TMI Blog1993 (9) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... us year relevant to this appeal and at the time of original assessment the ITO accepted the working of capital gains furnished by the assessee. Therein, the assessee had adopted the substituted value of 500 original shares as on 1st Jan., 1964 by invoking the provisions of s. 55(2) at the rate of Rs. 172 per share (Rs. 86,000 in all). The assessee also took the value of 700 bonus shares by spreading out the said substituted value of Rs. 172 per share and arrived at a figure of Rs. 71.67 per share for the bonus shares (Rs. 50,169 in all). So from the total sale price of Rs. 2,10,000 assessee claimed cost at Rs. 1,36,169 (Rs. 86,000 plus Rs. 50,169) which gave rise to capital gains of Rs. 74,000 and add. The original assessment was made on 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the fact that on this point Department's view has been upheld in the Gujarat High Court decisions in the case of Almbic Chemical Works Ltd. (No. 1) vs. CIT (1991) 98 CTR (Guj) 283 : (1992) 194 ITR 497 (Guj) and Alembic Chemical Works Co. Ltd. (No. 2) vs. CIT (1991) 98 CTR (Guj) 292 : (1992) 194 ITR 514 (Guj). 4. The learned advocate for the assessee, however, submitted that the Hon'ble Calcutta High Court decisions in the case of CIT vs. Steel Group Ltd. (1991) 22 CTR (Cal) 354 : (1981) 131 ITR 234 (Cal) and CIT vs. General Investment Co. Ltd. (1981) 20 CTR (Cal) 282 : (1981) 131 ITR 366 (Cal) were on this point in favour of the assessee. He submitted that those two Calcutta High Court decisions were not taken note of in the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that worst coming to worst the matter on merits deserves to be considered by the CIT(A) first and the Tribunal should not proceed to render a decision on merits when the merits have not been considered by the CIT(A) at all. 6. In the course of discussion, reference was also made to the Hon'ble Supreme Court decision in Shekhawati General Traders Ltd. vs. ITO 1972 CTR (SC) 120 : (1971) 82 ITR 788 (SC) and the Supreme Court decision in CIT vs. Simon Carves Ltd. 1976 CTR (SC) 418 : (1976) 105 ITR 212 (SC). 7. We have very carefully considered the rival submissions and also perused the decisions cited before us. First and foremost point is regarding the validity of reopening under s. 147(b). As already mentioned the learned advo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef that underassessment had taken place. Therefore, the order of the CIT(A) on this point deserves to be reversed. We need only point out the specific sentence from the order of the CIT(A), which according to us, was clearly erroneous. That is on page 3 and is as follows: "The subsequent pronouncement of the Madras High Court cannot be treated as settled law and, accordingly, it cannot be the basis of reopening of the assessment under s. 147(b)" As already indicated the learned advocate for the assessee himself has in all fairness conceded that subsequently pronounced High Court decision can constitute information. In the context of sentence reproduced above we need only further mention that pronouncement need not be treated as settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the quantification as done in the original assessment also cannot be finally treated as correct. The reason is that averaging out of the cost of bonus shares has been done in the original assessment with reference to the substituted cost of Rs. 172 per share and not as per the original cost price of Rs. 100 per share. The quantification of capital gains in such situations has given rise to various possibilities and various High Court decisions. As on this date perhaps a reasonable view would be that wherever substitution under s. 55(2) takes place for the relevant shares that is the final figure and for the subsequently acquired bonus shares the averaging out should be done with reference to the original cost and not the substituted fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
