Commissioner of Income-tax Vs. Luxmi Ideal Investment and Finance Corporation Pvt. Ltd. - Court Judgment

Deb, J.

1. The following questions arc involved in this reference under Section 66(1) of the Indian Income-tax Act, 1922 :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer had no jurisdiction to invoke Section 23A of the Indian Income-tax Act, 1922, for the second time?

2. If the answer to question No. (1) be in the negative, then whether the Tribunal was right in holding that, the order under Section 23A of the said Act relating to the assessment year 1956-57 was not justified on merits ?'

2. The assessee is a private limited company. In course of proceedings under Section 23A of the Indian Income-tax Act, 1922, for the assessment years 1955-56 to 1961-62, it was found by the Income-tax Officer that, except for the assessment years 1955-56 and 1958-59, the dividends declaredby the assessee were more than 60 per cent. but less than 90 per cent. In terms of a discussion between the Income-tax Officer and the assessee's representative the assessee wrote a letter to the Income-tax Officer stating therein that Hie assessee would declare additional dividends for the assessment years 1955-56 and 1958-59, respectively, and the proceedings in respect of the other years would be dropped which was confirmed by the Income-tax Officcr in his letter dated December 10, 1962, in the following terms:

'The dividends proposed as per your letter under reference for declaration on 14th December, 1962, in respect of the assessment year 1955-56 and the year 1958-59 arc in order. Please confirm that.....the amountsof dividends as proposed were actually declared.....

As regards the question of applicability of Section 104 of the new Act to the assessment year 1962-63, this is receiving my attention separately.'

3. The dividends for those two years were declared by the assosscc who informed the Income-tax Officer about it. After two years, the successor Income-tax Officer, while looking into the records for the assessment year 1962-63, formed an opinion that the business carried on by the assessee 'consisted wholly or mainly in the dealing in or holding of investments' and, therefore, he came to the conclusion that the statutory percentages applicable were 100% for the assessment years 1955-56 to 1960-61 and 90% for the assessment year 1961-62 and started the proceedings for the second time under Section 23A of the Act for these years and passed an order against the assessee.

4. The appeals filed by the assessee were dismissed by the Appellate Assistant Commissioner, but the second appeals filed by the assessee are allowed by the Tribunal. The bindings of the Tribunal are that in the earlier proceedings the Income-tax Officer was satisfied that the statutory percentage applicable was 90% and the proceedings for all those years were dropped by him after he was satisfied that the assessee had declared the dividends for the years 1955-56 and 1958-59,

5. It has been contended before us by Mr. B. L. Pal, the learned counsel for the revenue, that Section 23A of the Act does not impose any limitation on the power of the Income-tax Officer, not to speak of his successor, to take successive actions and to pass orders as many times as he may like notwithstanding any earlier order passed by him, and, therefore, the Tribunal was wrong in holding that the successor Income-tax Officer had no jurisdiction to invoke Section 23A of the Act for the second time.

6. But the question is not whether there is any limitation on the power of the Income-tax Officer or his successor but whether they have the power to act more than once under this section. This section is a penal provisionand it does not even indicate that they have such powers. Further, Section 23A says that the Income-tax Officer shall make 'an order' and not that he shall make as many orders as he likes. It is elementary that the Income-tax Officer is bound to drop the proceedings where no super-tax is payable by the assessee and in this case it has been done by the Income-tax Officer.

7. Further, the Indian Income-tax Act, 1922, expressly provides for initiation of subsequent proceeding in certain matters, to wit Section 34 of the Act. There is no such provision in Section 23A of the Act and, therefore, if an order passed by the Income-tax Officer under this section is prejudicial to the interests of the revenue it can be rectified only by the Commissioner of Income-tax under Section 33B of the Act and, hence, it must be held that no such power is intended to he given by the legislature to the Income-tax Officer or his successor under Section 23A of the Act.

8. We, therefore, reject the submissions of Mr. Pal. Accordingly, question No. 2 does not call for any answer. We return our answer only to question No. 1 in the affirmative and in favour of the assessee. There will be no order as to costs.

Dipak Kumar Sen, J.

9. I agree.