative, indicating that the Income-tax Officer did not have jurisdiction to issue the notice under section 11(1) without adhering to the four-year limitation specified in section 14. 2. Validity of the Business Profits Tax Assessment The second issue was whether the business profits tax assessment could be considered valid if the answer to the first question was negative. Given that the notice under section 11 was issued beyond the four-year period, the Court held that the assessment was invalid. The Tribunal had previously set aside the assessment on these grounds, and the High Court upheld this decision. The Court reiterated that the statutory powers must be exercised reasonably, and issuing a notice four years after the chargeable accounting period does not meet this standard of reasonableness. The Court concluded that the assessment made pursuant to the invalid notice could not be considered valid. Consequently, the second question was also answered in the negative. Conclusion The High Court upheld the Tribunal's decision, confirming that the Income-tax Officer did not have jurisdiction to issue the notice under section 11(1) without adhering to the four-year limitation specified in section 14. As a result, the business profits tax assessment was deemed invalid. The Court emphasized the importance of construing the Act as a whole and exercising statutory powers reasonably. The Commissioner was ordered to pay the costs of the reference, and both questions were answered in the negative.
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