9911796707
TMI Blog1968 (9) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... On March 8, 1958, the Income-tax Officer, however, passed orders under section 23A(1) by which the entire undistributed profits were deemed to have been distributed as dividends to the shareholders. As a consequence, the assessment orders were reopened under section 34 with the result the rebates granted earlier were withdrawn. The assessee was unsuccessful before the revenue as well as the Tribunal in his challenge as to the propriety of the order. The Tribunal's view was that section 23A created a fiction in respect of distribution of deemed dividends and it was, therefore, clear that the order passed under section 23A on March 8, 1958, related back to the anterior period and that further a logical extension of this view would be that, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o order made under section 23A, it was to that extent conclusive and could not be reopened or reviewed in exercise of his powers under section 34. Learned counsel urges that section 23A does not belong to the realm of assessment, unlike section 34, and it followed, therefore, that when rebate was granted, the decision of the Income-tax Officer that there has been no order under section 23A should stay, whatever may be the validity of an order passed subsequently under section 23A. He adds that such a subsequent order will be entirely innocuous for purposes of re-opening the assessments under section 34 and will be futile in withdrawing the rebate. On the other hand, the revenue, equally persuasively, contends that the application of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gements for the declaration and payment of dividends payable out of the relative profits and has deducted super-tax from the dividends in accordance with the provisions of sub-sections (3D) or (3E) of section 18 of the Act. It is then one can examine whether the conditions for allowance of rebate in clause (1) of the proviso have been satisfied. The conditions are two-fold : (1) The total income as reduced by seven annas in the rupee and the amount exempt from income-tax exceeds the amount of dividends declared in respect of the whole or part of the previous year; and (2) no order has been made under sub-section (1) of section 23A of the Income-tax Act. It is on the second condition, the argument on either side has centred. It seems to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modified the scheme of granting rebate in enacting the Finance Act of 1955, with a view to simplify the procedure and avoid delays . . ." Pitching himself on that position, Mr. Swaminathan urges that once rebate has been granted, it pre-supposes that a decision has been arrived at by the Income-tax Officer earlier or simultaneously under section 23A of the Income-tax Act and if that be so, there is no power vested in him under the Act to go back upon that view. The assessment order for the assessment year 1953-54 began by stating that the assessee was a public limited company carrying on business of accident insurance. It was evidently on this view, which is not now maintained, the Income-tax Officer thought that section 23A was inapplic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not relate to a charge of the income and, therefore, to an assessment of the income. We do not think that the analogy has application to the instant case. Section 34 is invoked in the present case not to reopen or reconsider an order under section 23A but to set right an assessment which has been made at too low a rate. If the Income-tax Officer has applied his mind to the conditions necessary for making or not making an order under section 23A and then allowed a rebate, whether the position would be different, we are not called upon to consider in this case. There is nothing in the record to show that the Income-tax Officer, before or at the time of making the assessment order, applied his mind to the provisions of section 23A in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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