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TMI Blog1997 (1) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, 1969, and March 30, 1969, at the price quoted in the official report and quotations of the Calcutta Stock Exchange Association. According to the assessee, he had incurred a loss of Rs. 1,57,792. The said claim of the assessee was accepted by the Income-tax Officer, 'C' Ward, Jodhpur, while making the assessment and the same was affirmed in appeal by the Appellate Assistant Commissioner. Subsequently, the Income-tax Officer received a letter dated March 21, 1974, from Shri S. M. Bagai, Deputy Director, Directorate of Inspector (Investigation), Special Cell, New Delhi, wherein it was stated that on information obtained from the Bombay Stock Exchange Directory, the book value per equity share of Maharaja Shree Umaid Mills Ltd. rose from Rs. 318.55 for the year ending December 31, 1965, to Rs. 401 for the year ending December 31, 1970, and the earning per share rose from Rs. 8.37 per share to Rs. 44 per share during the abovementioned period and that the dividend percentage also rose from 2 per cent. to 10 per cent. for the same period, but the quotations of the shares on the Calcutta Stock Exchange fell from Rs. 168 to Rs. 85 per share during this period. In the said letter of Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as 'the relevant assessment year')." A perusal of clause (b) of section 147 shows that for taking action under the said provision what was required was that : (i) the Income-tax Officer has received information, and (ii) in consequence of such information he has reason to believe that income chargeable to tax has escaped assessment for any assessment year. The question is whether in the present case after he had completed the original assessment, the Income-tax Officer had received information on the basis of which he could have reason to believe that the income chargeable to tax had escaped assessment. Shri D. R. Gupta, Income-tax Officer, 'B' Ward, Jodhpur, who was the assessing authority and who had issued the impugned notice, filed his counter-affidavit in reply to the writ petition, wherein he stated that during the assessment proceedings it was represented to him on behalf of the assessee that the shares of Maharaja Shree Umaid Mills Ltd. were regularly quoted on the stock exchange and that the sale was effected by the assessee at the prevalent market rate. A share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed to me on telephone that you have retained a copy of the statements for your own record. 2. I am enclosing herewith a statement containing certain financial information regarding the captioned company which has been extracted from the Bombay Stock Exchange Directory. According to this statement the paid-up equity capital of the company is Rs. 72,00,000 divided into 72,000 shares of Rs. 100 each, the equity share data at page 2 of the enclosed statement indicates that the book value per equity share rose from Rs. 318.55 for the year ending 31st December, 1965, to Rs. 401, for the year ending 31st December, 1970. The earning per share rose from Rs. 8.37 per share to Rs. 44 per share during the abovementioned period. The dividend percentage also rose from 2 per cent. to 10 per cent. for the same period. In spite of all these facts, the quotation of the shares in the Calcutta Stock Exchange fell from Rs. 168 per share to Rs. 8 per share during this period. 3. It is clear from these facts that the quotations appearing are as a result of certain manipulated transactions between the group itself and cannot be said to reflect the fair market value of the shares of this company. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concerned Wealth-tax Officers, Income-tax Officers and Gift tax Officers, who would be concerned with the case of the other share holders in Rajasthan. With regards, Yours sincerely, (Sd.) (S. M. Bagai)." In the second paragraph of his letter Shri Bagai has referred to the statement containing certain financial information regarding Maharaja Shri Umaid Mills Ltd. which he had extracted from the Bombay Stock Exchange Directory and which he had forwarded as an annexure along with the said letter. The said information was to the effect that the paid up capital of the company was Rs. 72,00,000 divided into 72,000 shares of Rs. 100 each ; the equity share data at page 2 of the enclosed statement indicated that the book value per equity share rose from Rs. 318.55 for the year ending December 31, 1965, to Rs. 401 for the year ending December 31, 1970, the earning per share rose from Rs. 8.37 per share to Rs. 44 per share during the abovementioned period and the dividend percentage also rose from 2 per cent. to 10 per cent. for the same period. But, in spite of all these facts, the quotation of the shares in the Calcutta Stock Exchange fell from Rs. 168 per share to Rs. 85 per share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the letter of Shri Bagai was received by the Income-tax Officer on March 26, 1974, and on the very next day, that is, on March 27, 1974, he issued the impugned notice under section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income-tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income-tax Officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the Income-tax Officer had in his possession information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment years. For the reasons aforementioned, we are unable to uphold the impugned j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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