Reasonable time for tax reassessment: unexplained inordinate delay and resulting prejudice made the excess profits tax action unsustainable.

Even where the statute prescribes no express limitation period, tax reassessment must be initiated within a reasonable time, and inordinate delay must be satisfactorily explained. Here, excess profits tax reassessment was commenced only after about 22 years and completed after about 24 years, long after the related income-tax reassessment had become final. The explanation that the department awaited finality of the income-tax proceedings was held inadequate because the delay had to be justified component-wise and the Excess Profits Tax Act involved distinct issues and evidence. The unexplained delay also caused prejudice as relevant material was no longer available. The reassessment was therefore unsustainable and the assessee succeeded.

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Issues: Whether the excess profits tax reassessment initiated after an inordinate lapse of time, without a satisfactory explanation from the revenue, was legally sustainable.

Analysis: The reassessment was triggered long after the related income-tax reassessment had become final, and the excess profits tax proceedings were commenced only after a delay of about 22 years and completed after about 24 years. The statutory scheme did not prescribe a limitation period, but the absence of a fixed period did not permit the authority to act after an unreasonable interval without justification. The delay was required to be explained component-wise, and the explanation that the department waited for the income-tax proceedings to attain finality was found inadequate. The prolonged delay also caused substantial prejudice because the separate computation under the Excess Profits Tax Act involved issues and factual material distinct from the income-tax proceedings, much of which was no longer available.

Conclusion: The reassessment was invalid because the delay was inordinate and remained unsatisfactorily explained, and the assessee succeeded.

Final Conclusion: The excess profits tax reassessment could not be sustained on account of unexplained inordinate delay, and the appeal was allowed in the assessee's favour.

Ratio Decidendi: Even where no express limitation period is prescribed, tax reassessment proceedings must be initiated within a reasonable time, and inordinate unexplained delay that causes prejudice renders the action unsustainable.

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