SEN, J. - (1.) THE Tribunal has referred the following two questions of law under s. 256(2) of the IT Act, 1961 ('the Act') to this Court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified to hold the order dt. 17th Oct., 1977 under s. 13 of the Companies (Profits) Surtax Act, 1964 rectifying the assessment was of doubtful validity ? 2. It the answer to question No. 1 is in the negative, whether the Tribunal was justified to uphold the decision of the CIT(A) in cancelling the order dt. 17th Oct., 1977 under s. 13 of the Companies (Profits) Surtax Act, 1964 for the asst. yr. 1972-73 ?"
(2.) THE relevant assessment year is the asst. yr. 1972-73, the accounting period ends on 30th June. The ITO originally completed the assessment on 18th July, 1975 under s. 6(2) of the Act. Later purporting to act under s. 13 of the Companies (Profits) Surtax Act, 1964, he recomputed the capital on 17th Oct., 1977 withdrawing from the capital base a sum of Rs. 16,50,000, being the amount set apart for dividends out of the general reserves. The previous year of the assessee commenced on 1st July, 1970 and ended on 30th June, 1971. The assessee-company had general reserves of Rs. 32,99,920. A dividend of Rs. 16,50,000 was declared on 16th November 1970 for the year ended 30th June, 1970. The ITO held : "........that the declaration of dividend on 16th Nov., 1970 dated back to the first day of the relevant previous year namely 1st July, 1970 and accordingly, the said sum of Rs. 16,50,000 was not a part of the reserves and hence not includible in the capital base."
(3.) IN appeal, the CIT(A) held that r. 1A introduced by the Finance Act, 1976 had no application to the present case and, hence, the rectification was not called for.;