Bombay H.C : The delay in reopening the excess profits tax proceedings has not been properly explained in spite of the fact that there was no time limit for initiation of the action provided under the Excess Profits Tax Act, 1940

High Court Of Bombay

CIT vs. Harinagar Sugar Mills Ltd.

Section WT 18(1)(a)

Asst. Year 1964-65, 1965-66, 1966-67, 1967-68, 1968-69

S. K. Desai & T. D. Sugla, JJ.

IT Application No. 14 of 1986

30th August, 1988

Counsel Appeared

V. R. Bhatia & J. B. Devdhar, for the Revenue : S. E. Dastur & J. J. Mehta, for the Assessee

DESAI, J.:

The question raised by the Department is as follows :

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing the assessee’s appeal on the ground that the delay in reopening the excess profits tax proceedings has not been properly explained in spite of the fact that there was no time limit for initiation of the action provided under the Excess Profits Tax Act, 1940 ?”

Rule was issued in this application on 11th March, 1987. The Tribunal has dealt with this aspect of the matter from paragraph 8 onwards of its appellate order and had come to the conclusion, following the decision of the Bombay High Court in Chimanram Motilal Pvt. Ltd. vs. CIT (1983) 140 ITR 809, that there was inordinate delay and hence the Department could not be permitted to reopen the excess profits tax assessment. Excess profits tax assessment sought to be reopened pertained to the year 1944-45.

Although the income-tax proceedings were earlier completed, they were reopened and these proceedings (after reopening) were also completed in December 1962. Thereafter, excess profits tax assessment was sought to be reopened in July 1976. This 13 to 14 years delay has not been satisfactorily explained. The explanations offered have not found favour with the Tribunal and do not appeal to us also. It is true that there is no period of limitation fixed by the statute but the approach of this Court, although indicated in a matter involving penalty, may also apply to reopening of excess profits tax assessments. Excess profits tax is a charge different from the ordinary rate of tax.

The difficulties which may be faced by an assessee by reason of such delay can be easily visualised. 4. Apart from the two judgments of the Bombay and Kerala High Courts referred to by the Tribunal in its order, Shri Dastur has also drawn our attention to some observations in Bharat Steel Tubes Ltd. vs. State of Haryana (1988) 3 SCC 478. These observations also seem to suggest that even where no limit is prescribed for taking recourse to a statutory provision, delay or rather inordinate delay may be an aspect which the Court can consider for quashing the proceedings. Thus, the approach as well as the final conclusion of the Tribunal are in order and do not call for a reference.

5. In this view of the matter, we discharge the rule but with no order as to costs of the application.

[Citation : 176 ITR 289]

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