Retrospective deferment cannot revive expired assessment limitation; a stay limited to prosecution proceedings does not halt assessment time.

A deferment order can exclude time from assessment limitation only if made before the limitation period expires; a post-expiry order cannot operate retrospectively to revive a time-barred assessment. The court also held that a stay order in earlier writ proceedings, confined to further action under a compounding or prosecution notice, did not restrain assessment proceedings and therefore did not extend the assessment period. On those principles, the deferment order and the assessment founded on it could not stand on limitation grounds, although liability to pay admitted tax remained unaffected.

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Issues: (i) Whether a deferment order passed after expiry of the limitation period for assessment can be given retrospective effect so as to save limitation. (ii) Whether the stay order passed in earlier writ petitions restrained assessment proceedings and thereby extended the time available for completing assessment.

Issue (i): Whether a deferment order passed after expiry of the limitation period for assessment can be given retrospective effect so as to save limitation.

Analysis: The statutory scheme permitted exclusion of time only when assessment was lawfully deferred within the currency of the limitation period. Once the period prescribed for assessment expired, the right to assess stood extinguished and there was no subsisting power to revive it by issuing a later deferment order and dating it back. The power to defer could not be exercised after limitation had already run out, and a post-expiry order could not relate back to validate a time-barred assessment.

Conclusion: The retrospective deferment order was invalid and could not save limitation; this issue is answered in favour of the assessee.

Issue (ii): Whether the stay order passed in earlier writ petitions restrained assessment proceedings and thereby extended the time available for completing assessment.

Analysis: The stay order was confined to further proceedings pursuant to the compounding/prosecution notice. Its language did not expressly or by necessary implication stay the assessment proceedings. A restraint on prosecution-related action could not be construed as a bar on assessment, and the order had to be read according to its own terms.

Conclusion: The earlier stay order did not stop the running of limitation for assessment; this issue is answered in favour of the assessee.

Final Conclusion: The impugned deferment order and the assessment action founded on it could not stand, and the assessee was protected from assessment on limitation grounds, though liability to pay admitted tax remained unaffected.

Ratio Decidendi: A deferment order intended to exclude time from limitation must be made before the period for assessment expires and cannot be validated retrospectively after limitation has run out; a stay order must expressly or by necessary implication restrain assessment before it can suspend limitation.

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