COMMISSIONER OF INCOME-TAX, BOMBAY vs. ROBERT J. SAS

CIVIL APPEAL No. 136/1962Supreme Court1962 INSC 32916 November 1962Bench: 5 JudgesAuthor: S.K. DAS, J.L. KAPUR, A.K. SARKAR, M. HIDAYATULLAH, RAGHUBAR DAYAL8 pages
AI SummaryDismissed

What were the facts?

The assessee, Robert J. Sas, was one of three shareholders in A.C.E.C. Private (India) Limited. The company made profits in the calendar year 1947, with the accounting year ending December 31, 1948, and the relevant assessment year being 1949-50. Despite profits, no dividend was declared at the shareholders' meeting on December 4, 1948. The Income-tax Officer passed an order under Section 23A(1) of the Income-tax Act on March 29, 1954, deeming the company's undistributed income as dividends distributed to shareholders. Notices under Section 34 of the Act were served on the shareholders, including the assessee, on April 1, 1954. The assessee contended that these notices were served beyond the four-year limitation period prescribed by Section 34(1)(b). The Tribunal accepted this plea, and the High Court, on reference, also ruled in favour of the assessee.

What did the Supreme Court hold?

The Supreme Court held that the first question regarding the necessity of Section 34 action was no longer surviving for decision, as it was previously held that assessment under Section 23A could only be made under Section 34. Therefore, the sole surviving question was whether the notice served on April 1, 1954, was out of time. The Court affirmed the High Court's decision that the notice was indeed out of time. It reasoned that the deemed distribution of dividend under Section 23A(1) occurred on the date of the general meeting (December 4, 1948), placing it within the accounting year 1948 and assessment year 1949-50. The limitation period under Section 34(1)(b) is four years from the end of the assessment year. Therefore, the notice served on April 1, 1954, was beyond this four-year period. The Court rejected the revenue's argument that Section 23A would become unworkable, stating that the assessment section (Section 34) prescribing a time limit does not invalidate Section 23A. The appeals were dismissed.

What were the issues?

1. Whether the Income-tax Officer was required to initiate action under Section 34 of the Indian Income-tax Act to tax the deemed income distributed by virtue of an order under Section 23A(1) of the Act. (Mixed law and fact, concerning Sections 23A(1) and 34). 2. If the answer to question 1 is affirmative, whether the notice served on April 1, 1954, was out of time, considering the observations in Navincoondra Majatlal v. Commissioner of Income-tax, Bombay City I (1955) 27 I.T.R. 245. (Mixed law and fact, concerning Section 34(1)(b)). Assessee's Arguments: The notices were served beyond the four-year period allowed by Section 34(1)(b), rendering the Income-tax Officer without jurisdiction. Revenue's Arguments: (1) There was no limitation prescribed for orders under Section 23A, and applying Section 34(1)(b) would make Section 23A unworkable. (2) The accounting year should be considered 1949 and the assessment year 1950-51, making the notice served within four years of the end of that year. (3) Proviso (1) to sub-section (3) of Section 34 applied, allowing assessment within one year of notice service if the notice was issued within the Section 34(1)(b) period.

Which sections of the Income-tax Act were involved?

Section 23A,Section 34,Section 66(1),Section 34(1)(b),Section 23A(1),Section 34(3)

AI-generated summary — verify with the full judgment below

2 S.C.R. SUPREME COURT REPORTS 209 Cadre' and the 'Provincialised Cadre' in the matter of promotion to the higher scale must be regarded as invalid. The appeal must therefore fail. BY COURT : In view of the opinion of the majority, the appeal ,is allowed and the order of the High Court striking down r. 2(d) and (e) and r. 3 in so far as it relates to promotions is set aside.

There will 'be no order as to costs in this appeal. COMMISSIONER OF· INCOME-TAX, BOMBAY v. ROBERT J. SAS (S. K. DAS, J. L. KAPUR, A. K. SARKAR; M. HIDAYATULLAH and RAOHUBAR DAYAL, JJ.)

Inwme Tax-Notico of ·as•umaent-Limitalicm for- Income deemed lo be distributed as dfoidtnd-Indian I~z Act, 1922 (11of1922), 88. 23 A(l), 34, The asscssccs were the three sharcholden of a private company. The company made profits in the calendar year 194 7, but did not declare any dividend at the shareholders mreting· held on December 4, 1948. The Income-tax Officer passed an 01 der under s. 23 A (I) of the Income· tax Act whereby the income of the company was dccrncd to have been divided amongst the· three shareholders. He issued notices to the as'ICSSCCS which were served on them on April 1, 1954. The

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