TMI Blog1962 (2) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the Income-tax Officer in treating the registered firm as the owner of the shares in respect of the entire number of 40 shares. It was not this initial and fundamental error that was sought to be rectified by the proceedings under section 35 ; but the removal of an anomaly in that error which continued to be affirmed ; in other words the object of the proceedings under section 35 was to carry out to its logical conclusion the error which had been committed in the order of assessment dated October 12, 1955, passed after invoking the provisions of section 34. We consider the submission of learned counsel for the respondents that the Income-tax Officer had jurisdiction under section 35 to rectify errors but not to effect merely readj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny disclosed a net profit of Rs. 1,09,165. The company, however, did not declare any dividend out of these profits but paid income-tax and super-tax thereon. After the merger of the Phaltan State in the Indian Union and the extension of the provisions of the Indian Income-tax Act thereto, the Income-tax Officer, who had jurisdiction over the assessment of the company, issued notice to it under section 34 of the Indian Income-tax Act and acting under the provisions of section 23A thereof directed that the undistributed assessable income of the company which amounted to Rs. 68,228 should be deemed to have been distributed as dividend among the shareholders as on the date of the general body meeting of the company (i.e., on March 11, 1946). Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the income the net dividend without being grossed up, while at the same time allowing credit for the tax deemed to have been paid thereon. He averred that this was a mistake apparent from the records and stated that he intended to rectify the same under section 35 of the Income-tax Act. The four assessees objected to the rectification, but almost the entirety of the grounds on which the objection was based related to the legality of the original assessment and the assessees desired that if any rectification was to be made it must be in relation to those items and not in regard to that for which notice had been served. The Income-tax Officer by his order dated October 12, 1955, rectified the assessment by grossing up the newly added di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration of the correctness of the construction adopted by the High Court of section 16(2) of the Income-tax Act. This court has held in Messrs. Howrah Trading Co., Ltd. v. Commissioner of Income-tax, that it is only the registered shareholder who is entitled to the benefit of the credit for tax paid by the company under section 18(5) as well as the corresponding grossing up under section 16(2). On that basis the only persons who were entitled to be treated as shareholders to whom the provisions of sections 16(2) and i8(5) of the Income-tax Act were attracted were the three partners in whose names the forty shares stood registered, as detailed earlier. An error had therefore been committed by the Income-tax Officer in treating the registe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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