1984 (3) TMI 130 - AT - Income Tax

Summary

Issues:
1. Determination of long-term capital gain on the transfer of shares.
2. Assessment barred by limitation.
3. Validity of assessment without obtaining prior approval of the IAC.
4. Whether the transfer of shares for obtaining a share in the property constitutes capital gains.
5. Opportunity for the assessee to present material for the valuation of shares.

Analysis:
1. The appeal was against the order of the CIT (Appeals) regarding the determination of long-term capital gain on the transfer of shares owned by the assessee in a company. The transfer of shares was part of a settlement decreed by the Calcutta High Court, involving the exchange of shares for the property. The ITO calculated the capital gain arising from the transfer, which was contested by the assessee before the CIT (A).

2. The CIT (A) found that the assessment was not barred by limitation as the timeline for the assessment process was within the specified limits under the Income Tax Act. The draft assessment order was served on time, and the directions under section 144B were received within the prescribed period, allowing for the assessment to proceed without limitation issues.

3. The assessee raised a concern about the validity of the assessment due to the lack of prior approval from the IAC. The CIT (A) determined that this was an irregularity rather than an illegality, citing relevant legal precedents. The matter was directed to be re-examined by the ITO after complying with the necessary provisions of the Act.

4. The CIT (A) held that the transfer of shares to obtain a share in the property constituted capital gains as per the terms of the settlement decreed by the Calcutta High Court. The exchange of shares for the property fell within the scope of capital gains tax, rejecting the assessee's argument that it was a family settlement without capital gains implications.

5. The assessee contended that the ITO did not provide adequate opportunity to present material for the valuation of shares exchanged. The Tribunal agreed with this submission and directed the ITO to consider the valuation of shares as on a specific date while reassessing the matter. The appeal was partly allowed based on these considerations.