TMI Blog1963 (3) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... 496. This income included a sum of ₹ 43,190 as the profit on the sale of shares of Orissa Cement Limited. These shares, according to the petitioner's contention, were not acquired for the purpose of dealing in them but were received from its managed company in respect of managing agency commission. In other words, it was a consideration of a paid-in species. It is stated that these shares were held as investment shares. The assessment was confirmed on appeal by the Appellate Assistant Commissioner, but on second appeal the Income-tax Tribunal held that the difference between the price at which the shares were sold and the cost of the shares did not arise in the course of the assessee's business activity and, therefore, the profits are not taxable . Another item included in the assessment was ₹ 31,355 which had been realised on the sale of the right to subscribe for the shares of Dalmia Cement (Bharat) Limited. The Controller of Capital Issues of the Government of India had given sanction to the managed company to issue further capital. The company issued ordinary shares accordingly. The registered holders of ordinary shares of the value of ₹ 2-8-0 each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer must have information which comes into his possession subsequent to his making the original order; and (2) that information must lead one to believe that income chargeable to tax has escaped assessment or has been under-assessed. The petitioner's stand has been that there was no fresh information from which it could be said that the Income-tax Officer had reason to believe that income had escaped assessment. No new facts had come to the notice of the Income-tax Officer nor was there any new information as to the true and correct state of the law. The Income-tax Officer could and ought to have assessed the amounts in question as capital gains even at the outset and he could not have recourse to section 34(1)(b). There was no statement and even if there was one it was fully known to the Income-tax Officer at the time of the assessment proceedings at the initial stage. At the stage of original assessment the petitioner had placed all the materials before the Income-tax Officer and had pointed out to him that the said items of income were not taxable under the head profits and gains of business . The Income-tax Officer on the material placed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst. In my view it is not sustainable. Section 2(4A) defines capital asset as being property of any kind held by an assessee, whether or not connected with his business, profession or vocation, but does not include any stock-in-trade, etc., personal effects, and land yielding agricultural income. The word property is of wide amplitude. Section 12B provides that: (1) The tax shall be payable by an assessee under the head 'Capital gains' in respect of any profits or gains arising from the sale, exchange, relinquishment or transfer of a capital asset effected after the 31st day of March, 1956,.... The word relinquishment has been newly inserted. I am inclined to agree with the contention on behalf of the respondents that a right to subscribe for shares is property and it is a capital asset . On the first point, on which main arguments have been addressed, I have been referred to a number of decisions to which reference may now be made. The decision of the Supreme Court in Chatturam Horilram Ltd. v. Commissioner of Income-tax [1955] 27 I.T.R. 709; [1955] 2 S.C.R. 290 lays down the proposition that: Where earlier assessment proceedings had in fact been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as to the true and correct state of the law. The word escape in the same provision was not confined to cases where no return had been submitted by the assessee or where income had not been assessed owing to inadvertence or oversight or other lacuna attributable to the assessing authorities; even in a case where a return had been submitted, if the Income-tax Officer had erroneously failed to tax a part of the assessable income, it was a case where that part of the income had escaped assessment. It was further observed that two conditions must be satisfied before the Income-tax Officer can act under section 34(1)(b): he must have information which comes into his possession subsequent to the making of the original assessment order, and that information must lead to his belief that income chargeable to tax has escaped assessment, has been under-assessed or assessed at too low a rate, or has been made the subject of excessive relief. The learned counsel for the petitioner also drew my attention to earlier decisions of the High Court of Allahabad in Kedarnath v. Commissioner of Income-tax([1947] 15 I.T.R. 224), New Victoria Mills Co. Ltd. v. Commissioner of Income-tax([1953] 24 I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught about in 1948 will appear from the portion of section 34(1)(b) reproduced below: 34. (1) If--... (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed...he may in...cases falling under clause (b) at any time within four years of the end of that year, serve... This section was amended once more in 1953, but the changes introduced are not relevant for purposes of the disposal of this dispute. It will thus be seen that between 1922 to 1938 the law was very liberal and the Income-tax Officer could reopen the matter if for any reason income, profits or gains chargeable to income-tax had escaped assessment... During the second period between 1939 and 1948 the requirements for reopening the matter depended upon definite information which had come into the possession of the Income-tax Officer who then discovers escapement. These are not the words to be construed for purposes of this case. As a resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved(1): We see no justification for holding that cases of income escaping assessment must always be cases where income has not been assessed owing to inadvertence or oversight or owing to the fact that no return has been submitted. In our opinion, even in a case where a return has been submitted, if the Income-tax Officer erroneously fails to tax a part of assessable income, it is a case where the said part of the income has escaped assessment. The appellant's attempt to put a very narrow and artificial limitation on the meaning of the word 'escape' in section 34(1)(b) cannot therefore succeed. The decisions cited at the bar on behalf of the assessee in this case and some others, including the decision of the Privy Council in Sir Rajendranath Mukherjee v. Commissioner of Income-tax [1934] 2 I.T.R. 71 (P.C.), were reviewed in the above decision of the Supreme Court. The action taken by the Income-tax Officer in this case appears to be in conformity with the view in respect of section 34(1)(b) taken by their Lordships of the Supreme Court in Maharaj Kumar Kamal Singh's case [1959] 35 I.T.R. 1; [1959] Supp. 1 S.C.R. 10. Mr. Hardy also drew my attention to Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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