Law: Income Tax Act, 1922

Section: 23(3)

JUDGMENT Srinivasan, J.-The assessment in question relates to the assessment year 1944-45. The assessee was originally assessed under section 23(1) of the Act on January 30, 1945, on an income of Rs. 5,403. On December 30, 1948, there was a reassessment under section 23(3) and section 34, and the revised assessment was in respect of a total income of Rs. 16,041. During the course of the assessment proceedings for the assessment year 1952-53, the Income-tax Officer came to be in receipt of information indicating that a certain income of the assessee had escaped assessment in the assessment year 1944-45. He accordingly reopened the assessment after the issue of a notice under section 34(1)(a) and brought to assessment a sum of Rs. 1,75,000 said to have been the profit earned by the assessee during the account year relevant to that assessment year in a certain transaction involving the purchase and sale of a coffee estate. The facts that emerge from the records and the statement of the case are briefly as follows: The assessee, along with some others, purchased in the year 1937 a group of coffee estates in the Mysore State from the Tea Estates (India) Ltd. Out of this purchase, the assessee, his uncle, M.C. Pothan, and another, K.M. Cherian, got as their share of the purchase an estate known as the Devadanam Group which was valued at Rs. 35,000. In 1940, part of the estate was taken away by K.M. Cherian. Accordingly, the remaining extent of that estate was left with the assessee and his uncle, M.C. Pothan, and in this estate, the two persons were entitled in the ratio of 7 : 4. In or about the year 1943, the assessee and the above-said Pothan promoted a public limited company called the Anaparai Estates Ltd. To this estate, they sold the Devadanam Coffee Estate for a consideration of rupees six lakhs and the consideration was received by them in the shape of shares allotted to them in that company. The assessee was allotted 1,90,909 shares which at Rs. 2 each were valued at Rs. 3,81,818. The other sharer, M.C. Pothan, was allotted 1,09,091 shares valued at Rs. 2,18,181, Even at this stage, it may be mentioned that on January 30, 1944, apparently on an enquiry…

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