BOMBAY PRINTERS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THREE questions are referred to us at the instance of the assessee by the Income -tax Appellate Tribunal, Bombay Bench 'C'. They are as follow : '(1) Whether, on the facts and in the circumstances of the case, the assessee -company was one in which the public are not substantially interested within the meaning of Explanation 1 to section 23A(1) of the Indian Income -tax Act, 1922, as it then stood ? (2) If the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, and considering the profits available for distribution, the provisions of section 23A(1) of the Indian Income -tax Act, 1922, were rightly applied in the assessee's case ? (3) Whether the order under section 23A(1) of the Indian Income -tax Act 1922, is vitiated by the fact that it was passed after completing the regular assessment on the assessee -company without issue of notice under section 34 of the said Act ?'

(2.) THE point in controversy relates to the application of s. 23A of the Indian I.T. Act, 1922, to the assessee -company. The ITO passed orders under s. 23A(1) in the assessee -company's case for the four assessment years 1956 -57, 1957 -58, 1959 -60 and 1960 -61. The matter ultimately came before the Tribunal, and in its consolidated order in I.T.A. Nos. 15452 to 15455 of 1963 -64, the Tribunal did not uphold the application of s. 23A(1) for the first three years but upheld it for the last year 1960 -61. It is this decision which is impugned in the question.

(3.) THE assessee took the matter before the AAC. It was contended in the first place that s. 23A of the Indian I.T. Act, 1922, was not applicable. The AAC, however, rejected the submissions of the assessee and upheld the conclusion of the ITO, namely, that the assessee was a company to which the provisions of s. 23A are technically applicable. In discussion the merits, the AAC upheld the application of the provisions contained in s. 23A, although he was satisfied that by not declaring dividend the assessee -company was not seeking to avoid tax. In his view, the circumstances clearly indicated that the shareholders concerned had formed the assessee -company was not with a view to earn profits. He concluded further that there was no attempt at avoidance of super -tax liability. Nevertheless, according to him, these aspects were irrelevant and the only criterion was whether the assessee -company had commercial profits for declaring dividends. As stated earlier, the matter was carried to the Tribunal, which found in favour of the assessee for the earlier three years but upheld the order of the IT for the last year with which we are concerned in this reference.