Deemed dividend requires reassessment machinery and notice before tax can be validly brought to charge.

Section 23A did not itself authorise a fresh assessment of deemed dividend; it only deemed the shareholder's proportionate share of undistributed profits to form part of total income. The tax had therefore to be brought to charge through the Act's assessment or reassessment machinery, including section 34 where that procedure applied. Because no notice under section 34 was issued, the reassessment was unsustainable and the assessment invalid. The text states that action under section 34 was necessary and that the appeal was dismissed.

---

---

Issues: Whether the inclusion of deemed dividend in the shareholder's total income under section 23A of the Income-tax Act required reassessment proceedings under section 34 and prior notice before the tax could be brought to charge.

Analysis: Section 23A did not itself authorise a fresh assessment; it created a fiction that the proportionate share of undistributed profits was to be included in the shareholder's total income for assessment. The assessment machinery had therefore to be invoked under the other provisions governing assessment and reassessment, including section 34 where applicable. In the absence of notice under section 34, the reassessment made to bring the deemed dividend to charge was not sustainable.

Conclusion: The answer was in favour of the assessee: action under section 34 was necessary, and the assessment made without issuing notice under that section was invalid.

Final Conclusion: The deemed dividend could not be validly assessed without recourse to the reassessment machinery prescribed by the Act, and the appeal was dismissed.

Ratio Decidendi: A provision deeming income to be included in a shareholder's total income does not itself authorise assessment; the tax can be levied only through the Act's regular assessment or reassessment procedure, including notice where that procedure is mandatory.

---