- (1.) IN the application the petitioner seeks appropriate writs and orders directing the respondents, their servants and agents to recall show -cause notice dated May 13, 1964, and to forbear from giving effect to the same. The petitioner is a public company incorporated under the Indian Companies Act, 1056, its registered office being at Birlanagar, Gwalior, Madhya Pradesh. The petitioner submitted its return of income for the assessment year 1955 -56 and this income was duly assessed and an order was made on January 31, 1956, by the Income Tax Officer "A" Ward, Jaipur. Thereafter, the Income Tax Officer wrote several letters to the petitioner requesting the petitioner to meet him in connection with proceedings under Sec. 23A of the Income Tax Act, 1922 (hereinafter referred to as the Act). The petitioner contended that it was a company in which the public was substantially interested, and for that reason Sec. 23A was not attracted. On April 21, 1959, the Central Board of Revenue made an order transferring the petitioners case to the respondent No. 1. By an order dated February 25, 1960, under Sec. 23(3) read with Sec. 34(1)(b) of the Act, the Income Tax Officer included certain items of income not previously included in the original assessment. An appeal was preferred against the said order before the Appellate Assistant Commissioner, but this appeal was dismissed on September 20, 1960. Thereafter, by another order dated September 22, 1960, made under Sec. 23(3) read with Sec. 34(1)(b) of the Act, certain further items of income were included in the assessment of the petitioner. By letters dated June 27, 1962, and December 14, 1962, the respondent No. 1 requested the petitioner to submit certain particulars regarding proceedings under Sec. 23A of the Act. These particulars were furnished by the petitioner. By a letter dated February 15, 1963, the petitioner, through its advocate, contended that no order under Sec. 23A of the Act could be made in respect of the assessment year 1955 -56, having regard to the provisions in Sec. 34(3) of the Act. Thereafter, a show -cause notice dated May 13, 1964, was issued by the respondent No. 1 whereby the petitioner was informed that upon scrutiny of the record for the year of account, relevant for the assessment year 1955 -56, it was noticed that the petitioner had not declared any dividend in spite of available surplus. The petitioner was further informed by this notice that the respondent No. 1 proposed to apply the provisions of Sec. 23A of the Act to the petitioner, and called upon the petitioner to show cause within a week why such an order should not be made. At a hearing on June 24, 1964, the petitioners representative contended before the respondent No. 1 that the latter had no jurisdiction to pass any order under Sec. 23A, in view of the provisions of Sec. 34(3) of the Act. The respondent No. 1, however, threatened to proceed in pursuance of the said show -cause notice and thereupon the petitioner obtained this rule nisi.
(2.) THE main contention of the petitioner is that an order under Sec. 23A of the Act is an order of assessment or reassessment within the meaning of the said Act, including Sec. 34(3) thereof. It is next contended that, assuming that Sec. 23A of the Act is attracted, the petitioner first became assessable under this Sec. during the assessment year 1955 -56 which ended on March 31, 1956. Under the provisions of the said Sec. 34(3), the respondent No. 1, it is contended, has no jurisdiction to make any order of assessment or reassessment after the expiry of four years from April 1, 1956. It was, therefore, argued that the respondent No. 1 had no jurisdiction to assess or reassess the petitioners profits or gains on the basis of the impugned notice dated May 13, 1964. It is for this reason that the petitioner contends that the respondent No. 1 should be directed to cancel or withdraw the said show cause notice dated May 13, 1964. In other words, the petitioners contention is that because no order can be made by reason of the bar imposed by Sec. 34(3) of the Act, the issue of the said show cause notice by the respondent No. 1 is illegal, and this notice should, therefore, be cancelled or withdrawn or quashed. The further contention of the petitioner is that the issue of the said show cause notice by itself is an act in excess of the jurisdiction of the respondent No. 1 and, therefore, appropriate writs should be issued prohibiting any further action on the basis of the said impugned notice. Mr. A.K. Sen, learned counsel for the petitioner, argued that the petitioner was entitled to relief as by the said notice dated May 13, 1964, the respondent No. 1 proceeded to do something which he could not do. It was argued that an order under Sec. 23A of the Act was an order of assessment and, therefore, such an order was subject to the bar imposed by Sec. 34(3) of the Act. It was also argued that it was plain from the terms of the said notice, that the respondent No. 1 was of the opinion that Sec. 23A of the Act applied, and for that reason the petitioner was liable to pay additional super -tax. But, it was argued, an order of assessment or reassessment could not be made by reason of the bar imposed by Sec. 34(3) of the Act; and therefore the notice calling upon the petitioner to show cause why an order under Sec. 23A should not be made, could not be issued by the respondent No. 1. Mr. Sen next argued that the Finance Act of 1955 amended Sec. 23A of the Act, and after this amendment the Sec. itself became a charging section, which empowered the Income Tax Officer to make an order that the assessee should be liable to pay super -tax at certain rates specified therein; but before the amendment, Sec. 23A had merely provided the conditions under which an order could be made; in other words, it was only a computation section, but the order of assessment itself could be made only under Sec. 34 of the Act. After the amendment, however, the position was radically changed and an order of assessment could be made under Sec. 23A of the Act. It was, therefore, argued that since an order could be made under Sec. 23A of the Act, the bar imposed by Sec. 34(3) of the Act deprived the Income Tax Officer of his power to make an assessment order, if the assessment proposed to be made was for a period beyond the period prescribed by Sec. 34(3) of the Act.
(3.) IN respect of the above contention, Mr. Sen, firstly, relied upon a Bench decision of the Gujarat High Court in Navanagar Transport and Industries Ltd. v/s. Income Tax Officer, Special Investigation Circle A. In that case also the Income Tax Officer issued a notice calling upon the assessee why an order under Sec. 23A should not be made against the assessee. The point regarding the bar of limitation imposed by Sec. 34(3) of the Act, however, was not taken before the Income Tax Officer, who held against the assessee, and, thereafter, the matter went to the Inspecting Assistant Commissioner for his approval, under sub -section (8) of Sec. 23A of the Act, and it was before the Inspecting Assistant Commissioner that the assessee urged the ground regarding the bar imposed by Sec. 34(3) of the Act to an order being made under Sec. 23A. But, before the Inspecting Assistant Commissioner could decide whether he should grant or refuse relief, a writ petition was filed for appropriate relief. One of the grounds urged before the court was that Sec. 34(3) imposed a bar to an order under Sec. 23A. A second ground however was also urged, namely, that the assessee had no commercial profits in respect of which it could be asked to make a further distribution, and if such distribution was ordered, it would amount to distribution of capital, which would be contrary to law. With regard to this second contention, it was held that there was an adequate alternative remedy provided by the Act and this remedy must be pursued by the assessee. It was held that if the assessee failed before the Income Tax Officer on this second ground, it could carry the matter in appeal before the Appellate Assistant Commissioner, and thereafter to the Tribunal and finally, to the High Court on a reference under Sec. 66, if a question of law arose out of the order of the Tribunal. This remedy, it was held, was a specific and adequate alternative remedy available to the assessee, and such remedy must be pursued. On this first ground mentioned above, however, it was held that Sec. 34(3) was general in its application and prescribed a period of limitation for every order of assessment or reassessment, other than an order under Sec. 23 to which clause (c) of sub -section (1) of Sec. 28 applied, or an order of assessment or reassessment in cases falling within clause (a) of sub -section (1) and sub -section (1A) of Sec. 34. The argument advanced in that case was that Sec. 23A before the amendment was merely a computation section, but after amendment it had become an assessment section. It was also argued that Sec. 23A after the amendment was a self -contained Sec. imposing liability to super -tax, and also providing for its computation and determination, and that when an order under the amended Sec. 23A was made it was an order determining the amount of super -tax payable by the company under that section. It was held that an order under Sec. 23A after its amendment by the Finance Act, 1955, was an order of assessment to which the period of limitation prescribed in Sec. 34(3) applied, and such an order could not, therefore, be made after the expiration of a period of four years from the end of the assessment year. In that view of the matter appropriate writs were issued for relief to the petitioner in that case. Relying upon this decision, Mr. Sen argued that the decision in this case was an authority for the proposition that an order under Sec. 23A of the Act could be made only if the bar imposed by Sec. 34(3) did not apply. But in this case, Mr. Sen argued, the assessment was clearly proposed to be made for a period beyond the period prescribed by Sec. 34(3) of the Act, and therefore the order could not be made, and the impugned notice to show cause also could not be issued. The next case relied upon by Mr. Sen is the decision of the Supreme Court in Commissioner of Income Tax v/s. Navinchandra Mafatlal, in which it was held that an assessment order could not be made under Sec. 23A of the Act (as it stood before the amendment) as that Sec. did not provide for any assessment being made, and that the assessment of a shareholder consequent on an order of distribution made under Sec. 23A, had to be made under the other provisions of the Act including Sec. 34. The Supreme Court, relying upon its earlier decision in Sardar Baldev Singh v/s. Commissioner of Income Tax, held that an assessment could not be made under Sec. 23A of the Act (as it stood before the amendment). Mr. Sen next relied upon the decision of the Supreme Court in Sardar Baldev Singh v/s. Commissioner of Income Tax. The next case relied upon by Mr. Sen was another decision of the Supreme Court in C.A. Abraham v/s. Income Tax Officer. Reliance was placed on this case for the observations of the Supreme Court that the expression "assessment" used in Chapter IV of the Act did not merely mean computation of income and that this expression was used in the Act with different connotations. I shall, however, refer to this decision in another connection, later in this judgment. ;