Business Profits Tax jurisdiction fails when notice is issued beyond the statutory four-year limit for escaped assessment.

The Bombay HC held that the Income-tax Officer could not validly invoke section 11(1) of the Business Profits Tax Act after the expiry of the four-year period reflected in section 14 for escaped profits. Construing the Act as a whole, the Court reasoned that the statute does not permit indefinite exposure to assessment and that a notice issued four years after the chargeable accounting period was not a reasonable exercise of power. Because the notice was invalid, the assessment made pursuant to it was also invalid and could not stand. The Court therefore upheld the setting aside of the business profits tax assessment.

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Issues: Whether a notice under section 11(1) of the Business Profits Tax Act, 1947, issued after the expiry of four years from the end of the chargeable accounting period was valid without recourse to section 14 of that Act.

Analysis: Section 11(1) empowered the Income-tax Officer to call for a return, but it did not expressly fix any time-limit for issuing the notice. The Court construed the Act as a whole and treated section 14 as significant to the scheme of the statute. Section 14 dealt with escaped assessment, under-assessment, and excessive relief, and permitted action only within four years from the end of the chargeable accounting period. Reading the two provisions together, the Court held that the Legislature did not intend an assessee to remain indefinitely exposed to proceedings, and that a notice under section 11(1) could not be treated as valid when issued after the period during which escaped-assessment action under section 14 was available. The Court also relied on the principle that statutory power must be exercised reasonably and on the analogous treatment of limitation in related excess profits tax legislation.

Conclusion: The notice was invalid, the assessment could not be sustained, and the question was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: A taxing statute must be construed as a whole, and where a general notice provision is linked to a specific escaped-assessment provision containing a temporal limit, a notice issued beyond that limit is not a valid exercise of the statutory power.

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