1984 (8) TMI 44 - HC - Income Tax

1953 (9) TMI 19 - HC

Issues Involved:
1. Justification of the Tribunal's upholding of the Income-tax Officer's order u/s 201(1) of the Income-tax Act, 1961.
2. Validity of the Income-tax Officer's letter dated July 28, 1962, as a certificate u/s 197(3) of the Income-tax Act, 1961.
3. Appropriateness of the company's reliance on the Income-tax Officer's letter dated July 28, 1962.
4. Applicability of the Rajasthan High Court's decision for assessment years 1960-61 and 1961-62 to the assessment year 1962-63.
5. Validity of issuing a notice u/s 156 to effectuate the order u/s 201(1).
6. Authority of the Income-tax Officer to pass the order u/s 201(1) despite issuing a statutory certificate u/s 197(3).
7. Timeliness of the Income-tax Officer's order under section 201(1) after a lapse of about 6 years from the dividend distribution date.

Summary:

Issue 1: Justification of the Tribunal's upholding of the Income-tax Officer's order u/s 201(1)
The Tribunal upheld the Income-tax Officer's order u/s 201(1) of the Income-tax Act, 1961, declaring the assessee as an assessee in default for short deduction of tax on dividends. The Tribunal found that the Income-tax Officer's letter dated July 28, 1962, could not be considered a valid certificate under section 197(3) of the Act.

Issue 2: Validity of the Income-tax Officer's letter dated July 28, 1962, as a certificate u/s 197(3)
The Tribunal held that the letter dated July 28, 1962, from the Income-tax Officer was not a certificate as contemplated by section 197(3) of the Income-tax Act, 1961. The Tribunal noted that the Income-tax Officer did not have the necessary information to determine the appropriate proportion of the dividend on which tax was not payable.

Issue 3: Appropriateness of the company's reliance on the Income-tax Officer's letter dated July 28, 1962
The Tribunal concluded that the company should not have acted on the basis of the Income-tax Officer's letter dated July 28, 1962, as it was not a valid certificate under section 197(3) of the Act. The Tribunal found that the letter did not absolve the company from its legal liability under section 194 of the Act.

Issue 4: Applicability of the Rajasthan High Court's decision for assessment years 1960-61 and 1961-62 to the assessment year 1962-63
The Tribunal distinguished the present case from the earlier decision of the Rajasthan High Court regarding assessment years 1960-61 and 1961-62. The Tribunal noted that the facts and the law applicable to the assessment year 1962-63 were different, and therefore, the earlier decision did not govern the present case.

Issue 5: Validity of issuing a notice u/s 156 to effectuate the order u/s 201(1)
The Tribunal held that the notice under section 156 of the Income-tax Act, 1961, could validly be issued to give effect to the order under section 201(1) of the Act.

Issue 6: Authority of the Income-tax Officer to pass the order u/s 201(1) despite issuing a statutory certificate u/s 197(3)
The Tribunal found that the Income-tax Officer could pass the order under section 201(1) of the Income-tax Act, 1961, even though he had issued a letter that the company considered a statutory certificate under section 197(3) of the Act.

Issue 7: Timeliness of the Income-tax Officer's order under section 201(1) after a lapse of about 6 years from the dividend distribution date
The Tribunal upheld the order of the Income-tax Officer despite it being passed after a lapse of about 6 years from the date of the distribution of the dividends.

Conclusion:
The High Court disagreed with the Tribunal's findings and held that the letter dated July 28, 1962, must be regarded as a certificate under section 197(3) of the Income-tax Act, 1961. Consequently, the action taken by the Income-tax Officer under section 201 was improper. The answers to questions Nos. 1, 2, 3, and 4 were in the negative, in favor of the assessee and against the Revenue. Questions Nos. 5, 6, and 7 were returned unanswered.

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