1963 (8) TMI 2 - SC - Income Tax

Court allows appeals, sets aside assessments, grants liberty for new assessments. Clarifies return filing doesn't trigger assessment.

The appeals were allowed with costs, and the assessments were set aside, granting liberty to make assessments separately for the periods not barred under ... True interpretation of the meaning of the expression ' escaped assessment ' in section 11-A of the Central Provinces & Berar Sales Tax Act, 1947 (XXI of 1947) questioned Held that:- In this case the Commissioner assessed the appellant in respect of the turnover of the entire year without showing separately the assessment of tax payable in respect of each quarter. We cannot, tberefore, confine the relief to be given to the appellant in these appeals to the period barred under section 11A of the Act. We would, therefore, set aside the assessments in both the appeals giving liberty to the respondent to make the assessment separately for the periods not barred under section 11A of the Act either because return was filed, as in the first case, or because the last quarter was within the period of three years, as in the second case. Appeal allowed. Issues Involved:1. Interpretation of the term 'escaped assessment' under Section 11-A of the Central Provinces & Berar Sales Tax Act, 1947.2. Whether assessment proceedings were pending before the Commissioner.3. Limitation period for issuing assessment notices.4. Validity of assessment notices issued beyond the prescribed time.Detailed Analysis:1. Interpretation of 'Escaped Assessment':The primary issue was the interpretation of the term 'escaped assessment' in Section 11-A of the Act. The court examined whether this term includes cases where no assessment was made at all or only post-assessment detection of evasion of tax. The court referred to various precedents, including the Indian Income-tax Act, and concluded that 'escaped assessment' includes turnover that has not been assessed at all due to the absence of initiated assessment proceedings.2. Pending Assessment Proceedings:The court considered whether proceedings for assessment were pending before the Commissioner. It was held that assessment proceedings commence when a return is submitted or a notice is issued under Section 10(3) or Section 11(2) of the Act. The court rejected the argument that the statutory obligation to file a return initiates the proceedings. The court clarified that proceedings start factually when a return is made or a notice is issued, not by the mere statutory obligation.3. Limitation Period for Issuing Assessment Notices:The court analyzed the limitation period under Section 11-A of the Act, which allows the Commissioner to assess escaped turnover within three calendar years from the expiry of the relevant period. The court emphasized that this period should be calculated from the expiry of the quarter for which the turnover escaped assessment. The court noted that the assessment proceedings must be initiated within this three-year period.4. Validity of Assessment Notices Issued Beyond Prescribed Time:The court scrutinized the validity of assessment notices issued beyond the prescribed time. It was held that if no return was filed and no notice was issued within the three-year period, the turnover for that period could not be assessed. In Civil Appeal No. 101 of 1961, the court found that the assessment proceedings were pending only for the quarter for which the return was submitted. In Civil Appeal No. 102 of 1961, the court held that the notice issued within three years from the expiry of the fourth quarter was valid, but the assessment for the entire year without specifying each quarter was invalid.Conclusion:The appeals were allowed with costs, and the assessments were set aside, granting liberty to the respondent to make assessments separately for the periods not barred under Section 11-A of the Act. The court emphasized that the statutory obligation to file a return does not initiate assessment proceedings; such proceedings begin only when a return is filed or a notice is issued. The court also clarified the scope of 'escaped assessment' and the limitation period for issuing assessment notices.