9911796707
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Issues:
Reopening of assessment based on alleged non-disclosure of material facts; Validity of reopening under section 147(a) of the Income-tax Act, 1961; Interpretation of sections 45, 49, and 55(2) in relation to cost of acquisition of shares; Substitution of market price as on 1-1-1954 for cost of acquisition; Ownership and transfer of shares in case of trust settlement and revocation. Analysis: The case involved an appeal by the department and a cross-objection by the assessee concerning the assessment year 1971-72 and long-term capital gains on the sale of shares. The original return declared a capital gain of Rs. 1,43,957, with the cost of acquisition based on the market value as on 1-1-1954. The reopening of the assessment was challenged by the assessee, arguing that all material facts were disclosed during the original assessment. The ITO reopened the assessment based on an audit note stating that the shares sold were different from those settled on trust, thus questioning the cost of acquisition. The Commissioner (Appeals) held the reopening invalid under section 147(b), canceling the reassessment order. The department appealed this decision. During the proceedings, the ITO's reasons for reopening highlighted alleged non-disclosure of material facts by the assessee regarding the substitution of market price as on 1-1-1954 for the cost of shares acquired prior to 1-1-1954. The Tribunal noted that all material facts were on record during the original assessment, including the trust revocation in 1963 and a government circular clarifying the treatment of converted shares for capital gains tax purposes. The Tribunal emphasized that the opinion of the revenue audit on a legal question did not justify reopening without actual non-disclosure of material facts. As such, the reassessment was deemed unjustified under section 147(a). Regarding the cross-objection, the Tribunal analyzed the ownership and transfer of shares in the case of trust settlement and revocation. It was established that no transfer occurred when shares were converted, and the assessee, as the original owner, had the right to substitute the fair market value as on 1-1-1954 for the cost of acquisition. The Tribunal confirmed the cancellation of the reassessment order and restoration of the original assessment, allowing the assessee's cross-objection while dismissing the department's appeal.
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