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TMI Blog1958 (11) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... od ending 31st March, 1947, and the amount required for distribution of that dividend to all the shareholders was only ₹ 32,538. Even after the distribution of the dividend to the shareholders there was, therefore, a surplus of ₹ 39,564 remaining in the hands of the respondent out of the balance income left after deduction of income-tax and super-tax. 3. Under section 23A of the Indian Income-tax Act, as it stood before the amendment made by the Finance Act of 1955, the Income-tax Officer had, in cases in which the dividend declared by a company for distribution among its shareholders was less than 60 per cent, of its assessable income as reduced by the amount of income-tax and super-tax payable thereon, the power to order that the undistributed portion of the assessable income shall be deemed to have been distributed among its shareholders; and upon the passing of such an order the proportionate share of the additional dividend payable to each shareholder was, by the provisions of the same section, to be included in the total income of the shareholder for the purpose of assessing his total income. There were three provisos to this section. Proviso 2 provided that in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that he proposes to make such an order, fails to make within three months of the receipt of such notice a further distribution of its profits and gains so that the total distribution made is not less than sixty per cent, of the assessable income of the company of the previous year concerned as reduced by the amount of income-tax and super-tax payable by the company in respect thereof:..." 4. As the amount (Rs.32,538) required for distribution of the dividend declared by the respondent was less than the percentages (namely, 60 per cent, and 55 per cent.) of the assessable income as reduced by the amount of income-tax and super-tax mentioned in paragraph 1 and proviso 2 of section 23A, the Income-tax Officer issued a notice to it on the 16th June, 1953, intimating that he was proposing to make an order under section 23A(1) declaring an amount of ₹ 10,723 (which was the difference between 60 per cent, of its assessable income as reduced by the amount of income-tax and super-tax thereon and the amount required for distribution of the declared dividend) to be deemed to have been distributed as dividend under that section and including proportionate share thereof in the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax and the amount required for distribution of the dividend declared by the company but the entire surplus of the assessable income as reduced by the amount of income-tax and super-tax over the amount required for distribution of the dividend actually declared by the company, the Commissioner made an order (annexure C) on June 14, 1954, under section 33B declaring the entire undistributed profits amounting to ₹ 39,564 to be deemed to have been distributed as dividend and directing the same to be apportioned among the several shareholders and their assessments revised accordingly. According to the Commissioner, it was the difference between ₹ 72,102 (which was the respondent's assessable income as reduced by the amount of income-tax and super-tax payable thereon) and ₹ 32,538 (which was the amount required for distribution of the dividend actually declared by it) that had to be ordered under section 23A(1) to be deemed to have been distributed as dividend and not the difference between ₹ 43,261 (which was 60 per cent, of the assessable income as reduced by the amount of income-tax and super-tax) and ₹ 32.538. 6. Against the Commissioner's order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court any question of law arising out of such order, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a statement of the case and refer it to the High Court." Section 33 of the Income-tax Act referred to in section 66(1) reads as follows : "33.(1) Any assessee objecting to an order passed by an Appellate Assistant Commissioner under section 28 or section 31 may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him. (2)The Commissioner may, if he objects to any order passed by an Appellate Assistant Commissioner under section 31, direct the Income-tax Officer to appeal. to the Appellate Tribunal against such order, and such appeal may be made within sixty days of the date on which the order is communicated to the Commissioner by the Appellate Assistant Commissioner. (2A)The Tribunal may admit an appeal after the expiry of the sixty days referred to in sub-sections (1) and (2) if it is satisfied that there was sufficient cause for not presenting it within that period. (3)An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal within sixty days of the date on which the order is communicated to him. " Section 336(4) provides: "An appeal to the Appellate Tribunal under sub-section (3) shall be in the prescribed form and shall be verified in the prescribed manner and shall be accompanied by a treasury receipt in support of having paid the fee of ₹ 100, and such appeal shall be dealt with in the same manner as if it were an appeal under sub-section (1) of section 33. " Therefore, although section 33(1) provides for appeals to be filed thereunder only against orders passed under sections 28 and 31, section 336(4) brings also appeals filed under section 336(3) and (4) within the purview of section 33 and so, the notice issued under section 336(4) on the disposal of an appeal filed under section 336(3) and (4) would confer upon the assessee and the Commissioner the right to ask for a reference under section 66(1) to the High Court in respect of the order passed in that appeal. In this view, the preliminary objection is untenable and it is accordingly overruled. 8. The only ground on which the respondent attacked the validity of the Commissioner's order before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble income as reduced by the amount of income-tax and super-tax thereon should also be deemed to have been distributed as dividend among its shareholders. He was also given by the action a further power, so far as the company's shareholders were concerned, to include in the total income of each shareholder his proportionate share of the notional additional dividend declared by him. The section contemplated two distinct acts on the part of the Income-tax Officer : (1) ordering the notional distribution of a notional dividend so far as the company was concerned, and (2) including the proportionate share of the notional dividend due to each shareholder in his total income so far as the shareholders were concerned. In Kanga's book on the Law and Practice of Income-tax, Volume I, page 581 (1958 Edition), it is said in the notes on the old section 23A : "An order made under this section was not itself an order of assessment. It had to be followed by an assessment on the shareholder either under section 23 or under section 34 before the shareholder could be held liable to pay tax in respect of the notional dividend income." That is to say, if the assessment of an indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l additional dividend of each shareholder shall be included in his total income. The relevant portion of the section reads : "... he shall,..... make..... an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income-tax purposes and reduced by the amount of income-tax and super-tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income." (underlining ours) Since notional distribution can be ordered by the Income-tax Officer under section 23A only if, within six months after the general meeting of the shareholders at which the accounts of the previous year are presented, the company does not declare a dividend and amounting to not less than sixty per cent, of its assessable income of that previous year as reduced by the amount of income-tax and super-tax payable thereon, and since the notional distribution is to be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment) Act, 1948. Without the proviso thereto section 34(2) as it stood before the amendment of 1948 read as follows: "No order of assessment under section 23 or..... reassessment under sub-section (1) of this section shall be made after the expiry, in any case to which clause (c) of sub-section (1) of section 28 applies, of eight years, and in any other case, of four years from the end of the year in which the income, profits or gains were first assessable." After the amendment of 1948, the provision in this behalf in section 34 reads as follows: "No order of assessment under section 23 to which clause (c ) of sub-section (1) of section 28 applies or of assessment or re-assessment in cases falling within clause (a) of sub-section (1) of this section shall be made after the expiry of eight years, and no order of assessment or re-assessment in any other case shall be made after the expiry of four years, from the end of the year in which the income, profits or gains were first assessable: Provided that where a notice under sub-section (1) has been issued within the time therein limited, the assessment or re-assessment to be made in pursuance of such notice may be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sought to be revised..." Although the Income-tax and Business Profits Tax (Amendment) Act, 1948, received the assent of the Governor-General only on the 8th September, 1948, section 1(2) of that Act provides : "Sections 3 to 12 shall be deemed to have come into force on the 30th day of March, 1948, and the amendment made in the Indian Income-tax Act, 1922 (XI of 1922), by section 2 shall be deemed to be operative so as to apply in relation to all assessments subsequent to the assessment for the year ending on the 31st day of March, 1948." As section 33B was added to the Income-tax Act by section 7 of the Income-tax and Business Profits Tax (Amendment) Act, 1948, the effect of section 1(2) would be to make section 33B a part of the Income-tax Act from March 30,1948. Therefore, any order made by the Income-tax Officer subsequent to that date would be liable to be revised by the Commissioner under section 33B, subject of course to the period of limitation prescribed by clause (2) of that section. There is nothing in section 33B which limits the powers of revision to orders passed in respect of the assessment year 1948-49 and subsequent years. 15. The Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention reliance was placed by their learned counsel on Income-tax Officer v. Calcutta Co. Ltd. [1953] 23 ITR 471, Chotanagpur Banking Association v. Commissioner of Income-tax [1956] 29 ITR 150, and Durgabati & Narmadabala Gupta v. Commissioner of Income-tax [1956] 30 ITR 101. In the case mentioned in the Tribunal's order, Niranjanlal Ramballabh's case (supra), the reference was made on account of the order made by the Commissioner under section 33B setting aside the Income-tax Officer's order granting an application for registration of a firm. On the 22nd July, 1947, the Income-tax Officer made the order granting the application for registration of the firm. The registration was for the assessment year 1944-45. This order was set aside by the Commissioner in revision on July 19, 1949. Thus, the order revised by the Commissioner had been made by the Income-tax Officer at a time when the Commissioner had no power at all to revise the Income-tax Officer's order, for the revisional powers were granted to the Commissioner only with effect from March 30, 1948, by section 7 of the Income-tax and Business Profits Tax (Amendment) Act, 1948. On this short ground the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we are unable to see anything in section 33B of the Income-tax Act and section 1(2) of the Income-tax and Business Profits Tax (Amendment) Act, 1948, limiting the powers under section 33B of the Income-tax Act to orders in assessment proceedings for the year 1948-49 and subsequent years. If the proceedings for the assessment of any earlier year were pending on March 30, 1948, we do not see why the powers under section 33B, which section came into effect on March 30, 1948, could not be exercised in respect of any order passed after that date in these proceedings. The view that we have taken is supported by the decisions in the cases relied upon by the Department's counsel. 16. Referring to Niranjanlal Ramballah's case (supra), Chakravartti, C.J., has said in Calcutta Discount. Co. Ltd.'s case (supra), at page 486 : "The effect of section 1(2) on section 33B is to make it a part of the Income-tax Act on and from the 30th March, 1948, and since the section is in no way limited as to the assessment years to which the order revised must relate and only provides by sub-section (2)(b) that no order shall be made under it after the expiry of two years from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 1949, in respect of the assessment year 1947-48. The case was first heard by a Division Bench consisting of Ramaswamy and Misra, JJ. They agreed as to the answers on the first three questions and differed as to the answer in respect of the fourth question. On the first question, which is the question relevant for the purpose of the present case, Ramaswamy, J., said at page 109 of the report: "It was contended before the Tribunal on behalf of the assessee that the Commissioner of Income-tax had no power to make an order under section 33B in respect of the assessment year 1947-48 as section 33B was for the first time brought into force on the 30th day of March, 1948, by the Income-tax Amendment Act of 1948 (XLVIII of 1948). It was argued that section 33B could not therefore be applied to the assessment made for the year 1947-48. The argument was rejected by the Tribunal on the ground that the order of the Income-tax Officer which was revised by the Commissioner was an order passed on the 24th of September, 1949, long after the enactment of section 33B of the Indian Income-tax Act. In other words, the Tribunal took the view that section 33B was in force when the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of it had to be made within such time as would allow the Income-tax Officer to make the consequential order under section 23 or section 34 within the time prescribed by section 34. If the time limits prescribed by section 34 for assessments under section 23 and re-assessments under section 34 were over, no useful purpose, it was contended, would be served by making an order under section 23A, for, in that case, the order under section 23A could not be followed up by action under section 23 or section 34 which was necessary for levying the tax on the notional dividend. 18. In reply to the notice, annexure 'A', the respondent had expressly agreed to the notional distribution of a sum of ₹ 10,723. He had no objection at that time that the order under section 23A could not be passed for the reason that it could not be given effect to as the time limits for assessments under section 23 and re-assessments under section 34 had expired. From the mere fact that by the date of the order under section 23A four years had expired from the close of the assessment year 1948-49 it is not possible to conclude that the time limit for making an assessment under section 23 or a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account, to sustain the plea of the petitioners that the period of limitation should be computed from the end of the accounting year of the assessee. We are clearly of opinion that the expression "any year" in section 34(1)(b) should be construed as the assessment year. That suffices to reject the contention of the learned counsel for the petitioners that the notices dated 23rd March, 1955, were issued beyond the period of limitation prescribed by section 34(1) of the Act." As the respondent had not taken the objection based on the time limit prescribed by section 34 before the Tribunal and the income-tax authorities and as the reference itself has not been sought for on the ground that the revisional powers of the Commissioner were exercised after the expiry of the time limits prescribed by section 34, the respondent cannot be allowed to raise this ground for the first time in this court. We may also say in this connection that if the individual shareholders are aggrieved by the re-opening of any completed assessment after the time limit prescribed by section 34-from whatever date that time limit might commence to run-it would be open to them to pursue appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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