Law: Income Tax Act, 1961

Section: 2(47)

Section 148, read with sections 2(47) and 45, of the Income-tax Act, 1961 [Corresponding to section 34(1), read with section 12B, of the Indian Income-tax Act, 1922 - Income escaping assessment - Issue of notice for - Assessment year 1957-58 - Assessee-company was carrying on business as managing agents and also as a share dealer and investor in shares - In original assessment ITO had brought two sums, namely, profits on sale of shares of a company and a sum realised on sale of right to subscribe for shares of a company, as assessee's business income - Tribunal on appeal held that two sums in question were not income hence, not taxable, at same time it also held that it was open for ITO to proceed further to tax sum as "capital gains" - ITO thereafter issued a notice under section 34(1)(b) of 1922 Act to assessee alleging that he had reason to believe that assessee's income for assessment year 1957-58 had escaped assessment and had been under assessed - Assessee filed writ petition challenging impugned notice on ground that ITO had no "information" in his possession and no "reason to believe" that income had escaped assessment and that sale of right of shares could in no case be treated as capital asset - Whether a right to subscribe for shares is property and it is a capital asset - Held, yes - Whether since Tribunal brought matter to notice of ITO that said particular receipts were taxable not as business but as capital gains, order of Tribunal constituted information and thus, impugned notices were valid - Held, yes FACTS The assessee-company was carrying on business as managing agents of two companies. The assessee was also a recognised share dealer and an investor in shares. For the assessment year 1957-58 the assessment of assessee included a sum of Rs. 43,190 as the profit on the sale of shares of a company. These shares, according to the assessee, were not acquired for the purpose of dealing in them but were received from its managed company in respect of managing agency commission. The assessment was confirmed on appeal by the AAC but on second appeal the Tribunal held that the difference between the price at which the shares were sold and the cost of…

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