COMMISSIONER OF INCOME TAX Vs. RAHIMTULLA A I

JUDGEMENT

(1.) THIS is a reference under section 256(1) of the Income -tax Act, 1961, made at the instance of the Revenue. The question posed to us read thus :

(2.) THE assessee was assessed as a non -resident individual. The assessment year is 1955 -56. The original assessment for that year was completed on October 17, 1955, on a total income of Rs. 44,503. The assessee held 565 shares in Fazalbhoy Ibrahim and Co. Ltd. (hereinafter referred to as 'the company'). Subsequent to the assessment, the Income -tax Officer, upon scrutiny of the assessee's accounts with the company and its balancesheet, found that the assessee had obtained a loan from the company and on March 31, 1955, owed a sum of Rs. 4,28,190 on that account. The company's balance -sheet showed that it had a reserve of Rs. 5,45,550 out of accumulated profits. The Income -tax Officer, therefore, found that the amount of Rs. 4,28,190 was a dividend taxable under section 2(6A)(e) read with section 12(1B) of the Indian Income -tax Act, 1922. With the previous approval of the Commissioner of Income -tax, therefore, he reopened the assessment of the assessee under section 147 of the Income -tax Act, 1961.

(3.) BY his order dated March 27, 1968, the Income -tax Officer stated thus :