BHARGAVA, J. - (1.) THE question of law referred by the Income-tax Appellate Tribunal for the opinion of this court is as follows : Whether the order of the Income-tax Officer under section 23A(1) of the Indian Income-tax Act is barred by limitation on the ground that it was passed on 14th March 1946 in respect of the assessment year 1940-41, the relevant previous year of the assessee company being calendar year 1939 ?
(2.) THE assessee, which is company incorporated under the Indian Companies Act, maintained accounts treating each calendar year as the year of account, so that the books of account were closed on the 31st of December, every year. THE company during the calendar year 1939 earned profits to the extent of Rs. 10,16,602 which were assessed in the hands of the company in the relevant assessment year 1940-41. Out of these profits, dividends amounting to Rs. 4,05,000 were declared at the annual general meeting of the assessee company held on 26th January, 1944, and those dividends were distributed amongst the shareholders. The assessment of the company was made by the Income-tax Officer on 23rd November, 1944, and by the order of assessment, the income held to be liable to income-tax was found to be somewhat higher than the amount of Rs. 10,16,602. Thereafter, the Income-tax Officer gave a hearing to a representative of the assessee company and, on 14th March, 1946 passed an order under section 23A(1) of the Income-tax Act holding that the undistributed portion of the assessable income of the assessee company for the previous year 1939, as computed for income-tax purposes and as reduced by the amounts of income-tax and super-tax payable by the assessee company, shall be deemed to have been distributed as dividends amongst the shareholders as at the date of the general meeting, to the extent of the difference between the 60 per cent. of the amount and the amount of dividend already declared and distributed. Against this order the assessee company filed appeals before the Appellate Assistant Commissioner of Income-tax and before the Income-tax Appellate Tribunal but unsuccessfully. The main point urged was that no order under section 23A(1) of the Income-tax Act could be passed against the assessee company by the Income-tax Officer after the expiry of the period of four years from the end of the year of assessment 1940-41, in view of the provisions of section 34(2) of the Income-tax Act.
(3.) WE may note that the reference in the argument is to section 34(2) the Income-tax Act, as at the relevant time the limitation for an order of assessment or re-assessment was laid down by section 34(2) of the Income-tax Act, the Act not having been amended by the Income-tax and Business Profits Tax (Amendment) Act (XL VIII of 1948). This contention was repelled by the Income-tax Appellate Tribunal and consequently, the question mentioned above has been referred the opinion of this court. The question, as framed requires a pronouncement by this court whether the order under section 23A(1) of the Income-tax Act is barred by limitation. Learned counsel for the assessee had to concede that there is no specific provision in the Income-tax Act prescribing a period of limitation for an order by the Income-tax Officer under section 23A(1) of the Act. Limitation was prescribed, principally, for orders of assessment or re-assessment of income and that provision contained in sub-section (2) of section 34 of the Income-tax Act.;