TMI Blog1962 (8) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... gs under section 34 of the Act in respect of the deemed distribution against the assessee, and these notices were issued even before the dates on which orders under section 23A were made, that is to say, in respect of the assessment year 1949-50 of the assessee, the notice was issued to him on 17th March, 1953, and in respect of the assessment year 1950-51, the notice was issued on 28th March, 1955. Both of these dates were anterior to the actual dates on which the orders under section 23A were passed. The section 34 assessments of the assessee were completed on 20th February, 1954, and 25th July, 1956, respectively, for the two years. Both the company and the assessee appealed. The Appellate Assistant Commissioner set aside the orders under section 23A on the ground of a defect in the proceedings. The assessee's appeals were also allowed by the Appellate Assistant Commissioner, apparently for the reason that on the date on which the notice was issued under section 34, there was no information upon which any escape of income could be founded. Following the setting aside of the orders under section 23A on the company, the Income-tax Officer made orders afresh after observing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further that there was no necessity for the issue of any direction by the Appellate Assistant Commissioner, his direction being based only upon his interpretation of when the deemed income in the hands of the shareholder became assessable which, in the light of decided authority, was erroneous. For these reasons, the Tribunal decided that the proceedings under section 34 were taken beyond the time-limit prescribed and set aside the assessments. On the application of the department, the following question stands referred to us: Whether, on the facts and circumstances of the case, the reassessment made on 11th February, 1957, is valid in law? We may set out a further fact. In T.C. No. 35 of 1958 (Since reported as Gobald Motor Service Ltd. v. Commissioner of Income-tax [1963] 47 I.T.R. 734), which was a reference arising out of the orders under section 23A of the Act, this court held that the order was not valid for the assessment year 1947-48, the validity of the order for 1949-50 was upheld. Learned counsel for the department concedes that in view of the findings of this court that the order of the company was not valid for the assessment year 1947-48, it should foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessability of the deemed dividend in the hands of the shareholder arose on the date on which a valid order under section 23A had been made upon the company, that is, on the 25th June, 1956. It was from this date that he computed the time-limit provided under section 34(1)(b) and observed further that this time-limit of four years together with one year from the completion of the proceedings, making a total of five years, would be available up to 31st March, 1961. The department takes its stand upon this order of the Appellate Assistant Commissioner and contends that the second proviso to section 34(3) of the Act operates to overcome the bar of limitation and that if the Income-tax Officer commences proceedings under section 34 of the Act, in order to give effect to any direction contained in an order under section 34, the bar of limitation is wholly removed. That is the question which we have to consider. Before doing so, we may remove the misapprehension that appears to exist in the order made by the Appellate Assistant Commissioner that the period of limitation commences from the date on which the order under section 23A was made upon the company. It is conceded by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, profits or gains were first assessable: Provided that where a notice under clause (b) of sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if at the time of the assessment or reassessment the four years aforesaid have already elapsed: Provided further that nothing contained in this section limiting the time within which any action may be taken or any order of assessment or reassessment may be made shall apply...or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31... It is this later proviso that is relied on by the learned counsel for the department in support of his contention that in a case where the Income-tax Officer purports to give effect to a direction of the appellate authority made under section 31, there is no bar of limitation whatsoever. It is the correctness of this contention that calls for examination. It seems to us that this contention can hardly be acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an erroneous conception of the date on which the income became assessable and in the full knowledge that any further proceedings would be barred under section 34 could validly be construed as a proper direction made under section 34 of the Act. Cases have no doubt arisen in which the giving of a direction in the appellate order has validly served to overcome the bar of limitation. For instance, in W.P. Nos. 225 and 1007 of 1958 (Since reported as A.S. Khader Ismail v. Income-tax Officer, Salem [1963] 47 I.T.R. 16), it was found by the appellate authority that an amount of income which was assessed in the assessment year 1945-46 really accrued in the accounting year relevant to the earlier assessment year and the appellate authority directed the Income-tax Officer to consider the assessment of the assessee for that earlier assessment year. Pursuant to this direction, the Income-tax Officer initiated proceedings under section 34 seeking to assess the income for the earlier assessment year. By that date, however, the period of four years from the end of that assessment year had elapsed. The question arose whether the second proviso to section 34(3) operated to save the bar of limita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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