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TMI Blog1971 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ing its registered office at Jaipur. For the assessment year 1962-63 relevant to the previous year ending March 31, 1962, the assessee filed its return before the Income-tax Officer, Company Circle I, Jaipur. On March 29, 1949, the assessee had acquired 12,000 ordinary shares of the Orient Paper Mills of the face value of Rs. 10 each. On this holding it received 12,000 bonus shares on or about April 28, 1951. It again received 60,000 bonus shares on or about June 4, 1954, and further acquired 25,200 right shares on June 26, 1961. It sold 22,000 shares during the assessment year 1962-63. It is common ground that these shares which were sold were out of the 24,000 shares which it held prior to January 1, 1954. The price realised on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be carried forward. By means of a notice dated January 4, 1967, the Income-tax Officer informed the assessee that he had reasons to believe that income chargeable to tax for the assessment year 1962-63 had escaped assessment within the meaning of section 147 of the Income-tax Act, 1961, hereinafter called the "Act". This notice was accompanied by a letter in which it was stated : " While working out the cost you claimed, the prevalent market price as on January 1, 1954, in complete disregard of the fact that the same shares had been given bonus shares in the subsequent years after January 1, 1954. The Supreme Court had laid down in the case of Dalmia Cement that while working out the capital gains the cost has to be worked out by avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be said that the Income-tax Officer had reason to believe that the income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. It was contended on behalf of the assessee before the High Court that it was altogether unnecessary for the assessee to have shown the acquisition of bonus shares in the return filed by it for the determination of the cost of acquisition of the shares held by it and, therefore, the notice issued by the Income-tax Officer was without jurisdiction. G. M. Mehta J. disposed of the matter by saying : " Prima facie, it cannot be said that the Income-tax Officer had no reason to believe tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning of the cost of acquisition is explained by section 55(2) and for our purpose that sub-section with clause (i) need be reproduced : " 55. (2) For the purposes of sections 48 and 49, 'cost of acquisition', in relation to a capital asset,-- (i) where the capital asset became the property of the assessee before the 1st day of January, 1954, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of January, 1954, at the option of the assessee ;...." The assessee had exercised the option of the fair market value of the assets. The shares which had been sold by it of both the companies had indisputably become its property before the first day of January, 1954. Therefore, all that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment Co. Ltd. The question which had to be decided in the above case was entirely of a different nature. The assessee there held ordinary shares in Rohtas Industries Ltd. apart from holding shares by way of investment and also as stock-in-trade of its business as a share-dealer. In 1944, the assessee acquired 31,909 of these shares and was holding them in January, 1945. In that month the Rohtas Industries Ltd. distributed bonus shares at the rate of one ordinary share for each original share. So the assessee got 31,909 bonus shares. Between that time and December 31, 1947, the assessee sold 14,650 of the original shares. The assessee acquired some newly issued shares in the years 1945 and 1947. The total holding of the assessee on J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r it wishes to take the cost of the acquisition of the asset to it as the cost of acquisition for the purpose of section 48 or the fair market value of the asset on the first day of January, 1954. The word "fair" appears to have been used to indicate that any artificially inflated value is not to be taken into account. In the present case it is common ground that when the original assessment order was made the fair market value of the shares in question had been duly determined and accepted as correct by the Income-tax Officer. Under no principle or authority can anything more be read into the provisions of section 55(2)(i) in the manner suggested by the revenue based on the view expressed in the Dalmia Investment Co's case. The High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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