Full Judgment Text
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PETITIONER:
M. M. PARIKH, INCOME-TAX OFFICER, SPECIALINVESTIGATION CIRCL
Vs.
RESPONDENT:
NAVANAGAR TRANSPORT & INDUSTRIESLTD. & ANR.
DATE OF JUDGMENT:
01/11/1966
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
RAMASWAMI, V.
BHARGAVA, VISHISHTHA
CITATION:
1967 AIR 823 1967 SCR (2) 38
CITATOR INFO :
D 1968 SC 816 (4)
F 1971 SC2471 (9)
F 1972 SC 236 (1,4,5,8,10)
RF 1977 SC 459 (1,5,6)
ACT:
Indian Income-tax Act (11 of 1922), s. 23A-Order under-
Whether an "order of assessment" -Section 23A, whether a
charging section Limitation under s. 34(3) if applies.
HEADNOTE:
The appellant-Income-tax Officer issued a notice to the
assessee company to show cause why an order under s. 23A of
the Indian Income-tax Act, 1922 should not be made for the
assessment year 1957-58. The assessee applied to the High
Court for ’a writ to restrain the appellant from giving
effect to the notice. The High Court held that an order un-
der s. 23A of the Act after its amendment by the Finance
Act, 1955, was an "order of assessment" to which the period
of limitation prescribed by s. 34(3) applied and since such
an order could not be made after the expiration of four
years from the end of the assessment year 1957-58 the
proceedings initiated against the; assessee in respect of
the assessment year 1957-58 after March 31, 1962 was without
jurisdiction.
HELD Section 23A is not a charging section and an order made
thereunder is not an "order of assessment" to which the
period of limitation prescribed by s. 34(3) applied.
Section 23A before it was amended by Finance Act, 1955 was
procedural. Section 23A(1), after it was amended by the
Finance Act. 1955 provides within itself machinery for
imposition of liability to pay additional super tax, but it
has not on that account been made a charging section. A
charge to tax arises under ss. 3, 4 and 5 of the Act for
payment of income-tax and super tax and not under s. 23A.
[47 E]
Section 23A does not use the expression "assessment" in the
body of cl. (1) : and to the title of the section after it
was amended, viz. "Power to assess companies to super-tax
on undistributed income in certain cases", it is impossible
to give any exalted meaning so as lo convert what is an
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order directing payment of tax into an order of ’assessment
within the meaning of s. 34(3) of the Indian Income-tax Act,
1922. Every order which contemplates computation of income
for determination of the amount of tax payable is not an
order of assessment within the meaning of the Act : -nor
does prescribing of procedure for determining and imposing
tax liability make it an order of assessment. ’Me Income-
tax Act contemplates making of diverse orders by Income-tax
Officers directing payments of sums of money by tax payers
which are of the nature of orders for payment of tax, but
still are not orders of assessment. [45 A-D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1082 of
1965.
39
Appeal from the judgment and order dated February 21, 1964
of the Gujarat High Court in Special Civil Application No.
802 of 1962.
S.V. Gupte, Solicitor-General, R. D. Karkhanis and R. N.
Sachthey, for appellant.
S. T. Desai and K. R. Chaudhari, for the respondents.
R. Vankatraman and R. Gopalakrishnan, for intervener No.
1.
S. P. Mehta, D. Pal and D. N. Gupta, for intervener No. 2.
D. Pal and D. N. Gupta, for intervener No. 3.
R. Gopalakrishnan and S. Swaminathan, for intervener No.
4.
The Judgment of the Court was delivered by
Shah, J. M/s Navanagar Transport & Industries Ltd.-
hereinafter called ’the assessee’-is a company in which "the
public are not substantially interested" within the meaning
of s. 23A of the Indian Income-tax Act, 1922. At the annual
general meeting held on December 4, 1957, the Company
declared Rs. 8,767/as dividend payable to the shareholders
for the year ending March 31, 1957. The Income-tax Officer,
Special Investigation Circle, Ahmedabad, determined the
taxable income of the assessee for the assessment year 1957-
58 at Rs. 1,10,769/-. Since the dividend declared by the
Company was less than the statutory percentage of the total
income of the Company, as reduced by the taxes specified in
cls. (a) & (b) of sub-s. (1) of s. 23A, the Income-tax
Officer issued a notice on November 15, 1961 calling upon
the assessee to show cause why an order under s. 23A should
not be made for the assessment year 1957-58 and submitted
the record to the Inspecting Assistant Commissioner seeking
permission under sub-s. (8). The assesses then applied to
the High Court of Gujarat under Art. 226 of the Constitution
for a writ of mandamus restraining the Income-tax Officer
from giving effect to the notice under s. 23A against the
assessee.
The High Court held that an order under s. 23A of the
Income-tax Act, 1922, after its amendment by the Finance
Act, 1955, is an "order of assessment" to which the period
of limitation prescribed by s. 34(3) applies and since such
an order cannot be made after the expiration of four years
from the end of the assessment year 1957-58 the proceedings
initiated against the assessee in respect of the assessment
year 1957-58 after March 31, 1962 was without jurisdiction.
The Income-tax Officer has appealed to this Court with
certificates granted by the High Court.
Section 23A has undergone changes from time to time. Before
it was amended by the Finance Act, 1955, s. 23A enacted that
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40
where the Income-tax Officer is satisfied, that the
dividends distributed by the Company are less than sixty per
cent of the assessable income of the Company as reduced by
the income-tax and supertax payable by the Company, he shall
make an order (except in certain circumstances specified)
that the undistributed portion of the assessable income of
the Company computed for income-tax purposes as reduced by
the income-tax and super-tax in respect thereof be deemed to
have been distributed as dividends among the shareholders
and thereupon the proportionate share of each shareholder
shall be included in the total income of each shareholder
for the purpose of assessing his total income. Before an
order under s. 23A, as it then stood, became effective, two
steps had to be taken(i) an order had to be made that the
undistributed portion of the assessable income of the
Company shall be deemed to have been distributed as
dividends among the shareholders; and (ii) the deemed income
of each shareholder had to be included in the total income
of such shareholder for the purpose of assessing his total
-income. An order declaring that the undistributed portion
of the income shall be deemed to have been distributed was
not an order of assessment: the order of assessment was made
only when the Income-tax Officer took action against each
shareholder for bringing the deemed income of each
shareholder to tax in his individual assessment. The
Legislature did not provide any period of limitation for
making an order declaring that the undistributed portion of
the income shall be deemed to be distributed as dividends.
But since the order had to be followed up in the assessments
of the -shareholders individually, the order would, if made,
be ineffective, if it was not made within the period
prescribed by s. 34(3); see Commissioner of Income-tax,
Bombay City-I v. Robert J. Sas .,and Others.(1). The
procedure for bringing to tax undistributed income of
companies which distributed less than the statutory
percentage of its total income was clumsy and dilatory.
Before tax could be recovered, enquiry had to be made into
the matters referred to in s. 23A (1) and also whether the
Company was one in ’which the ’Public were not substantially
interested, and after the order was made, each individual
shareholder had to be separately .,assessed. in respect of
the deemed income.
The Legislature by the Finance Act, 1955, altered the scheme
for imposition and collection of tax. Section 23A as
amended by -the Finance Act, 1955, read as follows:
"(1) Subject to the provisions of sub-sections
(3) and (4), where the Income-tax Officer is
satisfied that in respect of any previous year
the profits and gains distributed as dividends
by any company within the twelve months
immediately following the expiry of that
previous year
(1) [1963] : 209:48 I.T.R. 177.
Supp. 2 S.C.R.
41
are less than sixty per cent of the total
income of the company of that previous year as
reduced by-
(a)the amount of income-tax and super-tax
payable by the company in respect of its total
income, but excluding the amount of any super-
tax payable under this section;
(b)the amount of any other tax levied under
any law for the time being in force on the
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company by the Government or by a local
authority in excess of the amount, if any,
which has been allowed in computing the total
income;and
(c)in the case of a banking company, the
amount actually transferred to a reserve fund
under section 17 of the Banking Companies Act,
1949 (X of 1949);
the Income-tax Officer shall, unless he is
satisfied that, having regard to losses
incurred by the company in earlier years or to
the smallness of the profits made in the previous
year, the payment of a dividend or a larger
dividend than that declared would be
unreasonable, make "an order in writing that
the company shall, apart from the sum
determined as payable by it on the basis of
the assessment under section 23, be liable to
pay super-tax at the rate of four annas in the
rupee on the undistributed balance of the
total income of the previous year, that is to
say, on the total income reduced by the
amounts, if any, referred to in clause (a),
clause (b) or clause (c) and the dividends
actually distributed, if any:
Provided that-
(a) in the case of a company whose
business consists. wholly or mainly in the
dealing in or holding of investments; and
(b) in the case of any other company where
the reserves (including the amounts
capitalised from the earlier reserves)
representing accumulations of past profits whic
h
have not been the subject of an order under
this sub-section, exceed either the aggregate
of
(i) the paid-up capital of the company
exclusive of the capital, if any, created out
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,
Sup. CI/67-4
42
this section shall apply as if for the words
sixty per cent of the total income’, wherever
they occur, the words ’the whole of the total
income’ had been substituted.
(2) No order under sub-section (1) shall be
made’-
(i) in the case of a company referred to in
clause (a) of the Proviso to that subsection,
which has distributed not less than ninety per
cent of its total income as reduced by the
amounts, if any, referred to in clause (a),
clause
(b) or clause (c) of that sub-section, or
(ii)in the case of any other company which has
distributed not less than fifty-five per cent
of its total in,come as reduced by the
amounts, if any, aforesaid, or
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(iii)in any case where according to the
return made by a company under section 22, it
has distributed not less than sixty per cent
of its total income as reduced by the amounts,
if any, aforesaid, but in the assessment made
by the Income-tax Officer under section 23 a
higher total income is arrived at, and the
difference in the total income does not arise
out of the application of the proviso to
section 13 "or sub-section (4) of section 23
or the omission by the company to disclose its
total income fully and truly, unless the
company, on receipt of a notice from the
Incometax Officer 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 total income of the
company of the relevant previous year as
reduced by the amounts, if any, aforesaid.
(3)Where on an application presented to him
in this behalf by a company within the period
of twelve months referred to in sub-section
(1) or within the period of three months
referred to in sub-section (2), the
Commissioner -of Income-tax is satisfied,
having regard to the current requirements of
the company’s business or such other
requirements as may be necessary or advisable
for the maintenance and development of that
business, the declaration or payment of a
dividend or a larger dividend than the
proposed to be declared or paid would be
unreasonable, he may reduce the amount of the
minimum distribution required of that company
under sub-section (1) to such figure as he may
consider fit and further determine the period
within which such distribution should be made.
The principal change made by the amendment was
that in the conditions prescribed by the
section, the Company and not the
43
shareholders were made liable to pay tax, and for that
purpose the procedure was rationalised. The original scheme
which contemplated two orders--One against the Company and
the other against each individual shareholder was replaced
by the imposition of tax liability upon the Company, on the
income-tax Officer being satisfied about the existence of
preliminary conditions which attracted liability to
additional super-tax.
By the Finance Act 26 of 1957 the section was further modi-
fied. Sub-sections (1) & (2), insofar as they are material,
were substituted by the following sub-sections:
" (1) Where the Income-tax Officer is
satisfied that in respect of any previous year
the profits and gains distributed as dividends
by any company within the twelve months
immediately following the expiry of that
previous year are less than the statutory
percentage of the total income of the company
of that previous year as reduced by-
(a)the of income-tax and super-tax payable by
the company in respect of its total income,
but excluding the amount of any super-tax
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payable under this section;
(b) the amount of any other tax levied under
any law for the time being in force on the
company by the Government or by a local
authority in excess of the amount, if any,
which has been allowed in computing the total
income; and
(c) in the case of a banking company, the
amount actually transferred to a reserve fund
under section 17 of the Banking Companies Act,
1949-
the Income-tax Officer, shall, unless he is satisfied that
having regard to losses incurred by the company in earlier
years or to the smallness of the profits made in the previ-
ous year, the payment of a dividend or a larger dividend
than that declared would be unreasonable., make an order in
writing that the company shall, apart from the sum
determined as payable by it on the basis of the assessment
under section 23, be liable to pay super-tax at the rate of
fifty per cent in the case of a company whose business
consists wholly or mainly in the dealing in or holding of
investments, and at the rate of thirty-seven per cent in the
case of any other company, on the undistributed balance of
the total income of the previous year, that ’is to say, on
the total income reduced by the amounts, if any, referred to
in clause (a), clause (b) or clause (c) and the dividends
actually distributed, if any.
44
(2) No order undersub-section (1) shall be
made,-
(i) in the case of a company whose business
consists wholly or mainly in the dealing in or
holding of investments which has distributed
not less than ninety per cent of its total
income as reduced by the amounts, if any,
referred to in clause (a), clause (b) or
clause (c) of sub-section (1); or
(ii)in the case of any other company whose
distribution falls short of the statutory
percentage I by not more than five per cent
of, its total income as reduced by the
amounts, if any, aforesaid; or
(iii)in any case where according to the
return made by a company under section 22, it
has distributed not less than the statutory
percentage of its total but in the assessment
made by the Incometax Officer under section 23
a higher total income does not arise out of
the application of the proviso to section 13
or sub-section (4) of section 23 or the
omission by the company to disclose its income
fully and truly;
unless the company, on receipt of a notice
from the Income-tax Officer, 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 the statutory percentage of the
total income of the company as reduced by the
amounts, if any, aforesaid;"
Sub-sections (3) to (7) of s. 23A as introduced by the
Finance Act, 1955, were omitted. By this amendment, the
scheme for imposing liability for payment of additional
super-tax was not altered.
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It was urged before the High Court, and the argument
appealed to the High Court, that an order under s. 23A as
amended by the Finance Act, 1955, and as further modified by
the Finance Act, 1957, by the Income-tax Officer directing
payment of additional supertax was an order of assessment
which could only be made before the expiry of the period of
limitation prescribed by s. 34(3) of the Income-tax Act,
1922. In support of this view, it was said that the
expression "assessment" used in the Indian Income-tax Act,
1922, has different meanings in the context in which it
occurs: sometimes it is used as meaning computation of
income, sometimes as determination of the amount of tax
payable, and sometimes the procedure for imposing liability
upon the tax-payer.
45
Reliance in this behalf was placed upon the judgment of the
Privy Council in Commissioner of Income-tax, Bombay
Presidency & Aden v. Khemchand Ramdas.(1) But s. 23A does
not use the expression "assessment" in the body of cl. (1):
and to the title of the section after it was amended, viz.
"Power to assess companies to super-tax on undistributed
income in certain cases", it is impossible to give any
exalted meaning so as to convert what is an order directing
payment of tax into an order of assessment within the
meaning of s. 34(3) of the Indian Income-tax Act, 1922.
Every order which contemplates computation of income for
determination of the amount of tax payable is not an order
of assessment within the meaning of the Act: nor does
prescribing of procedure for determining and imposing tax
liability make it an order of assessment. The Income-tax
Act contemplates making of diverse orders by Income-tax
Officers directing payments of sums of money by tax-payers
which are of the nature of orders for payment of tax, but
which are still not orders of assessment. For instance,
under s. 18A(1) the Income-tax Officer is entitled to direct
advance payment of tax. An order may also be made under s.
35(9) where the Income-tax Officer is satisfied that the
income-tax payable by a Company on its profits and gains out
of which the Company has declared a dividend, has not been
paid within three years after the financial year in which
the dividend was declared, he may proceed to recompute the
amount by reducing it in, the same proportion as the amount
of income-tax remaining unpaid by the Company bears to the
amount of; income-tax payable by it on such profits and
gains. Similarly under sub-s. (10) of s. 35, before it :was
deleted by the Finance Act, 1959, where a rebate of income-
tax was allowed to a company on a part of its total income
and subsequently the amount on which the rebate of income-
tax was allowed was availed of by the Company, for declaring
dividends in any year, the Incometax Officer had to
recompute the tax by reducing the rebate originally allowed.
Again by s. 35(l1), as added by the Finance Act of 1958,
development rebate in respect of a ship, machinery or plant
under s. 10(2)(vi-b) could be deemed to have been wrongly
allowed if the ship, machinery or plant was sold or
otherwise transferred, or the amount credited to the reserve
account under that clause was diverted for another purpose
within ten years, and the Incometax Officer had to recompute
the income, and levy tax on the footing of such recomputed
income. In each of these cases there is computation of
income, determination of tax payable and procedure is
prescribed for imposing liability upon the tax-payer. But
still these are not orders of assessment within the meaning
of s. 23. The salient feature of these and other orders is
that the liability to pay tax arises not from the charge
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created by statute, but from the order of the Income-tax
Officer.
(1) 6 I.T.R. 414.
46
The argument that S. 23A is a self-contained section
imposing liability to pay additional super-tax does not
convert that section into one for assessment of tax. There
is undoubtedly a hearing before liability is imposed for
payment of additional super-tax; there is declaration of
liability and the liability is determined in the manner
prescribed by the section. That there is, as was argued
before this Court, "a considerable parallel between ss. 23 &
23A" will not justify the assumption that what is done by an
order under s. 23A as amended is assessment of tax
liability. There is a vital difference between the
assessment of tax under s. 23 and imposition of liability
under s. 23A. Tax liability quantified by an order under s.
23 is a charge statutorily imposed by ss. 3 & 4 of the Act.
It is true that the statutory liability is, till the last
day of the year of account, ambulatory, but the charge is
still a statutory charge on income. The function of the
Income-tax Officer is to compute the taxable income and to
crystallize the charge on the taxable income. Under S. 23A
there is no statutory charge in respect of additional super-
tax and the liability is imposed by the order of the Income-
tax Officer. Source of the liability to pay additional
super-tax is not in ss. 3 & 4 of the Act: it lies in and
arises out of the order of the Income-tax Officer. Before
imposing liability for additional super-tax, the Income-tax
Officer has to determine whether the Company is one to which
the provisions of s. 23A apply; he has also to determine
whether the Company has distributed within twelve months
immediately following the expiry of the previous year the
statutory percentage of the total income of the Company as
reduced by the taxes and levies prescribed therein; he has
also to determine whether, having regard to the loss
incurred by the Company in the earlier years or to the
smallness of the profits made in the previous year, the
payment of a dividend or a larger dividend than that
declared would be unreasonable. It is after making these
enquiries that the Income-tax Officer may make the order
directing payment of additional super-tax at the rates
prescribed. The process to be followed is not the process
of assessment, but of determining whether the liability
should be charged and imposed. For that purpose the Company
is given a right to explain the reasons for failure to
distribute the statutory percentage of profits as dividends.
In certain special circumstances contemplated by sub-s. (2)
of S. 23A, the order imposing tax liability cannot be made
unless the Company after receiving a notice from the Income-
tax Officer that he proposes to make such an order fails to
make within three months of the order further distribution
of its income so that the total distribution made is not
less than the statutory percentage of the total income of
the Company of the relevant previous year as reduced by the
amounts, if any, aforesaid. Provision was also made in sub-
s. (3) inserted by the Finance Act of 1955 authorising the
Commissioner of Income-tax to reduce the amount of minimum
distribution required of a Company, if having regard to the
current
47
requirements of the Company’s business or such other
requirements as may be necessary, or advisable for the
maintenance or development of the business, the declaration
or payment of a dividend or a larger dividend than that
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proposed to be declared was unreasonable.
It was urged that under the Indian Income-tax Act 43 of 1961
the Parliament has prescribed by s. 106 for making an order
under s. 104 (of which the scheme is similar to the scheme
of s. 23A as amended) a period of limitation. Section 106
of the Income-tax Act, 1961, provides that no order under
s.104 shall be made after the expiry of four years from the
end of the assessment year relevant to the previous year
referred to in sub-s. (1) of that section, or after the
expiry of one year from the end of the financial year in
which the assessment or re-assessment of the profits and
gains of the previous year aforesaid is made, whichever is
later. But the provisions of s. 23A have to be construed as
they stood before the Act of 1961 was enacted, and the mere
fact that the Legislature has chosen to specify a period of
limitation for making an order imposing liability under s.
104 of the Act of 1961 upon a Company which has failed to
distribute the statutory percentage of its distributable
income will not justify an inference that such a period of
limitation was implicit in the previous Act.
Section 23A, before it was amended by the Finance Act, 1955,
was undoubtedly procedural: Commissioner of Income-tax,
Bombay City-I v. Afco (Private) Ltd.(1). Section 23A (1),
after it was amended by the Finance Act, 1955, provides
within itself machinery for imposition of liability to pay
additional super-tax, but it has not on that account been
made a charging section. A charge to tax arises under ss.
3, 4 & 55 of the Act for payment of income-tax and super-tax
and not under s. 23A.
Some additional indication which supports the view which we
have expressed is furnished by ss. 30 & 31 of the Indian
Income-tax, Act. Section 30 provides for appeals from
certain specified orders of the Income-tax Officer to the
Appellate Assistant Commissioner. Under s. 30 an assessee
denying his liability to be assessed under the Act may
appeal against the order of assessment. If the assessee is
a company it may also appeal against an order made under s.
23A (1) under s. 30. If an order under s. 23A were to be
regarded as an order of assessment, it was plainly
unnecessary to retain, after the amendment by the Finance
Act, 1955, the right to appeal against the order made under
sub-s. (1) of s. 23A by an independent clause. It is true
that by s. 20(4) of the Finance Act, 1955, it was expressly
enacted that the provisions of s. 23A of the Income-tax Act
as in force immediately before April 1, 1955, shall continue
to apply to a company in respect of which profits and gains
of the
(1) [1963] Supp. 1 S.C.R. 766: 48 I.T.R. 76.
48
previous year relating to the assessment year prior to the
assessment year ending March 31, 1956, and also to its
shareholders referred to in sub-s. (1) of s. 23A as then in
force in respect of their appropriate previous years, and
this necessitated that the right to appeal against the order
under s. 23A before it was amended be preserved. But there
is nothing. in s. 30 which indicates that the reference to
the right of appeal was restricted to orders under s. 23A,
before the Act was amended by the Finance, Act; 1955, and
that it did not refer to an order made under s. 23A(1) after
that clause was amended. The specific clause relating to
the right of appeal reserved against the order under sub-s.
(1) of s. 23A is general, and confers a right of appeal
against the order passed under sub-s. (1) of s. 23A before
it was amended by the Finance Act, 1955, and also under s.
23A after it was amended. There is no such reservation of
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the nature suggested by counsel for the assessee, and we see
no reason to hold that the Legislature intended to make such
a reservation and did not expressly so provide.
Under sub-s. (2) of s. 30 different periods of limitation
for filing appeals against various orders under the Income-
tax Act are prescribed. Against an order of assessment, an
appeal lies within 30 days from the date of receipt of
notice of demand objected to, and against an order under s.
23A. an appeal lies within 30 days from the intimation of an
order under that section. The Act does not call the order
under s. 23A (1) for payment of additional super-tax a
notice of demand. If the argument that an order under s.
23A, after it wag amended, is an order of assessment,
evidently the period of limitation covered by the first
clause, namely, thirty days from the receipt of notice of
demand will apply. It could not have been intended that the
right of appeal could be exercised either within thirty days
from the date on which an order under s. 23A was intimated
or within thirty days from the date of receipt of notice of
demand. Similarly, s. 31, which deals with the right of
appeal from an order of assessment to the Appellate
Assistant Commissioner, provides by sub-s. (3) that in
disposing of an appeal the Appellate Assistant Commissioner
may, in the case of an order of assessment-(a) confirm,
reduce, enhance or annul the assessment or (b) set aside the
assessment and direct the Income-tax Officer to make a fresh
assessment after making such further inquiry as the Income-
tax Officer thinks fit, or the Appellate Assistant Com-
missioner may direct, etc. and in the case of an order under
sub-s. (1) of s. 23A under cl. (d) confirm, cancel or vary
such order. If an order under sub-s. (1) of s. 23A was an
order of assessment, even after the Act was amended, it was
unnecessary to retain cl. (d) in that form.
The right to prefer an appeal could obviously be exercised
both against an order under s. 23A before it was amended and
after it was amended. Since the Legislature has not chosen
to make
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suitable amendments to restrict the right of appeal only to
those cases where the right is exercised against an order
declaring that the undistributed portion of the income shall
be deemed to be distributed, it May reasonably be inferred
that the right is exercisable in respect of the orders made
prior to the amendment made by the Finance Act, 1955, and
also orders made thereafter.
It was pointed out that under s. 45 of the Act reference to
sub-s. (3) of s. 23A could only be to the section as it
stood before the amendment by the Finance Act, 1955.
Insofar as it is material, s. 45 provides:
"Any amount specified as payable in a notice
of demand under sub-section (3) of section 23A
Shall be paid within the time, at the place
and to the period mentioned in the notice or
order
Under sub-s. (3) of s. 23A before it was amended by the
Finance Act of 1955, tax payable on the proportionate share
of any member of a company in the undistributed profits was
liable to be recovered from the Company, if it could not be
recovered from the shareholder. By the Finance Act, 1955,
this clause was deleted and another clause which had nothing
to do with recovery of tax was substituted as sub-s. (3).
By the Finance Act, 1957, that new sub-s. (3) has been
deleted. Section 45 deals with recovery of tax and in the
context in which it occurs, reference in s. 45 to sub-s’ (3)
of s. 23A can only mean reference to that sub-section as it
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stood prior to the Finance Act of 1955. But that can not be
a ground forinferring that by s.23A which is referred to in
ss. 30 & 31 only intended to refer to the section as it
stood before the Finance Act, 1955.
The appeal is allowed and the petition filed by the assessee
its dismissed with costs in this Court and the High Court.
Y.P.
Appeal allowed.
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