9911796707
TMI Blog1983 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... e said assessment by the petitioner challenging, inter alia, the valuation of unquoted shares of two companies and the disallowance of exemption under s. 5(1)(viii) of the W.T. Act in respect of jewellery was allowed by an order, dated August 17, 1973, from which a further appeal has been preferred by the WTO before the Income-tax Appellate Tribunal. The WTO, " P " Ward, District I(i), Calcutta, to whom the case and the file of the petitioner was transferred in October, 1973, thereafter, issued a notice, dated March, 25, 1975, under s. 17 of the W.T. Act as follows : " I have reason to believe that your net wealth chargeable to tax for the assessment year 1970-71 has escaped assessment within the meaning of section 17 of the Wealth-tax Act. I, therefore, propose to reassess the said net wealth that has so escaped assessment. I hereby request you to deliver to me within 35 days of the receipt of the notice a return in the attached form of your net wealth chargeable to tax along with such other particulars as are required to complete the form for the said assessment year. " The petitioner is aggrieved by the aforesaid and has sought to challenge the same in this applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the genuineness of the quotation of the shares of the said company subsequently. By a letter, dated March 18, 1975, the Director of Inspection (Investigation), Special Cell, informed the Commissioner of Wealth-tax as follows: " Maharaja Shree Umaid Mills Ltd. is a company of Bangur group assessed by the ITO-B-Ward, Jodhpur. Although the book value of an equity share of Rs. 100 paid up of this company rose from Rs. 332 to Rs. 401 from the year 31-12-67 to 31-12-70 and the earning per share rose from Rs. 12.32 to Rs. 44 per share during the same period, the quotations of the shares, in the Calcutta Stock Exchange, where it is listed, fell from Rs. 110 to Rs. 85.50. For the calendar years 1971, 1972 and 1973, the earning per share was Rs. 24.82, 34.76 and 76.50 respectively. During the same period the book value rose from Rs. 445 in the year 1971 to Rs. 524 in 1973. In spite of this increase, stock market quotations have remained below Rs. 96 per share. The total paid up equity capital of this company is Rs. 72,00,000 divided into shares of Rs. 100 each. The total number of shareholders has fluctuated between 22 as on June, 1968 to 38 as on June, 1973. A list of the equity s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company indicating the places of assessments, as far as is known to this Directorate, is enclosed herewith as annexure " D ". A list of companies of the Bangur group is also enclosed as annexure " E ". This will help the location of cases where action has to be considered. It is requested that a copy of this letter may kindly be passed on to the Income-tax Officers concerned with the assessments of the shareholders of this company, so that they may examine whether the value being returned by the shareholders in their wealth-tax assessments and the value at which the shares are being transferred reflect the fair market value of the shares. The Income-tax Officers may be asked to apply their minds to the facts of each case and take such action as they may deem fit. " It is alleged that the said letter was communicated to the WTO concerned by D.I. (Investigation) on March, 25, 1975. It is alleged that the WTO after perusing the materials contained in the said letter came to be of the prima facie opinion that the shares of the said company have not been quoted regularly and that the quotation at the relevant date was far below the fair market value of the shares and did not refl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case, the assessee who was assessed to income-tax in the assessment year 1969-70 claimed that he had suffered long-term capital loss on sale of bonus shares of Maharaja Shree Umaid Mills Ltd. in the said assessment year. The loss claimed was allowed to be carried forward. Later, the ITO sought to reopen the assessment under s. 147(b) of the I.T. Act, 1961, on the ground that the income of the assessee chargeable to tax in the said assessment year had escaped assessment. The ITO acted on the basis of a letter, dated March 21, 1974, of the Deputy Director of Inspection (Investigation) Special Cell, where it was, inter alia, alleged that quotations in respect of the shares of the said company were the result of extremely limited and manipulated transactions within one group and did not reflect the fair market value of the shares. The assessee challenged the proceedings in an application under art. 226 of the Constitution in the Rajasthan High Court. A Division Bench of the High Court held that, ex facie, the letter of the Deputy Director did not contain any information within the meaning of s. 147(b) of the Act and could furnish no reasonable grounds for the belief that any i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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