Decided on September 21,1972

UNION OF INDIA Respondents


K.K.DESAI, J. - (1.) IN this petition under Art. 226 of the Constitution, the petitioner company, which is a private limited company, has challenged the legality of the orders dated August 27, 1965, and September 23, 1965, made by the ITO under S. 35 of the INCOME TAX ACT, 1922, whereby he rectified in respect of the asst. yrs. 1960 -61 and 1961 -62 two previous orders made under S. 23A of the Act on June 26, 1963.
(2.) THE only and main contention made on behalf of the petitioner -company to challenge the legality of the orders is that, having regard to the facts involved and the record before him, the ITO had no authority, power and jurisdiction under S. 35 of the Act to rectify the previous orders made under s. 23A. In connection with this contention the facts which require to be noticed are as follows : The assessment of income -tax of the petitioner -company in respect of the asst. yrs. 1960 -61 and 1961 -62 was completed respectively on November 23, 1960, and December 11, 1961. The distributable balance left in the hands of the petitioner -company for these two respective years was respectively Rs. 49,113 and Rs. 53,438. Having regard to the failure of the petitioner -company to distribute the above distributable balance by way of dividend amongst shareholders, the ITO decided that action was liable to be taken against the petitioner -company under S. 23A of the Act. He, therefore, served two different show -cause notices dated November 7, 1962, for each of these two years and after the petitioner -company had shown cause, he by his two separate orders, both dated July 23, 1963, made under S. 23A of the Act, held that having regard to the above failure the petitioner -company was liable to pay super -tax, in respect of the above undistributed balances, of 37 per cent of the undistributed balance and directed recovery thereof from the petitioner - company. He recorded that the orders were made with the previous approval of the IAC. Sec. 23A provided for charging super -tax at two respective rates of 37 per cent and 50 in the following manner : ". . . . be liable to pay super -tax at the rate of fifty per cent in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments, and at the rate of thirty -seven per cent in the case of any other company . . ."
(3.) APPARENTLY by the above two orders made for the above respective years super -tax at the rate of 37 per cent was directed to be charged and recovered on the footing of a finding that the petitioner -company was not a company whose business consisted wholly or mainly in the dealing in or holding of investments.;

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