SHYAM SUNDARI DEVI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under section 66(1) of the Indian Income-tax Act, 1922, is in relation to the assessment year 1952-53. After the original assessment for the year 1953-54 was completed, it was reopened under section 34(1) of the Act, after obtaining prior approval of the Commissioner of Income-tax Patna, to assess Rs. 20,416, which was treated as a deemed dividend under section 23A(1) of the Income-tax Act. In the case of Messrs. Indian Mica Supply Co. (P) Ltd., the dividend of the company was deemed to have been distributed on the 20th May, 1952, but in an appeal preferred by the company the date of declaration was held to be 29th of December, 1951, and not 20th May, 1952. The assessee who is a shareholder of that company and in whose total income was included her share of the dividend from that company for the assessment year 1953-54 under section 34(1) of the Act, went in appeal to the Appellate Assistant Commissioner, who held that the deemed dividend was no assessable in the previous year relating to the assessment year 1953-54. He gave direction to the Income-tax Officer to include the same in the previous year relating to the assessment year 1952-53. Following this, notice under section 34(1) of the Act was given by the Income-tax Officer on the 2nd September, 1960, and the dividend due to the assessee was included in her total income in the assessment. Against this again, the assessee went in appeal contenting that the proceeding under section 34(1) in relation to the assessment year 1952-53 was barred by limitation as provided under sub-section (3) of section 34, since a period of four year had elapsed from the last date of the assessment year of 1952-53. That contention was not accepted by the Appellate Assistant Commissioner or by the Appellate Tribunal when the assessee went in appeal before them.

(2.) It is in the aforesaid circumstances that reference under section 66(1) of the Act was sought by the assessee and the Tribunal, in making the statement to this court, framed the question as follows :

(3.) From what we have already stated, it will appear that the action under section 34(1) of the Act on the 2nd of September, 1960, in relation to the assessment year 1952-53 was clearly barred by time, unless the second proviso to sub-section (3) of section 34 came to the aid of the department. We have disposed of another, (Ram Gopal Rajgarhia v. Commissioner of Income-tax, 1963 MJC 413 ) today, the 13th January, 1966, involving the very same question in regard to the deemed dividend from the same company in the case of another shareholder assessee. There we have referred to a decision of the Supreme Court in the case of Income-tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das, in which it was held that the jurisdiction as well as all the finding "by an appellate authority" under the Indian Income-tax Act are confined to the assessment year (also the connected previous year involved in the assessment under consideration) Any observations or conclusion in respect of thing other than that will not be covered by "any finding or direction contained in an order" as mentioned in the second proviso to section 34(3). The Appellate Assistant Commissioner in the appeal relating to the assessment year 1953-54 held that the deemed dividend did not relate to the connected previous year. His observation that it related to the assessment year 1952-53 and his direction to the Income-tax Officer to reopen the assessment under section 34 for that purpose were not within his jurisdiction for purposes of lifting the ban of limitation as mentioned in the second proviso to sub-section (3). In that view, the assessment made after serving a notice under section 34(1) of the Act long after the expiry of four years from the end of the assessment year 1952-53 was beyond time. And, in that view, the deemed dividend could not have been included in that proceeding within the total income of the assessee.