Sudhindra Mohan Guha, J. - (1.) This reference under Section 256(1) of the I.T. Act, 1961, at the instance of the assessee relates to the assessment year 1966-67, the relevant previous year being the one ended on June 30, 1965.
(2.) The assessee is a company to which the provisions of Section 104 of the I.T. Act, 1961, are applicable. The assessee was assessed to tax on a total income of Rs. 4,31,200 on which a tax of Rs. 2,14,661 was levied. After deduction of tax, the balance of assessed income came to Rs. 2/16,539. The assessee had not declared any dividend in respect of the relevant previous year within 12 months immediately following the expiry of the previous year. In reply to the notice issued by the ITO the assessee pleaded that, in view of the past years' tax liability of Rs. 6,58,592, there was hardly any scope for them to distribute any dividends and, therefore, the liability under Section 104 to pay additional tax was not attracted.
(3.) The plea, however, was not accepted by the ITO. According to him there was enough money to meet all the tax liabilities and also the tax liability of the year in question. Accordingly, the ITO levied an additional tax of Rs. 50,565.;