Decided on October 28,1994



N.K. Agrawal, Member - (1.) IN this appeal by the assessee for assessment year 1984-85, the only substantive ground Is against the levy of tax under Section 104 of the INcome-tax Act, 1961, at Rs. 23,050.
(2.) Assessment was completed on an income of Rs. 2,66,060 on 27-2-1987. Thereafter, the Assessing Officer proceeded under Section 104 on the ground that the assessee had failed to declare any dividend within a period of 12 months from the end of the previous year' relevant to the assessment year under consideration. The assessee pleaded that there were losses in earlier years and the income assessed could not, therefore, be treated to the sufficient for declaration of any dividend. The assessee, in its reply filed before the Assessing Officer, put forth three reasons for not declaring any dividend. It was claimed that the funds were required for the repayment of unsecured loans and that there were past losses. Third reason assigned was that the balance left in the profit and loss account was very small for declaring any dividend. The Assessing Officer declined to accept any of the three reasons and levied penalty for not declaring any dividend in accordance with the provisions of Section 104. The assessee went in appeal inviting again the attention of the CIT(A) to its explanation furnished for not declaring any dividend in this year. It was claimed that the assessee had to adjust past losses and on that account the balance profit left was not sufficient for declaring any dividend. Certain provision for tax was also made and for this reason also the amount available could not be said to be sufficient for declaring any dividend. The appeal, however, failed.
(3.) THE Id. counsel has, at the outset, challenged the order passed under Section 104 on the ground that the Assessing Officer passed his order on 25-3-1988 whereas the previous approval of the of the IAC had actually not been obtained by the that time. Our attention has been drawn to the notice given by the IAC to the assessee (copy placed at page 15 of the compilation). In that notice, the assessee was required to appear on 28-3-1988 but that date of hearing was scored and a fresh date 25-3-1988 was written by hand. THE Id. counsel has submitted that the date of hearing had been changed in the notice so as to conceal the violation of the provision of law contained in Section 107. Section 107 required that no order shall be made by the Assessing Officer under Section 104 unless the previous approval of the IAC was obtained. It further required the IAC to give his approval to any order proposed to be made by the ITO only after the company concerned had been given an opportunity of being heard. It is pointed out by the Id. counsel that the Assessing Officer was supposed to make an order under Section 104 only after obtaining previous approval of the IAC under Section 107. Since the IAC required the assessee to appear on 25-3-1988, it would mean that previous approval from the IAC was not available with the Assessing Officer when he passed the order under Section 104 on 25-3-1988. THE Id. counsel has contended that it was also a case of violation of natural justice and, therefore, the order passed under Section 104 was not valid. Reliance has been placed on the decision of the Supreme Court in the case of R.B. Shreeram Dwga Prasad and Fatechand Nursing Das v. Settlement Commission [1989] 176 ITR 169.;

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