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1961 (1) TMI 9

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....atlal, had also since died and the present respondents are the legal representatives of Navinchandra Mafatlal. We are concerned in this case with the assessment of the income of Mafatlal Gagalbhai for the accounting years 1941 and 1942, corresponding to the assessment years 1942-43 and 1943-44. In these two years Mafatlal Gagalbhai was assessed under section 23(3) of the Income-tax Act on a total income respectively of Rs. 3,76,539 and Rs. 4,42,693. In the first year, no appeal was preferred, and in the second, the appeals to the Appellate Assistant Commissioner and the Tribunal were unsuccessful. In the accounting year 1941 Mafatlal Gagalbhai held 12,485 ordinary shares and 2,500 preference shares in a company called Gagalbhai Jute Mil....

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....been first a distribution among the preference shareholders and the balance thereafter must be deemed to have been distributed amongst the ordinary shareholders. The respondent also had appealed to the Tribunal against the order of the Appellate Assistant Commissioner ; but seeing the order of the Tribunal in the appeals of the company, it was realised that if the appeals were to be proceeded with, there would be additional levy of tax if the matter was referred back to the Department in accordance with the decision in the appeals of the company. The legal representative of the assessee, therefore, withdrew the appeals with the leave of the Tribunal. When the matter went back to the Department on the order of the Tribunal in the appeals o....

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....ncome of a shareholder of the dividend which is deemed to have been distributed under section 23A(1) of the Act ? " The reference was heard by Chagla, C. J., and Tendolkar, J. On the question whether the assessment could be said to have been properly made, the learned judges gave different reasons, but both held that section 23A was either a procedural section or a computation section but did not give the right to the Department to make an assessment. In doing so, they purported to follow an earlier decision of the same High Court reported in S. G. Cambatta v. Commissioner of Income-tax where it was stated as follows : "... section 23A is a mandatory section and lays down rules of computation in computing the total income of the shareho....

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....ome-tax Officer without resort to section 34 and a notice prior to assessment. He contended that section 23A is a self-contained section and brings to charge dividends deemed to have been distributed and, in terms, does not require any other assessment proceedings either by way of section 23 or section 34 of the Act. In our opinion, this matter is no longer open to argument after the decision of this court in Sardar Baldev Singh v. Commissioner of Income-tax. Dealing with section 23A and section 34 it was observed by this court as follows : " It seems to us that the Tribunal was wrong in the view that it took. The learned Solicitor-General conceded that this is so. We are unable to agree that an assessment could be made under section 23A.....