CHATTURAM HORILRAMLTD Vs. STATE

JUDGEMENT

(1.) In these two cases, that is Miscellaneous Judicial Case No. 42 of 1952 and Miscellaneous Judicial Case No. 43 of 1952, the common question of law submitted by the Income-tax Appellate Tribunal to the High Court is :

(2.) In Miscellaneous Judicial Case No. 42 of 1952, the assessments on the company Messrs. Chatturam Horilram Ltd. for the years 1940-41, 1941-42 and 1942-43 were completed by the Income-tax Officer and the total amounts of income were determined for the respective years as Rs. 4,40,735, Rs. 12,02,450 and Rs. 14,36,012. The assessable incomes were determined to be Rs. 3,36,290, Rs. 5,26,386 and 4,89,624, for the respective years. But the company had declared dividends only to the extent of Rs. 48,000, Rs. 90,000 and Rs. 1,20,000 in respect of the profits for the calendar years 1939, 1940 and 1941. It is clear, therefore, that the dividends fell short of 60 per cent. of the assessable income as reduced by the taxes payable. According to the profit and loss accounts of the company, the profits earned for the calendar years 1939, 1940 and 1941 amounted to Rs. 1,15,281, Rs. 4,61,214 and Rs. 3,02,371 respectively. The Income-tax Officer held after examination of the account books of the company that the profit and loss accounts of the company did not reflect the true profits for "the respective years and had reasons to believe that the company had secreted its profits in the shape of cash deposits in the accounts of the share-holders. Upon the materials available, the Income-tax Officer determined that the true profits for the respective years were Rs. 4,40,735, Rs. 12,02,450 and Rs. 14,36,012 as already stated. In view of the fact that the conditions prescribed in Section 23A applied, the Income-tax Officer obtained approval of the Inspecting Assistant Commissioner and made an order in writing under Section 23A (1), Income-tax Act that the undistributed portion of the assessable income for the years in question should be deemed to have been distributed as dividend among the share-holders on the date of the general meetings and that the proportionate share of each share-holder should be included in his total income for the purposes of assessment. Appeals were taken by the company before the Appellate Assistant Income-tax Commissioner against the order of assessment under Section 34 and also against the order of assessment under Section 23A.

(3.) As regards the appeals under Section 34, the Appellate Assistant Income-tax Commissioner modified the amount of assessment in several particulars and, on the question of cash credit which the company claimed to be the result of sale of gold purchased in previous years, the Appellate Assistant Income-tax Commissioner remanded the question to the Income-tax Officer for making a proper assessment after inquiry into the matter. In Income-tax Appeal No. 53 of 1945-46, the Appellate Assistant Income-tax Commissioner passed the following order :