Limitation and retrospective amendment under section 23A were applied to super-tax liability, with reasonableness left for reconsideration.

An order directing payment of additional super-tax under section 23A of the Indian Income-tax Act, 1922, was held outside the limitation period applicable to assessment orders under section 34(3), so the limitation objection failed. The Finance Act, 1956 amendment to section 23A was also held to apply retrospectively to the assessee company for assessment year 1955-56, because the earlier protected period did not cover its accounting year and the later substitution operated from 1 April 1955. The reference was answered mainly in favour of the Revenue, but the matter was remitted for consideration of whether the company's dividend declaration satisfied the reasonableness requirement under section 23A.

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Issues: (i) Whether an order under section 23A of the Indian Income-tax Act, 1922, was barred by limitation under section 34(3); (ii) Whether the amendment to section 23A made by the Finance Act, 1956, applied to the assessee company for assessment year 1955-56.

Issue (i): Whether an order under section 23A of the Indian Income-tax Act, 1922, was barred by limitation under section 34(3).

Analysis: The limitation provision in section 34(3) applies to orders of assessment, whereas an order directing payment of additional super-tax under section 23A is not an order of assessment. The question was controlled by the settled position that section 23A orders fall outside the scope of section 34(3).

Conclusion: The order under section 23A was not barred by limitation and this issue was decided against the assessee.

Issue (ii): Whether the amendment to section 23A made by the Finance Act, 1956, applied to the assessee company for assessment year 1955-56.

Analysis: The amendment was construed in the light of its express retrospective operation and the legislative scheme contained in the Finance Acts of 1955 and 1956. The earlier law was continued only for the restricted prior period mentioned in the Finance Act, 1955, and the assessee's accounting year ending on 31 May 1954 did not fall within that protected period. The later substitution by the Finance Act, 1956, also operated retrospectively from 1 April 1955.

Conclusion: The amended provision applied to the assessee company and this issue was decided against the assessee.

Final Conclusion: The reference was answered predominantly in favour of the Revenue, but the matter was sent back for the Tribunal to consider whether the assessee's conduct satisfied the reasonableness requirement under section 23A.

Ratio Decidendi: An order under section 23A of the Indian Income-tax Act, 1922, is not governed by the limitation applicable to assessments under section 34(3), and a fiscal amendment expressed to have retrospective effect must be applied according to its legislative sweep, while the reasonableness of the company's dividend declaration remains a necessary element for section 23A relief or liability.

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