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Issues:
1. Initiation of proceedings under section 23A by a successor-in-office to the Income-tax Officer. 2. Validity of proceedings under section 23A in relation to time-bar and assessment completion date. 3. Consideration of composition money in proceedings under section 23A. 4. Determination of assessable income for the purpose of section 23A. Analysis: Issue 1: The first issue in this case pertains to whether proceedings under section 23A could be initiated by the successor-in-office to the Income-tax Officer who had made the assessment of the assessee company for the relevant year. The court held that as per the provisions of the Income-tax Act, any Income-tax Officer has the authority to exercise powers within the area of appointment. Therefore, the initiation of proceedings by the successor-in-office was deemed valid. Issue 2: The second issue raised was regarding the time-bar and validity of proceedings under section 23A in relation to the completion date of the assessment. The court analyzed the relevant provisions of section 23A and concluded that an order under this section can be made based on the failure to distribute dividends in a previous year. The court emphasized that the Act does not provide a specific limitation period for such orders, making the argument for time-bar invalid. Therefore, the proceedings under section 23A were considered valid. Issue 3: The third issue revolved around the consideration of composition money in proceedings under section 23A. The court clarified that the composition money paid by the assessee cannot be considered as a permissible deduction under section 10(2)(xii) of the Income-tax Act. Citing precedents, the court held that such payments made to compound offenses are not considered as expenditures wholly and exclusively for the purpose of the business, thus rejecting the allowance of the composition money in reducing the assessable income. Issue 4: The final issue addressed was the determination of assessable income for the purpose of section 23A. The court interpreted that "assessable income" refers to the income assessable to income-tax under the Indian Income-tax Act, regardless of whether it is based on the company's balance sheet or the assessed income. The court emphasized that the income for the purpose of section 23A should be the one assessable under the Act, ensuring that dividends are declared based on actual profits earned by the company. In conclusion, the court answered the questions raised in the reference, affirming the validity of the proceedings under section 23A initiated by the successor-in-office, rejecting the time-bar argument, disallowing the consideration of composition money, and determining the assessable income based on the income assessable under the Act. The court directed the assessee to pay the costs of the reference.
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