- (1.) DIPAK KUMAR SEN, J. 1. The facts found or admitted and the proceedings leading up to these references are, inter alia, that Sohanlal Jajodia, the assessee, was assessed to income-tax for the asst. yr. 1955- 56, the accounting year ending some time in April, 1955. The said assessment was reopened by a notice dated April 10, 1963. The assessee was a partner of Madanlal Sohanlal & Co., a registered firm. In 1946, the firm had purchased the entire shares of M/s Hall and Anderson (P.) Ltd., a private limited company. Thereafter, a public limited company in the same name, namely, Hall & Anderson Ltd., was floated and the assets of the private limited company were sold to the public limited company for Rs. 80 lakhs. The said amount was received by the firm on behalf of the private limited company. In the balance-sheet of the private limited company as on March 31, 1947, the said amount of Rs. 80 lakhs was shown " as an advance recoverable in cash from a director ".
(2.) IN the assessment, the ITO found that on the date of the transfer of the shares of the private limited company to the public limited company, the former had accumulated profits to the extent of Rs. 12,26,206 consisting of balances in the reserve and the profit and loss accounts. As all the shares of the private limited company had been acquired by the firm which was the only shareholder of the company, the ITO held that the firm should be regarded as a director in respect of the said advance or loan of Rs. 80 lakhs and as the said amount included the accumulated profits of Rs. 12,26,206, the latter amount became a deemed dividend under S. 2(22)(e) of the IT Act, 1961, and became assessable in the hands of the firm as deemed dividend. It was recorded that the said amount has already been so assessed. The ITO held further that as the assessee was a partner of the firm and a director of the private limited company, the said amount should also be treated as deemed dividend in his bands and assessed as such as a protective measure. Being aggrieved, the assessee preferred an appeal before the AAC. The AAC held that as he had already held the amount to be assessable in the hands of the firm, the assessment of the same amount in the bands of the assessee was not justified. He deleted the addition. Being aggrieved, the Revenue preferred a further appeal before the Tribunal. The Tribunal found that as the assessment of the assessee had been reopened under S. 147 of the IT Act, 1961, by a notice under S. 148 of the said Act, the reassessment would be governed both in respect of the procedure and substantive law by the later Act of 1961. The Tribunal found that as there was no provision corresponding to S. 12(1B) of the Indian IT Act, 1922, in the IT Act, 1961, the said amount could not be treated as deemed dividend in the hands of the assessee.
(3.) THE Tribunal found further that it appeared from the assessment order that the ITO had proceeded on the basis of S. 2(22)(e) of the IT Act, 1961. Inasmuch as the advance in the instant case was made during the previous year relevant to the asst. yr. 1947- 48, the assessment could not have been made under S. 2(22)(e).;