9911796707
TMI Blog1986 (7) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... The capital gain disclosed in the original return on sale of the shares of the company was Rs. 1,43,957. The computation for this amount filed with the return was as follows : Computation of capital gains on sale of investments---Bhor Industries (P.) Ltd. Rs. Rs. (i) Sale of proceeds of 120 equity shares 3,24,000 Less : Market value as on 1-1-1954 (120 x 828.57) 99,428 ------------------- 2,24,571 Capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res, etc. These shares had been acquired by the assessee prior to 1-1-1954. After the shares were settled on trust there was reconstitution in the capital structure of the said company and different series of shares were issued for the existing shares. Those shares were received by the trustees for the original shares. The trust which was created by the assessee was revocable after six years. That trust was in fact revoked by the assessee by indenture dated 1-4-1963. As a result of this revocation the shares of the said company which were held by the trustees were reverted to the assessee and the assessee again became owner of these shares. These shares were then sold in the relevant accounting year giving rise to capital gains with which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, the Commissioner (Appeals) held that all the material facts had been truly and fully stated at the time of original assessment and, as such, reopening was invalid under section 147(b). He, accordingly, cancelled the reassessment order. He did not express any opinion on merits of the case. The department has now come in appeal before us. 5. We have heard the parties. The reasons for reopening are stated by the ITO in his letter dated 16-12-1980 addressed to the assessee in the following words : "From the perusal on records, I find that for the assessment year 1971-72 you have declared long-term capital gains of Rs. 1,56,657 on sale of certain shares of Bhor Industries (P.) Ltd. including the shares which were settled upon trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is only failure to state truly and fully the material facts by the assessee that confers jurisdiction on the ITO to reopen the assessment under section 147(a). If all material facts are fully and truly stated, the ITO is not entitled to reopen the assessment under that provision. In the present case, all the material facts were on record. The whole assessment filed was before the ITO. The trust has been revoked in 1963. There was a circular by the Government dated 12-5-1964 [F. No. 12/1/64-IT(AI)] addressed to all the Commissioners. The position was clarified in the following words : "Where one type of share is converted into another type of share (including conversion of debentures into equity shares), there is, in fact, no 'transfer' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of audit on this question of law would not form valid basis for reopening. Since there was no omission to state the material facts, reopening under section 147(a) was not justified. We, accordingly, confirm the order of the Commissioner (Appeals) cancelling the reassessment order. 7. We now come to the cross-objection. In the cross-objection, the ground raised is that the Commissioner (Appeals) ought to have recorded a finding that the assessee was entitled to substitute the market price as on 1-1-1954 for the cost of acquisition. The Commissioner (Appeals) has not recorded the said finding because of the fact that according to him the reopening itself was bad. Since the assessee wants that this question should be finally decided on mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious owner before 1-1-1954 could be the cost of the capital asset to the previous owner or the fair market value of the assets as on 1-1-1954 at the option of the assessee. In the present case, the assessee would have option to substitute the fair market value as on 1-1-1954, under this provision. He had substituted the same in the computation filed with the original return. There was no error in the said substitution and, as such, the opinion of the ITO that the assessee was not entitled to substitute the fair market value as on 1-1-1954 was not correct. We, accordingly, confirm the cancellation of the reassessment order and restoration of the original assessment order. 9. In the result, the appeal filed by the department is dismissed, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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