JASWANT SINGH S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE are references under S. 66(1) of the Indian IT Act, 1922 (to be hereinafter referred to as "the Act"). A common question of law is referred to this Court in these cases by the Tribunal (Delhi Bench), and that question is :

(2.) THE assessees in these cases are shareholders in Uttam Singh Dugal and Co. (P) Ltd., New Delhi. The assessment year, with which we are concerned in this case, is 1954 -55, the account period being the year ending March 31, 1954. The ITO initiated proceedings under S. 23A of the Act against Uttam Singh Dugal & Co. as per his notices dated March 8, 1957. But an order under that section was passed only on January 20, 1960. Even before that order was made, he initiated proceedings against the assessees by issuing notices under S. 34(1)(b) on March 20, 1959. On the basis of those notices, assessment orders against the assessees were made during the last week of January, 1960. The question for consideration is whether the notices issued against the assessees under S. 34(1)(b) of the Act are valid notices.

(3.) SEC . 23A(1) provides that as soon as an ITO makes an order in writing that the undistributed portion of the assessable income of the company during the relevant previous year as computed for income - tax purposes and reduced in the manner provided in that section, shall be deemed to have been distributed as dividends amongst its shareholders as at the date of the general meeting of the company and thereupon the proportionate share thereof of each shareholder shall be included in his total income. On the basis of that provision, it was contended that in view of the order made by the ITO on January 20, 1960, it should be deemed that the dividends in question had been distributed in the year 1953 -54 and, consequently, the same was assessable in the asst. yr. 1954 - 55 ; but in fact it was not assessed ; hence, the same could be brought to tax by having recourse to S. 34(1)(b). Sec. 34(1)(b) to the extent it is material for our present purpose, reads : "34. (1) If - . . . . (b) notwithstanding that there has been no omission or failure as mentioned in cl. (a) on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income -tax have escaped assessment for any year, or have been under -assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under cl. (a) at any time within eight years and in cases falling under cl. (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub -s. (2) of S. 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub - section : . . ."