Pillani Investment Corporation Ltd. Vs.
I.T.O.'A'ward, Calcutta & ANR  INSC 321 (23 November 1971)
SIKRI, S.M. (CJ) SIKRI, S.M. (CJ) REDDY, P.
JAGANMOHAN DUA, I.D.
CITATION: 1972 AIR 236 1972 SCR (2) 502 1972
SCC (1) 122
F 1989 SC1298 (7)
Income-tax Act, 1922, ss. 23A and 34(3)-S.
34(3) whether applicable to an order under s. 23A.
Supreme Court-Review of previous decision
The appellant company objected to an order
tinder s. 23A sought to be passed against it by the Income-tax Officer on the
ground that it was an order of assessment or re- assessment within the meaning
of s. 34(3) of the Act and barred by time. The writ petition in the High Court
having failed the company by special leave appealed to this Court.
A plea was made for reviewing the judgment in
Parikh's case in which this Court had held that s. 34(3) was not applicable to
an order tinder s. 23A.
HELD : The plea for review of Parikh's case
must be rejected because : (i) The point was not likely to arise under the
Income-tax Act, 1961 as s. 106 thereof provides a period of limitation for an
order such as the one in question; (ii) It was not shown that some vital point
was not considered or that the judgment was clearly erroneous so as to justify
review on the principles laid down in Keshav Mills; (iii) The words 'after the
expiry of four years from the end of the year in which the income. profits and
gains were first assessable' in s. 34(3) are not apposite to cover the order
made under s. 23A as it stood before its amendment by the Finance Act It of
1957. An order tinder s. 23A does not assess income. profits and gains as such
but levies super-tax on a certain portion of the undistributed profits and
gains. The taxable event is non-distribution of some part of profits which have
already been assessed. They were not only first assessable but assessed. It
would be odd to start the beginning ,of the period of limitation from the time
the profits were actually first assessed. [504 H-505 F] The appeal must
accordingly be dismissed.
M. M. Parikh v. Navanagar Transport &
Industries, 63 I.T.R. 663. reaffirmed.
Keshav Mills v. C.I.T. Bombay ,  2
S.C.R. 908, 921, applied.
Navanagar & Industries v. Ltd. v. I.T.O.
Special Investigation Circle, Ahmedabad, 54 I.T.R. 271, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 7 of 1968.
Appeal by Special leave from the judgment and
order dated February 23, 1967 of the Calcutta High Court in Appeal No. 195 of
M. C. Chagla, N. R. Khaitan, Lila Seth, 0. P.
Khaitan and B. P. Maheshewari, for the appellant.
503 B. Sen, A, N. Kirpal, R. N. Sachthey and
B. D. Sharma, for the respondents.
M. C. Setalvad, T. .4. Ramchandran and D. N.
Gupta for intervener No. 1.
P. C. Bharati, J. B. Dadachanji, 0. C. Mathur
and Ravinder Narain, for intervener No. 2.
The Judgment of the Court was delivered by
Sikri C.J. This appeal by special leave is directed against the judgment of the
High Court of Calcutta (D. N. Sinha, C.J., and A. K. Mukerjee, J.) dismissing the
appeal of the appellants from the judgment of B. C. Mitra, J., dismissing an
application under Art. 226 of the Constitution made by the appellant. The
Division Bench followed the decision of this Court in M. M. Parikh v. Navanagar
Transport & Industries(1).
The order impugned in the application is
dated May 13, 1964.
By this order the Income-tax Officer stated
that "on scrutiny of the records for the year of account relevant to the
assessment year 1955-56 it has been noticed that the Company did not declare
any dividends at its general meeting, even though there were sufficient profits
available for doing so and that there were no losses incurred in the earlier
years." He also noticed that "during the relevant period the Company
was one in which the public were not substantially interested in terms of
sub-section 9 of section 23A." He concluded that "the provisions of
Section 23A are, therefore, applicable and the Company is liable to pay
additional Super-Tax as per provisions of law." The Income-tax Officer
thereupon called upon the Company to show cause in writing why an order under
section 23A be not passed. The appellant company protested that an order under
S. 23A would be an order of assessment or reassessment within S. 34(3) of the
Indian Income Tax Act, 1922, and, therefore, would be barred.
A Bench of five Judges gave special leave. A
Division Bench of this Court (Hegde and Grover, JJ.) has referred the case to a
In M. M. Parikh v. Navanagar Transport &
Industries (1) it was held that "an order under section 23A of the Indian
Income-tax Act, 1922, as amended by the Finance Acts of 1955 and 1 957, made by
the Income-tax Officer directing payment of additional super-tax is not an
order of assessment within the meaning of s. 34(3) of the Act, and to such an
order the period of limitation prescribed under section 34(3) does not
apply." (1) 63 I.T.R. 663.
504 The learned counsel for the appellant,
Mr. Chagla, said that the judgment in M. M. Parikh's(1) case was clearly
erroneous and it should be overruled and relief granted to his client.
Mr. B. Sen, learned counsel for the
respondents, contended that this Court should decline to review its earlier
judgment because it cannot be said that the earlier decision was clearly
erroneous. He drew our attention to the judgment of a Bench of seven Judges in
Keshav Mills v. Commissioner of Income-tax, Bombay(2) where Gajendragadkar,
C.J., speaking for the Court observed at page 921':
"When this Court decides questions of
law, its decisions are, under art. 141, binding on all courts within the
territory of India, and so, it must be the constant endeavor and concern of
this Court to introduce and maintain an element of certainty and continuity in
the interpretation of law in the country.
Frequent exercise by this Court of its power
to review its earlier decisions on the ground that the view pressed before it
later appears to the Court to be more reasonable, may incidentally tend to make
law uncertain and introduce confusion which must be consistently avoided. This
is not to say that if on a subsequent occasion, the Court is satisfied that its
earlier decision was clearly erroneous, it should hesitate to correct the
error; but before a previous decision is pronounced to be plainly erroneous,
the Court must be satisfied with a fair amount of unanimity amongst its members
that a revision of the said view is fully justified." Gajendragadkar,
C.J., pointed out, among other considerations, the following considerations to
be borne in mind :
"On the earlier occasion, did some
patent aspects of the question remain unnoticed, or was the attention of the
Court not drawn to any relevant and material statutory provision, or was any
previous decision of this Court bearing on the point not noticed?" These
observations are binding on us and, therefore we must consider the arguments of
Mr. Chagla in the light of these observations.
We may first point out that this point is not
likely to arise under the Income-tax Act, 1961, as s. 106 thereof specifically
provides a period of limitation regarding orders under s. 104, which is
equivalent to s. 23A of the Income-tax Act, 1922. Mr. Chagla was not able to
show us that any vital point was not considered. He has not been able to
convince us that the judgment (1) 63 I.T.R. 663.
(2)  2 S.C.R, 908, 921.
505 is clearly erroneous. Accordingly we must
decline to review the case.
We may, however, add that one point which was
not noticed by this Court in M. M. Parikh's(1) case or in the judgment of the
High Court of Gujarat, appealed from in that case (Nava- nagar & Industries
Ltd. v. Income-tax Officer, Special Investigation Circle, Ahmedabad ) (1) tends
to show that the case was correctly decided. It seems to us that the words
"after the expiry of four years from the end of the year in which the
income, profits or gains were first assessable" in S. 34(3) are not really
apposite to cover the order made under s. 23A, as it stood before its amendment
by the Finance Act 11 of, 1957. Section 34(3), without the proviso, at the
relevant time read as follows :
"34(3) No order of assessment or re-
assessment, other than an order of assessment under section 23 to which clause
(c) of subsection (1) of section 28 applies or an order of assessment or
reassessment in cases falling within clause (a) of sub-section (IA) of this
section shall be made after the expiry of four years from the end of the year
in which the income,, profits or gains were first assessable." In our view
an order under S. 23A does not assess income, profits or gains as such but what
it does is to levy super tax on a certain portion of the undistributed profits
and gains. The section gives indications how this amount is arrived at and it
is not necessary to deal with those matters. Further, this order is made
following the expiry of the previous year as the Income-tax Officer has to take
into consideration the dividend distributed within 12 months following the
expiry of the previous year the profits and gains of which are being
considered. In other words the taxable event is non-distribution of some part
of profits, which have already been assessed. They were not only first
assessable but assessed. It would be odd to start the beginning of the
limitation period from the time when the profits were actually first assessed.
Mr. Setalvad, on behalf of one of the
interveners, said that the judgment of this Court in M. M. Parikh's(1) case has
been interpreted in some cases to mean that the order under S. 23A is not even
an order of assessment for the purposes of rectification and for other purposes.
We are not concerned with that question in this case and we do not express any
opinion on that point.
In the result the appeal fails and is
dismissed. There will be no order as to costs.
(1) 63 I.T. R. 663.
(2) 54 I.T.R. 271.