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TMI Blog1968 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ility for that year at Rs. 26,275. On the view that the assessee failed to declare 60% of the balance as dividend, the Third Additional Income-tax Officer, Coimbatore, applied the provisions of section 23A and directed payment of Rs. 9,155.28 as tax on the undistributed profits. In doing so, he did not accept the statement of the assessee in reply to a notice given by him under section 23A that because the company was running at a loss ever since its incorporation till March 31, 1956, the provisions of section 23A should not be applied. The figures presented by the assessee before the Income-tax Officer exhibited that the company had earned a net profit of Rs. 93,488 for the year ended March 31, 1957, and an accumulated loss of Rs. 74,658, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the provisions of section 23A are applicable to the assessee's case for the assessment year 1957-58? " We are inclined to think that the Tribunal has misdirected itself on the principles that should apply in applying section 23A and, further, a reading of its order shows that it failed to have a precise appreciation of the facts, particularly as to the availability of profits in the assessment year for distribution as dividend. The Tribunal purported to rely on Sir Kasturchand Ltd. v. Commissioner of Income-tax and found that the only consideration that should weigh with Income-tax Officer in applying section 23A is as regards the smallness of the profits made in the previous year or the loss incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant year but also to all other relevant circumstances. " The Supreme Court in that case did not find it possible to lay down any concrete tests of reasonableness in the context and pointed out that the only guidance was the Income-tax Officer's capacity to put himself in the position of a prudent business man or the director of a company and his sympathetic and objective approach to the difficult problem that arises in each case. It is clear, therefore, that the Tribunal in this case took too narrow a view of the factors that ought to be taken into consideration in applying section 23A. Availability of profits in the year in question, out of which dividends could be declared, is an important consideration that should be investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to the books and the assessment orders for the several earlier years and their resulting position, we are of the view that it has not precisely applied its mind to the accurate position. For instance, in paragraph 16 of its order, the Tribunal makes this statement : " In working out a loss of Rs. 93,084 the assessee has taken the net figure instead of showing the income of that year. This gives an altogether incorrect picture. " This shows that the Tribunal has not properly appreciated the facts. We answer the reference in favour of the assessee which means the Tribunal will have to dispose of the appeal afresh in the light of the observations contained in this judgment and according to law. There will be no order as to c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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