Law: Income Tax Act, 1922

Section: 34(3)

Section 148, read with sections 104 and 143 of the Income-tax Act, 1961 [Corresponding to section 34(1)(b), read with sections 23A and section 34(3), of the Indian Income-tax Act, 1922] - Income escaping assessment - Time-limit for issuance of notice - Assessment years 1947-48 and 1948-49 - ITO passed order under section 23A on 12-12-1951 as result of which certain sums of dividends were deemed to have been distributed to shareholders including assessee for assessment years in question - In order to give effect order under section 23A notices were served on assessee under section 34, read with section 22(2) on 30-3-1955 to submit his returns for those years - Whether limitation of four years prescribed by section 34(3) for issuing notices to shareholders under section 34(1)(b) runs from end of relevant assessment year and not from date on which order under section 23A was made and, hence, impugned notices, in instant case, were barred by limitation and invalid - Held, yes FACTS The assessee held some shares in a company and on 12-12-1951, the ITO, who had jurisdiction to make assessment on the company, passed an order under section 23A as the result of which dividends of Rs. 3,92,097 and Rs. 4,98,829 were deemed to have been distributed to the assessee for the assessment years 1947-48 and 1948-49. Thereafter in order to give effect to order under section 23A, notices were served on the assessee on 30-3-1955, for making the assessment on the assessee under section 34 read with section 22(2) calling on him to submit his returns of total income for each of the two assessment year. The question arose in the subsequent proceedings was whether the notices under section 34(1)(b) had been issued within time and the Tribunal following the decision of the Bombay High Court in CIT v. Robert J. Sas [1958] 34 ITR 222 held that the notices had been issue beyond the period of limitation and, therefore, annulled the assessments. On reference: HELD The Madras High Court in S. Seethai Achi v. ITO [1960] 40 ITR 170, has taken the view that in order to given effect to an order under section 23A the department can only take action under section 34(1)(b ) and that the notice under…

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