# '502 PILLANI INVESTMENT CORPORATION LTD v. I.T.O. 'A' WARD, CALCUTTA & ANR

- **Citation:** [1972] 2 S.C.R. 502
- **Court:** Supreme Court of India
- **Decided:** 1971-11-23
- **Case number:** Civil Appeal No. 7 Of 1968
- **Bench:** S .. M. S!Kri, P. Jaganmohan Reddy, I.. D. Dua, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/502-pillani-investment-corporation-ltd-v-i-t-o-a-ward-calcutta-anr-5670
- **Pages:** 4

## Headnote

Income-tax Act, 19'22, ss. 23A and 34(3)-S. 34(3)
whether app/i-
.cable to an order un<Jer s. 23A.
Supreme Court-Revietv o/ prerio11s decision when justified.
A
B
The appellant company objected to an order under s. 23A sought to be
·passed against it. by the Income-tax Officer on \he ground that it was an
C
.order of assessment or re-assessment within the meaning of s. 34(3) of
1he Act ancl'barred by time. The writ petition in the High Court having
failed the comP.any by special leave appealed to this Court. A plea was
·made for re,ie\Ving the judgment in Parikh's case in which this Court
'had held that s. 34(3) was not applicable to an order under s. 23A.
HELIJ: 1nc pico for review of Parikh's case must be rejected be·
cause : (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
<:onsidered or that the juclgment was clearly erroneous so as to justify re·
·view 011' 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 wzre first assessable' ins. 34(3) are not apposite to cover
·the order made under s. 23A as it stood before its amendment by the
Finano~ Act II of 1957. An order under s. 23A does not assess income,
profits ano gains as such but levies super-tax un 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 FJ
The appeal must accordingly be dismissed.
M. M. Parikh v. Navanagar Transport & Industries, 63 I. T. R.
663,
-reaffirmed.
Keshav Milh'. v. C.1.T. Bombay, [1965] 2 S.C.R. 908, 921, applr,d.
D
E
F
Navanaga,. & Industries Ltd. v. ]. T.0. Special Jnvest(r;ation Circle.
G
Ahmedabad, 54 I.T.R. 271, referred to.
CrVJL APPELLATE .TUR!SDICTION: Civil Appeal No. 7 Of 1968.
Appeal by special leave from the judgment and order dated
February 23, 1967 of the Calcutta High Court ~n Appeal No. 195
·Of 1966.
H
M. C. Chag/a, N. R. Khaitan, Lila Seth, 0. P. Khaitan a11J
:8. P. Maheshwari, for the appellant.
A
PILLANI INVESTMENT CORP. v. I.T.O. (Sikri, C.J.)
503
B. Sen, A. N. Kirpal, R. N. Sachthey and B. D. Sharma, for the
respondents.
M. C. Setalvad, T. A. Ramachandran and D. N. Gupta for
intervener No. 1.
B
P. C. Bhartari, J. B. Dadachanji, 0. C. Mathur and Ral'inder
c
D
E
F
G
.H
Narain, for intervener No. 2.

## Text

'502
PILLANI INVESTMENT CORPORATION LTD.
v.
I.T.O. 'A' WARD, CALCUTTA & ANR.
November 23, 1971
{S .. M. S!KRI,, C.J., P. JAGANMOHAN REDDY, I.. D. DUA AND
G. K. MITTER, JJ.]
Income-tax Act, 19'22, ss. 23A and 34(3)-S. 34(3)
whether app/i-
.cable to an order un<Jer s. 23A.
Supreme Court-Revietv o/ prerio11s decision when justified.
A
B
The appellant company objected to an order under s. 23A sought to be
·passed against it. by the Income-tax Officer on \he ground that it was an
C
.order of assessment or re-assessment within the meaning of s. 34(3) of
1he Act ancl'barred by time. The writ petition in the High Court having
failed the comP.any by special leave appealed to this Court. A plea was
·made for re,ie\Ving the judgment in Parikh's case in which this Court
'had held that s. 34(3) was not applicable to an order under s. 23A.
HELIJ: 1nc pico for review of Parikh's case must be rejected be·
cause : (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
<:onsidered or that the juclgment was clearly erroneous so as to justify re·
·view 011' 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 wzre first assessable' ins. 34(3) are not apposite to cover
·the order made under s. 23A as it stood before its amendment by the
Finano~ Act II of 1957. An order under s. 23A does not assess income,
profits ano gains as such but levies super-tax un 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 FJ
The appeal must accordingly be dismissed.
M. M. Parikh v. Navanagar Transport & Industries, 63 I. T. R.
663,
-reaffirmed.
Keshav Milh'. v. C.1.T. Bombay, [1965] 2 S.C.R. 908, 921, applr,d.
D
E
F
Navanaga,. & Industries Ltd. v. ]. T.0. Special Jnvest(r;ation Circle.
G
Ahmedabad, 54 I.T.R. 271, referred to.
CrVJL APPELLATE .TUR!SDICTION: Civil Appeal No. 7 Of 1968.
Appeal by special leave from the judgment and order dated
February 23, 1967 of the Calcutta High Court ~n Appeal No. 195
·Of 1966.
H
M. C. Chag/a, N. R. Khaitan, Lila Seth, 0. P. Khaitan a11J
:8. P. Maheshwari, for the appellant.
A
PILLANI INVESTMENT CORP. v. I.T.O. (Sikri, C.J.)
503
B. Sen, A. N. Kirpal, R. N. Sachthey and B. D. Sharma, for the
respondents.
M. C. Setalvad, T. A. Ramachandran and D. N. Gupta for
intervener No. 1.
B
P. C. Bhartari, J. B. Dadachanji, 0. C. Mathur and Ral'inder
c
D
E
F
G
.H
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 Comt 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(').
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 tenns 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 Incometax 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(') it
. was held that "an order under section 23A of the Lndian Incometax Act, 1922, as amended by the Finance Acts of
1955 and
1957, 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."
(I) 63 1.T.R. 663.
504
SUPREME COURT REPORTS
[1972] 2 S.C.R.
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 that this
Court should decline to review its earlier judgment because it
cann!>t 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 '\\ithin
the territory of Tndia, and so, it must be the constant
endeavour 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 t\lis 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 pervious 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 aoy 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
(I) 63 I.T.R. 66J.
(2) [1965] 2 S.C.R. 908, 921.
A
c
I>
F
G
H
A
B
c
D
E
F
G
H
PJLLANI INVESTMENT CORP. V. I.T.O. (Sikri, C.J.)
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(') case or in the judgment of
the High Court of Gujarat, appealed from in that case
(Nava11agar & Industries Ltd. v. Income-tax Officer, Specia' lnvestiga·
tion 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 II of 1957.
Section 34 (3),
without the proviso, at the relevant time read as follows :
"34(3) No order of assessment or re-assessment,
other than an order of assessment under section 23 to
which clause ( c) of sub-section (I) of section 28
applies or an order of assessment or re-assessment 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 poruon 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.
G.C.
Appeal dismissed.
I) 631.T.R. 663.
(2) 54 l.T.R. 271.