1. WAHEEDUDDIN AHMAD, J.-This judgment will dispose of Civil Appeals Nos. K-41 and K-42 of 1972, in which common question of law is involved.
2. Civil Appeal No. K-41 of 1972 arises out of Civil Reference No. 6 of 1965 decided by the former High Court of West Pakistan, Karachi Bench on the 30th October 1968. The facts in that case are that appellant Messrs Dada Limited is a private limited company. For the chargeable accounting period ending the 31st March 1958, a notice under section 11(1) of the Business Profits Tax Act was served on the appellant on the 19th August 1959, i.e., after the end of the financial year that followed the chargeable accounting period. The appellant filed a return on the 12th October 1959, and was assessed to Business Profits Tax on the 27th March 1963. The appellants challenged this assessm ent before the Income-tax Appellate Tribunal on the ground that no notice under section 11(1) of the Business Profits Tax Act having been issued or served within the financial year following the end of the chargeable accounting period i.e., financial year 1958-59, it became a case of escapement of tax and the assessm ent could be made only after a notice under section 34 of the Income-tax Act read with section 19 of the Business Profits Tax Act had been served on the appellant. It was urged that no such notice having been served on the appellants at anytime, the assessm ent made was invalid. The Income-tax Appellate Tribunal, by order dated the 9th June 1964, rejected the contention and dismissed the appeal. The Tribunal held that in proceedings under Business Profits Tax Act, it is not necessary that the procedure laid down under section 34 should be followed and that a notice under section 11(1) can be issued at any time. The appellants filed an application under section 66(1) of the Income-tax Act read with section 19 of the Business Profits Tax Act to the Tribunal requiring the Tribunal to refer the High Court, the following questions:-
(1) Whether in the facts and circumstances of the case, the Tribunal is right in holding that for the purposes of Business Profits Tax, notice under section 11(1) can be issued at any time without issuing any notice under section 34 of the Income-tax Act read with section 19 of the Business Profits Tax Act?
(2) Whether in the facts and circumstances of the case, the Tribunal, relying on the Central Board of Revenue's notification dated the 4 July 1968, was right in holding that the Business Profits Tax Assess--ment for the chargeable accounting period ending on 31st March 1958, could be made up to 31st March 1963?
3. The Tribunal referred both the questions to the former High Court of West Pakistan, Karachi Bench, by order dated the 19th January 1965. Before the High Court, the appellants gave up the second question and pressed only the first question. The High Court, by order dated the 30th October 1968, answered the first question in the affirmative. The appellants then filed a petition for grant of certificate under section 66-A(2) of the Income-tax Act read with section 19 of the Business Profits Tax Act and the High Court was pleased to grant the petition by order dated the 29th October 1970, certifying the case to be fit for appeal to the Supreme Court.
4. Civil Appeal No. K-42 of 1972 arises out of the judgment of the former High Court of West Pakistan, Karachi Bench, dated the 30th October 1968, in Income-tax Reference No. 8 of 1968.
5. The facts in this case are that the appellants Messrs Muhammad Ibrahim & Co., is a private limited company. For the chargeable accounting period ending on the 30th June 1957, a notice under section 11(1) of the Business Profits Tax Act was served on the appellants on the 9th June 1959, i.e.; long after the end of the chargeable accounting period. The appellants did not file any return but was assessed to Business Profits Tax on the 30th March 1963. The appellants filed an appeal against the assessm ent before the Income-tax Appellate Tribunal challenging the validity of the assessm ent, inter alia, on the ground that no notice under section 11(1) of the Business Profits Tax Act having been issued or served within the chargeable accounting period or even within the financial year next following the end of chargeable accounting period it became a case of escapement of tax and that assessm ent could be made only after a notice under section 34 of the Income-tax Act read with section 19 of the Business Profits Tax Act had been served on the appellants. No such notice having been served on the appellants at any time, the assessment made was invalid. The Tribunal, by order dated the 24th September 1964, rejected the contention and dismissed the appeal. The Tribunal held that this was not a case of escapement of assessm ent and notice under section 34 of the Income-tax Act was not required to be served on the appellants after the expiry of the chargeable accounting period for the financial year next following the end of the chargeable accounting period. It further held that notice under section 11(1) of the Business Profits Tax Act could be served at any time as there was no limitation to serve such a notice. The appellants then filed an application under section 66(1) of the Income-tax Act read with section 19 of the Business Profits Tax Act to the Income-tax Appellate Tribunal requiring the Tribunal to refer the following questions to the High Court:-
(1) Whether the assessm ent under the Business Profits Tax Act for the chargeable accounting period ending on 30th June 1957, could be made after the expiry of 4 years from the end of the chargeable accounting period?
(2) Whether assessm ent under the Business Profits Tax Act for the chargeable accounting period ended on 30th June 1957, made in pursuance of notice under section 11(1) of the Business Profits Tax Act on 9th June 1959 and without issuing any notice under section 34 of the Income-tax Act read with section 19 of the Business Profits Tax Act valid and legal?th Before the High Court, the appellants gave up the first question. As regards--the second question, the High Court relied upon its decision in Reference No. 6 of 1965 which is the subject-matter of C. A.
6. No. K-41 of 1972 before this Court, and answered in the affirmative i.e., against the appellants.
7. Thereupon, the appellants filed a petition for grant of certificate under section 66-A(2) of the Income-tax Act read with section 19 of the Business Profits Tax Act. The High Court certified the case to be fit for appeal to this Court by its order dated the 29th October 1970.
8. It is in these circumstances that these two appeals have come to this Court. In both the cases, the following is a common question of law:- "Whether in the facts and the circumstances of the case, the Tribunal is right in holding that for the purposes of Business Profits Tax notice under section 11(1) can be issued at any time without any notice under section 34 of the Income-tax Act read with section 19 of the Business Profits Tax Act."
9. Mr. A.I Athar, learned counsel for the appellants, has contended that no period of limitation is mentioned in section 11 of the Business Profits Tax Act but on the analogy of section 22 of the Income-tax Act, a notice given under it after one year of the accounting period, is considered as invalid. On the same analogy, it should be held that a notice under section 11(1) of the Business Profits Tax Act, can only be given within one year after the chargeable accounting period. The contention of the learned counsel has not impressed me. A comparison of section 22 of the Income-tax Act and section 11 of the Business Profits Tax Act will show that in sub--section (2) of section 22, the words are "during the previous year", whereas in subsection (1) of section 11, the corresponding words are "any chargeable accounting period specified in the notice". The effect of the words "during the previous year" is that a notice under this subsection is valid only if given within the immediately following year. The word "any" in subsection (1) of section 11 is important and that shows that a notice can be given at any time. In this connection, the High Court made the following observations: "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 sub-- section (1) of section 11. In subsection (2) of section 22, the words are- "during the previous year".
10. Their effect i3 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 the provision the corresponding words are- "any chargeable accounting period specified in the notice."
11. 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. A.I 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 (I1) of section 2, is as follows: - "previous" means-
(1) ------------------------------------------------------------------------------..
(2) the twelve months ending on the thirtieth day of June next preceding the year for which the assessm ent is to be made . . . ."
12. We feel that the words "next preceding the year" in the above definition make it clear that the words "previous year" which appear in sub--section (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. A.I Athar, 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 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 the 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 Apt, 1922, is not correct,"
13. The view of the High Court appears to be correct. The learned counsel for the appellants, in support of his contention has relied on Commissioner of Income-tax, Bombay v. Narsee Nagsee & Co.
14. ((1960) 401 T R 307). It was held by the majority in that case that- "a notice under section 11(1) of the Business Profits Tax Act must be given within the financial year which commenced next after the expiry of the accounting period or the previous year which was by itself or included the chargeable period in question."
15. PLD 1961 SC 375), a decision of this Court. In that case, it was held as under:- "Under section 11 of the Business Profits Tax Act, 1947, the return has necessarily to b9 in respect of profits made during a chargeable accounting period and, therefore, the notice calling for such a return should ordinarily be issued within a reasonable period after the termination thereof and this reasonable period should not extend beyond the period specified in section 14."
16. It was further held:- "It is true that section 11, Business Profits Tax Act, fixed no time limit for the issuance of the notice but the profits and taxable profits, of which returns are called for, are to be with respect to a particular chargeable accounting period specified in the notice."
17. It was further concluded as under:- "Therefore, proceedings initiated under section 11 of the Act, after the prescribed period of 4 years, that is, on the 16th January 1952 for assessing the business profits tax for the chargeable accounting periods commencing on 1st April 1946 and ending on 14th July 1946 and commencing on 15th July 1946 and ending on the 13th July 1947, were not valid." "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 proposed to fix time limit within which profits, which have escaped assessment, will be made liable to be taxed."
18. "Section 11(I).-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 and taxable profits of the business of 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."
19. Section 14 reads as under:- "Section 14.-If, for any reason profits of any chargeable accounting period chargeable to business profits tax have escaped assessm ent, or have been under-assessed, or have been the subject of excessive relief, the Income-tax Officer 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 11, and may proceed to assess or re-assess 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: Provided that unless definite information has come into his possession the Income-tax Officer shall not initiate proceedings under this section without obtaining the previous approval of the Inspecting Assistant Commissioner of Income-tax.
20. A perusal of these sections will show that under both the sections, a notice is necessary. In spite of that, it was impliedly held by this Court in the case of The Commissioner of Income-tax, East Pakistan v. Messrs Hossen Dada, Karachi, that without issuing notice under section 14 of the Business Profits Tax Act, proceedings initiated under section 11 of the Act are sufficient and the notice calling for a return under section 11 should ordinarily be issued within a reasonable period after the termination thereof and this reasonable period should not extend the period specified in section 14 of the Act.
21. "Section 34(1).-If for any reason income, profits or gains chargeable to income-tax have escaped assessm ent in any year, or have been under--assessed or have been assessed at low a rate, or have been the subject of excessive relief or refund under this Act, the Income-tax Officer may 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 subsection (2) of section 22, and may proceed to assess or re-assess 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 subsection: Provided , Provided Provided (1-A) Notice under subsection (1) may be served by the Income-tax Officer-
(a) to any ease in which lie has reason to believe that assessee or any other person on his behalf has not filed any return under sub--section (1) or subsection (2) of section 22, at any time;
(b) in any case in which he has reason to believe that the assessee has for any year concealed the particulars of his income or deliberately furnished inaccurate particulars thereof or omitted or failed to disclose all material facts necessary for the assessment for such year, within six years from the end of the year in which the assessment for such year was first made and where no assessm ent has been made,, within six years from the end of the last year in which assessment or such year could be made, had clause (c) been applicable to such case: Provided that in a case where a fresh assessment is made for any year in pursuance of an order under section 31, section 33, section 33-A or section 34-A the period of years referred to in this clause shall commence from the end of the year in which the fresh assessment is made;
(c) in any other case, within four years from, the end of the year for which assessment is to be made.
(2) No order of assessm ent under section 23 or of assessment or re--assessment under subsection (1) of this section shall be made after the expiry, except in any case in which the assessee has not filed any return under subsection (1) or subsection (2) of section 22 or concealed the particulars of his income or deliberately furnished incorrect particulars of such income or omitted or failed to disclose all material facts necessary for the assessment for that year, of . . . . .
22. Four years from the end of the year in which the income, profits or gains were first assessable."
23. Provided that:----
(i) ____________________
(a) __________________--
(b) _________________
(ii) ____________________
(iii) __________________
(iv) __________________ Explanation I_________ Explanation II________ (2-A)________________ Provided_____________ (2-B)________________ (2-C)________________ (2-D)________________ This aspect of the case was considered in Commissioner of Income-tax, East, Karachi v. Messrs Reyaz-o-Khalid Co., Karachi (PLD 1973 SC 98). It was observed as under in that case:- "The chargeable accounting period in the present case ended on 31st March 1953. Tax to be assessed on the profits earned during this period in the year ending on 31st March 1954. The four years' period thus extended up to 31st March 1958. The impugned assessment completed on the last mentioned date was, therefore, within time. There is a marked difference between the provisions of the repealed section 14 of the Business Profits Tax Act and section 34 of the Income- tax Act in this respect. Under section 14, the Income-tax Officer could call for a return and assess business profits tax within four years of the end of the chargeable accounting period. The time limit would thus have expired on 31st March 1957 and had section 14 remained in force up to 31st March 1957. However, as the section was repealed on 4th March 1957, and replaced by section 34 of the Income-tax Act, the time limit was extended up to 31st March 1958. The assessment made on that day was, therefore, not beyond limit."
24. The facts of this case are as under: "That the respondent is a firm carrying on business of purchase . And sale of cotton at Karachi.
25. Notice for the assessm ent under the Business Profits Tax Act for the chargeable accounting! Period ending on 31st March 1953, was served on them on 3rd August 1957, and the assessment was completed on 31st March 1958. The assessment was disputed by the respondent before the Appellate Assistant Commissioner on the ground that it was barred by the period prescribed in section 14 of the Business Profits Tax Act. The contention prevailed and the assessment was quashed. On a further appeal by the Revenue Department, the Tribunal held that when the assessm ent was completed by the Income-- tax officer, section 34 of the Income-tax Act had replaced section 14 of the Business Profits Tax Act and under that section the assessment made on 31st March 1958 was well within time.
26. Thereafter, the respondent applied to the Tribunal for referring the above-mentioned question of law to the High Court in the exercise of its advisory jurisdiction under section 19 of the Business Profits Tax Act read with section 66 of the Income-tax Act. The application was allowed and a reference made to the High Court which was answered in the negative and the assessment order was quashed as beyond time under section 14 of the Business Profits Tax Act. In the opinion of the learned Judges, section 14 of the Business Profits Tax Act which prescribed a period of four years to assess escaped business profits remained -in force till 31st March 1957, on which date the assessee acquired a vested right which could not be taken away by the subsequent application of section 34 of the Income-tax Act with effect from 1st April 1957. At the instance of the Revenue Department, a certificate was granted under section 66-A(2) of Income-tax Act for appeal to this Court."
27. It was on these facts that the above observation was made by this Court.
28. It will be noticed that in this case also no notice under section 14 of the Business Profits Tax Act or section 34 of the Income-tax Act was issued and in spite of that, the assessment was held to be valid as it was made within the time prescribed by section 34 of the Income-tax Act. The contention of the learned counsel for the appellant that failure to initiate proceedings under section 11(1) of the Business Profits Tax Act within the accounting chargeable year amounts to escapement of income is not well founded. The words .B `escaped assessment' in section 34 of the Income-tax Act means to evade or to elude or an accidental or inadvertent omission. In the present case, no such thing has happened and, therefore, it is not a case of escapement of.
29. Income, HAMOODUR RAHMAN, C. J.-I agree.
30. MUHAMMAD GUL, J.-I agree.