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PETITIONER: PILLANI INVESTMENT CORPORATION LTD.

       Vs.

RESPONDENT: I.T.O.’A’WARD, CALCUTTA & ANR.

DATE OF JUDGMENT23/11/1971

BENCH: SIKRI, S.M. (CJ) BENCH: SIKRI, S.M. (CJ) REDDY, P. JAGANMOHAN DUA, I.D. MITTER, G.K.

CITATION:  1972 AIR  236            1972 SCR  (2) 502  1972 SCC  (1) 122  CITATOR INFO :  F          1989 SC1298  (7)

ACT: 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 when justified.

HEADNOTE: 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 , [1965] 2 S.C.R. 908,  921,

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applied. Navanagar   &   Industries  v.  Ltd.   v.   I.T.O.   Special Investigation Circle, Ahmedabad, 54 I.T.R. 271, referred to.

JUDGMENT: 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 1966. 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 larger Bench. 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

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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) [1965] 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-

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             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.                                      Appeal dismissed. G.C. (1)  63 I.T. R. 663. (2)  54 I.T.R. 271. 506