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TMI Blog1962 (3) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ny could have declared a larger dividend. He accordingly applied section 23A and made an order that a further sum of ₹ 77,692 shall be deemed to have been distributed as dividends among the six shareholders of the company. The assessee appealed to the Appellate Assistant Commissioner, contending that on the basis of the book profits, which represented the profits available for distribution, the company had declared dividends in excess of 60 per cent. thereof. This plea was rejected by the Appellate Assistant Commissioner who held that the adjusted book profits, that is to say, profits as finally determined by the inclusion of suppressions and inflations, were the book profits that should be taken into account for determining whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied then no order under section 23A can be made. If he does not come to that conclusion, then, with the previous approval of the Inspecting Assistant Commissioner, an order can be made by the Income-tax Officer deeming the undistributed portion of the assessable income of the company of that previous year, as computed for income-tax purposes and reduced by the amounts of income and super-tax payable by the company in respect thereof, to have been distributed as dividends. The figures relevant to the application of the above provision (as it stood before its amendment by the Finance Act of 1955) are these: Assessable income of the company ₹ 2,04,222 Less taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts that the profits shown by the accounts are much less than the real profits. The profits made, therefore, necessarily indicate the profits that are determined by the Income-tax Officer to have been made, but not those intangible profits which go to make up the assessable income of the company. Decisions have laid it down that there is a fundamental difference between the assessable income of the company and the profits made by it. It would be sufficient to refer to Commissioner of Income-tax v. Bipinchandra Maganlal and Company [1961] 41 ITR 290 . In that case, the question arose whether the excess of the sale value of the machinery over the written-down value, which is treated as revenue receipt for the purpose of computing the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at are the profits that were made during the year in question. For instance, if the Income-tax Officer finds that there has been a suppression of profits he is not prevented from adding that amount of suppression to the book profits in arriving at the final figure of profits. But that is different from the computation of the assessable income which is well understood to take in other items which are not real. It has been contended again that the expression profits made must be limited to the profits that were made during 1hat accounting year alone and that no portion of the profits of the earlier year, even if that had been brought forward can be taken note of for the purpose of section 23A. We are not inclined to accept this argument. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a consideration has to be repelled. It was found by the department in the course of the assessment proceedings that there had been a suppression of a sum of ₹ 15,000 under luggage collections and a further sum of ₹ 25,000 under spare parts , so that the profits made during the year must necessarily take into account these suppressions which had been kept out of the account books. There was a further amount of ₹ 34,000 and odd which related to the disallowance of depreciation. In the light of what we have said above, this sum, though added back to the profits for the purpose of determining the assessable income of the assessee, cannot be regarded as commercial profits available for being dealt with as such. There can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sum of ₹ 45,000 as dividend. We are not impressed with this argument. What was clearly found was that the books of account were unreliable and that the actual profits made during the year must be enhanced by the amounts suppressed. It was not notional addition by any means. That being so, the assessee's claim that he was ignorant of the volume of profits available during that year was rightly rejected by the departmental office below. In the light of what we have stated, all the requirements of section 23A were satisfied and the application of that provision to the facts of the case has not been shown to be erroneous in any way. The question is accordingly answered in the affirmative and against the assessee, which shall pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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