SARDAR SURJIT SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made under s. 66(1) of the Indian IT Act. The facts are as follows : Sir Indra Singh and his two sons, Sardar Baldev Singh and Ajaib Singh, were the only shareholders in M/s Indra Singh & Sons (P) Ltd. Sir Indra Singh transferred 350 shares to his grandson, Sardar Surjit Singh, before the annual general meeting of the said company which was held on the 30th March, 1949. The said Sardar Surjit Singh is the assessee in this case, and we are concerned with the assessment for the year 1949- 50. On the 19th Jan., 1953, an order was made under s. 23A of the IT Act upon M/s Indra Singh & Sons (P) Ltd. and by that order it was directed that the undistributed portion of the assessable income of the company should be deemed to have been distributed as dividend among the shareholders as at the date of the general meeting aforesaid, and in consequence the proportionate share thereof of each shareholder was to be included in the total income of such shareholder for the purpose of assessing his total income. The amount of dividend that was thus deemed to have been distributed to the assessee was Rs. 1,38,052. On the 27th Nov., 1954, a notice was issued under s. 34 of the said Act, requiring the assessee to file a return. Although in the statement of the case, s. 34 only is mentioned, it appears that the actual notice was under s. 34(1)(a). Previous to this notice, the assessee had no assessable income and never filed a return. Upon receipt of the said notice, he filed a return showing the said amount of dividend for Rs. 1,38,052 under protest. He was assessed upon that income. Against this assessment, the assessee appealed to the AAC and, thereafter, to the Tribunal, both of whom have upheld the assessment. Before the Tribunal the assessee raised three contentions :

(2.) THE Tribunal held against the assessee, whereupon the assessee asked for an order of reference and the following questions were referred.

(3.) THE same objection was taken before the Supreme Court in the case of Sardar Baldev Singh vs. CIT (1960) 40 ITR 605 (SC), Sarkar J. explained the real nature of s. 23A as follows :