Escaped turnover and reassessment limitation: erroneous exemption can be reopened, and timely initiation saves later completion.

Turnover earlier treated as exempt can still be reassessed as escaped turnover under section 16 if the assessing authority omitted it from tax by taking an erroneous view of exemption. The provision covers turnover left out of assessment for any reason, including items previously considered and exempted, and the reassessment was therefore upheld. Limitation under section 16 is satisfied when proceedings are initiated within five years from the expiry of the relevant assessment year; completion after that period does not bar the reassessment if the matter remained pending in time. The Madras HC therefore sustained the reassessments and rejected the limitation challenge.

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Issues: (i) whether turnover earlier treated as exempt could be brought to tax in reassessment proceedings as escaped turnover under section 16; (ii) whether reassessment completed after five years was barred by limitation when the proceedings had been initiated within the statutory period.

Issue (i): whether turnover earlier treated as exempt could be brought to tax in reassessment proceedings as escaped turnover under section 16.

Analysis: An assessment can result either in taxability or exemption. Where an item of turnover was not brought to tax because the assessing authority took a wrong view and treated it as exempt, the turnover is still one that has escaped assessment. The power under section 16 extends to reassessing turnover omitted from assessment for any reason whatsoever, including cases where the item was earlier considered and exempted by the assessing authority.

Conclusion: The reassessment on this ground was valid and was in favour of Revenue.

Issue (ii): whether reassessment completed after five years was barred by limitation when the proceedings had been initiated within the statutory period.

Analysis: The limitation under section 16 concerns the initiation of proceedings within five years from the expiry of the relevant assessment year. Where the reassessment proceedings were initiated and remained pending within that period, completion of the reassessment after the expiry of five years is not barred. Since the proceedings in the present case were pending within time, the bar of limitation did not apply.

Conclusion: The reassessment was not time-barred and was in favour of Revenue.

Final Conclusion: The revisional challenges failed, and the reassessments made under section 16 were sustained.

Ratio Decidendi: Turnover omitted from assessment for any reason, including erroneous exemption, is escaped turnover liable to reassessment, and reassessment is not barred if proceedings are initiated within the statutory period even though completed later.

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