Commercial profits under section 23A include suppressed receipts, justifying a larger dividend where distribution was unreasonably low.

Section 23A of the Income-tax Act, 1922 was applied by treating "profits made" as real commercial profits available for distribution, not merely book figures or assessed income. The provision requires first that the declared dividend fall below the statutory percentage of reduced assessable income, and then a further inquiry into whether a larger dividend would be unreasonable having regard to the smallness of profits. On the facts, the books were unreliable, concealed receipts were added, and the year's commercial profits were sufficient to justify a larger dividend; even without bringing forward earlier profits, the result was the same. The section was therefore correctly applied against the assessee.

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Issues: Whether section 23A of the Income-tax Act, 1922 was properly applied on the facts found, including the meaning of "profits made" for deciding whether a larger dividend ought to have been declared.

Analysis: The provision requires first that the dividend declared should fall below the statutory percentage of the reduced assessable income, and then that the Income-tax Officer should examine whether, having regard to the smallness of the profits made, a larger dividend would be unreasonable. The expression "profits made" is not confined to the figures shown in the books of account or to assessed income alone, but refers to real commercial profits available during the relevant year. On the facts, the books were found unreliable, concealed receipts had to be added, and the commercial profits available for distribution were materially higher than the dividend declared. The court also held that, even if brought-forward profits were left out of account, the profits of the year itself justified the conclusion that a larger dividend was reasonably distributable.

Conclusion: Section 23A was rightly applied, and the question referred was answered in the affirmative against the assessee.

Ratio Decidendi: For the purpose of section 23A, "profits made" means real commercial profits available for distribution and may include suppressed profits proved on assessment, while being distinct from assessable income.

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