1971 (4) TMI 29 - HC - Income Tax

Applicability of period of limitation provided u/s 34(3) on the order passed u/s 23A since order under s. 23A is not an assessment order within the meaning of section 34(3 - period of limitation on that section is not applicable

Summary

Issues:
- Interpretation of section 23A of the Income-tax Act, 1922
- Applicability of time limitation on orders passed under section 23A
- Reference to the decision of the Gujarat High Court
- Supreme Court's ruling on the nature of orders under section 23A

Analysis:
The High Court of Allahabad dealt with a reference under section 66(1) of the Income-tax Act, 1922, initiated by the Commissioner of Income-tax concerning M/s. Brij Transport Company Ltd.'s assessment for the year 1956-57. The company failed to distribute 60% of its distributable surplus as dividend within the stipulated time frame under section 23A of the Act. Consequently, the Income-tax Officer imposed super-tax on the undistributed balance. The Appellate Assistant Commissioner rejected the company's argument that the order under section 23A was time-barred, stating that no time limit applied post the 1955 amendment.

The company then appealed to the Income-tax Appellate Tribunal, citing the Gujarat High Court's decision in a similar case to support its contention that the order under section 23A was time-barred. The Tribunal agreed with the company, holding that the order was indeed beyond the time limit. However, the Tribunal did not address the second contention raised by the company. Subsequently, the Tribunal set aside the Income-tax Officer's order, prompting the Commissioner of Income-tax to refer the matter to the High Court.

The High Court considered the Supreme Court's ruling in M. M. Parikh v. Navanagar Transport and Industries Ltd., which clarified that an order under section 23A was not an assessment order subject to the time limitation under section 34(3) of the Act. Therefore, the High Court concluded that the Income-tax Officer could issue an order under section 23A even after four years from the end of the assessment year. The Court answered the reference question in the negative, favoring the Commissioner of Income-tax due to the Supreme Court's interpretation. Since the assessee did not appear, no costs were awarded, and the counsel's fee was assessed at Rs. 200.