1993 (9) TMI 137 - AT - Income Tax

Summary

Issues:
Validity of reopening under section 147(b), applicability of High Court decisions, quantification of capital gains.

Validity of Reopening under Section 147(b):
The appeal by the Department objected to the cancellation of reassessment under section 147(b). The Assessing Officer reopened the case based on fresh information from a Madras High Court decision, resulting in a different computation of capital gains. The CIT(A) held the reopening was invalid. The Tribunal noted that a High Court decision can constitute valid information for reopening under section 147(b). The Tribunal found that the Assessing Officer could have reasonably believed that underassessment had occurred based on the Madras High Court decision. The Tribunal disagreed with the CIT(A)'s view and reversed the decision, emphasizing that the subsequent High Court decision could be considered as valid information for reopening.

Applicability of High Court Decisions:
The Departmental Representative argued for upholding the reassessment based on Gujarat High Court decisions, while the advocate for the assessee cited Calcutta High Court decisions in their favor. The Tribunal analyzed various High Court decisions and found that the Gujarat High Court decisions could not be mechanically applied to the case. The Tribunal decided to restore the matter of quantification of capital gains to the file of CIT(A) for further review, considering the specific circumstances of the case.

Quantification of Capital Gains:
The original assessment quantified capital gains by averaging out the cost of bonus shares with reference to the substituted cost, leading to various possibilities. The Tribunal suggested that for subsequently acquired bonus shares, averaging out should be done with reference to the original cost and not the substituted fair market price. Referring to Supreme Court and Bombay High Court decisions, the Tribunal did not express a final opinion on this point but decided to restore the quantification of capital gains to the file of CIT(A) for a thorough review.

In conclusion, the Department's appeal was allowed, and the cancellation of reassessment under section 147(b) was vacated. The CIT(A) was directed to decide the quantification of capital gains on merits after providing both the assessee and the Department with a reasonable opportunity to be heard.