9911796707
TMI Blog1981 (9) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... y 28, 1966, the assessee had on its hands distributable profits of Rs. 47,167, but it did not distribute any dividends at all for the year. The ITO, accordingly, applied s. 104 to this company. The assessee relied on sub-s. (2) of the section and urged that the order should not be made. The assessee pointed out that it had carry forward losses of prior years amounting to Rs. 2,41,718. Viewed against these losses, it was urged, the assessee's decision not to distribute any dividends cannot be regarded as unreasonable. The ITO did not accept the position that there were losses in the previous years. He relied on the findings in the orders of regular assessment made on the assessee for those years and held that the losses were fictitious a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's true commercial income. The Supreme Court rejected this contention. The position may, therefore, be taken to be that it is open to the ITO to reject the assessee's claim that there were losses in prior years by showing that in the relevant assessments the losses had not been proved to be actual losses. The ITO in this case was not wrong in principle in referring to the concerned assessment orders and basing his conclusion about the genuineness of the losses on the findings rendered in those assessments. It, however, came to pass in this case that the estimated assessments in which the assessee's claim for losses had been rejected by the ITO had been subsequently interfered with by the Tribunal in appeals which had been preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that year. The Tribunal observed that it would have been an unreasonable corporate decision to declare a dividend, when the prior years' accumulated losses were more than the current income could absorb. In this view, the Tribunal set aside the levy of additional income-tax on the undistributed income of the assessee. The present reference before us has been made at the instance of the I. T. dept. Their learned counsel contested the Tribunal's decision on the basis of the following questions of law : " 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the application of section 104 of the Act was not warranted ? 2. Whether, on the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributed income. Where an assessing officer had gone into the accounts and other material facts at the stage of regular assessment and had fixed the assessee's income on that basis, there is no harm in the department adopting those findings in collateral proceedings taken against the very company for levy of additional income-tax on its undistributed income. This is good workable doctrine, considering that additional income-tax on undistributed profits of certain companies is a fiscal measure incorporated into the general framework of the general tax on income. But it would undermine the very basis of this doctrine if, undeterred by an appellate decision which sets aside, the findings in the prior years' assessments, it were still thought o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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