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TMI Blog1968 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... section 23A of the Act as it then stood. The accounting year of the company ended with May 31, 1954. The distribution was so effected in accordance with the letter and procedure as was in force on the date of distribution which but for the supervening amendment of section 23A by the Finance Acts of 1955 and 1956, appears to be in order. We shall refer to the scope and effect of the Finance Acts as above presently. For the respondent, the assessment for the years 1955-56 was originally completed on February 17, 1956, on a total income of Rs. 2,58,168. After the amendments to section 23A were made during the subsequent years, which according to the revenue were retroactively operative, the Income-tax Officer initiated proceedings under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may immediately dispose of the first question as it is covered by the authority in M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries Ltd. , where the Supreme Court has finally settled the question by stating that an order under section 23A of the Indian Income-tax Act, 1922, made by the Income-tax Officer, directing payment of super-tax is not in order of assessment within the meaning of section 34(3) of the Act and to such an order the period of limitation prescribed under section 34(3) does not apply. The first question is answered accordingly and against the assessee. The answer to the second question depends upon whether the text and content of the amendment is made applicable expressly or by necessary implication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe of the retroactive operation of the amendment caused by the Finance Acts of 1955 and 1956, it should also be remembered that section 23A is in the nature of a penal provision and necessarily the onus is on the revenue to prove that the ingredients of the section are satisfied before an order is made thereunder. Veeraswami J. in Indian Commerce and Industries Co. Ltd. v. Commissioner of Income-tax, after observing the ratio in Commissioner of Income-tax v. Gangadhar Banerjee and Co. Private Ltd., reiterated: " . . . . the section is in three parts ; the first relevant to jurisdiction, the second with reference to the exercise of jurisdiction, and the third for making an order declaring statutory dividends. The Supreme Court further laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its profits and gains which have not been the subject of an order under this sub-section ; and (ii) any loan capital which is the property of the shareholders, or the actual cost of the fixed assets of the company, whichever of these is greater ......... " By section 20(1) of the Finance Act of 1955, the amendment as above shall have effect on and from 1st April, 1955. Sub-section (4) of section 20 of the Act provided: " For the removal of doubts, it is hereby declared that the provisions of section 23A of the Income-tax Act, as in force immediately before the 1st day of April, 1955, shall continue to apply to a company in respect of its profits and gains of a previous year relevant to any assessment year prior to the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd application. Sub-section (4) of section 20 of the Finance Act of 1955 makes the prior law (prior to 1st of April, 1955) applicable to a company in respect of a year previous to the assessment year ending with the 31st day of March, 1955. Therefore, the old law was still continued as regards profits for the assessment year 1954-55. This means that continuance of the unamended section would relate to the financial year 1953-54, that is the accounting year ending March 31, 1954. In the instant case, the accounting year of the company ended with May 31, 1954. Therefore, the old law necessarily is inapplicable to the facts of this case. In fact, the statement of objects and reasons of the Bill leading to the Finance Act of 1955 also make this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany in not having declared the 100 per cent. of its profits as dividends, which scale was prescribed later by the Finance Acts but with retrospective effect and whether there are other circumstances which prompt one to justify the action of the company as reasonable are matters which have to be considered but not animadverted to by the revenue at any time. Even the Tribunal failed to consider this. Whilst, therefore, answering the second question against the assessee and in favour of the department, we direct that when the appeal is considered by the Tribunal it would bear in mind the third ingredient of section 23A and find whether the company acted unreasonably in declaring 60 per cent. of its distributable profits as dividends. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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