COMMISSIONER OF INCOME TAX Vs. NARAYANA PAI T

JUDGEMENT

(1.) THIS reference under section 256(1) of the Income-tax Act, 1961, hereinafter called "the Act", made at the instance of the Commissioner of Income-tax, Mysore, relates to the assessment year 1965-66. The question of law referred by the Income-tax Appellate Tribunal, Bangalore Bench, is :

(2.) FOR the assessment year 1965-66, an assessment order was made by the Income-tax Officer on June 8, 1966, on a total income of Rs. 29,062, which include share of profits from various firms and also dividends and interest on securities. On March 27, 1965, in the year of account relevant to the assessment year 1965-66, the assessment had sold 4,735 partly paid "B" class ordinary shares of Rs. 10 each (Rs. 7.50 paid) of the Syndicate Bank Ltd., Manipal, to Dr. T. M. A. Pai Benevolent Fund Trust at the cost price. The Commissioner of Income-tax issued under section 263 of the Act a notice dated April 19, 1968, requiring the assessee to show causes as to why the assessment order darted June 8, 1966, should not be revised and the Income-tax Officer asked to re-do the assessment by assessing capital gains arising out of the sale of the shares by applying the provisions of section 52 of the Act. The assessee, through his authorised representative, filed objections to the proposed revision. It was contended in the said objections that the provisions of sub-section (1) of section 52 of the Act are not applicable to the instant case and that the provisions of sub-section (2) of the said section are also not applicable in view of the fact that partly paid up share of the Syndicate Bank Ltd. are not quoted in the market and they also do not find ready buyers and, therefore, there is no basis to hold that their fair market value on the date of transfer was Rs. 16.90 per share as stated in the notice of the Commissioner. The objection raised by the assessee were rejected by the Commissioner, and by order dated May 4, 1968, he set aside the assessment order of the Income-tax Officer and directed him to re-do the assessment in accordance with law.

(3.) THE question now is whether the tribunal was right in the view it has taken that there was no material for the Commissioner of Income-tax to the conclusion that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue.