CHATTURAM HORILRAM LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, Messrs. Chatturam Horil-ram Ltd. (hereinafter referred to as the Company), is a private limited Company which carries on mica business on a large scale. For the accounting year corresponding to calendar year 1938, the books of the Company showed a profit of Rs. 97,868/-. THE books also showed that there was a loss of Rs. 1,15,481/- on account of previous years. THE Income-tax Officer held in the course of assessment that the profit and loss account of the Company did not reflect the true profits, that, on the contrary, the Company had secreted its profits in the shape of cash deposits in the accounts of the share-holders, and that the true profits of the Company for the accounting year 1938 should be computed to be a sum of Rs. 4,86,351/- after making certain adjustments. THE Income-tax Officer considered that the losses incurred prior to calendar year 1938 were wiped out toy the profits which were actually realised in calendar year 1938, Since the conditions requisite for the application of Section 23A were satisfied the Income-tax Officer wrote to the Inspecting Assistant Commissioner of Income-tax for his approval to make an order under Section 23A, On the 2nd of March, 1945, the Inspecting Assistant Commissioner issued a notice to the Company in the following terms:

(2.) AFTER hearing learned counsel for the parties, we are satisfied that the first question has not been happily framed and that the question should be redrafted as follows in order to bring out the real controversy between the parties :