Law: Income Tax Act, 1922

Section: 34(1)(b)

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1)(b), read with section 23A and 34(3), of the Indian Income-tax Act, 1922] - Income escaping assessment - General - Assessment year 1951-52 - As a result of order under section 23A of 1922 Act, share of dividend was deemed to have been distributed to shareholders of company, including assessee - Initial assessment inclusive of dividend was completed on 8-7-1953 - Subsequently, ITO issued notice under section 34 of 1922 Act on 28-3-1956 - Whether, since notice under section 34(1)(b) was served on assessee beyond period of four years from close of relevant assessment year, proceedings under section 34 were not validly initiated and assessment was to be held to be without jurisdiction - Held, yes FACTS As a result of an order, under section 23-A the share of dividend was deemed to have been distributed to the shareholders of the company, including the assessee in the instant case. The date of the general meeting relevant to this deemed distribution being December, 1950, the proportionate share of the dividend became assessable by inclusion in the total income of the assessee for the assessment year 1951-52. The initial assessment inclusive of this dividend had been completed on 8-7-1953. The ITO issued a notice under section 34 on 28-3-1956. The objection taken by the assessee to the assessment on the ground that he had not been served before the end of four years following the close of the assessment year, was overruled by the ITO. On appeal, the AAC set aside the assessment and on further appeal, Tribunal confirmed the order of the AAC. On reference : HELD It is well settled that section 23A is only a machinery provision and that any assessment of the shareholder of a company to whom a dividend is deemed to have been distributed has to be assessed or reassessed in relation to that amount only by resort to sections 23 and 34 as the case may be. Accordingly after an order had been made under section 23A, in cases where the original assessment of the shareholder has already been made under section 23, there has to be a re-assessment only after the service of notice under section 34. Under section…

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