NARAYANAN K N Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THESE writ appeals arise from the common judgment in O.P. Nos. 3444 and 3445 of 1979 (K. N. Narayanan v. 1TO [1984] 145 ITR 373 (Ker)). The learned judge dismissing the petitions challenging the order made by the Commissioner of Income-tax under Section 264 of the Income-tax Act, 1961, held that, in respect of the shares in question, there was a sale and a resale, and consequently income arose under the head "Capital gains", and the returns filed by them for the assessment year 1977-78 including such income had been correctly filed, and the Commissioner was right in rejecting the subsequent contention of the petitioners that the returns were wrongly filed and no such income arose.

(2.) THE petitioners held 1,700 shares each in a company called Haileburia Tea Estates Ltd. K. N. Narayana Iyer, who is the petitioner in O. P. No. 3444 of 1979, entered into a contract on behalf of himself and his relatives and nominees, including the petitioner in O. P. No. 3445 of 1979, being his brother, with M/s. Tea Sales & Allied Industries (India) Private Ltd., as evidenced by exhibit P-1. THE shares in question were agreed to be sold not later than March 31, 1979. THEy were admittedly sold before that date. THE last paragraph in exhibit P-1 reads :

(3.) ON a careful examination of the paragraph which we have set out above, it would be clear, as we have already indicated, that what the parties had provided, for whatever reason, is that in the event of the totality of 1,19,760 shares not being transferred by reason of the failure to get the necessary sanction of the authorities, even the shares transferred should be retransferred and the amounts paid should be repaid. In other words, what had been sold had to be resold and the money paid had to be repaid in the event of any one share out of the totality of shares covered by the agreement remaining unsold. This is exactly what the parties intended by the agreement and what they accomplished. This is how the parties understood the transaction at all material times, as is clear from exhibit P-1, and also from their subsequent conduct in filing the returns showing capital gains arising from the sale of the shares in question here. In the circumstances, the Commissioner rightly found that the assessees who are the appellants here made no mistake in filing the returns and the concerned officer made no mistake in assessing them in respect of the amounts returned. The learned judge has also so found and we are in complete agreement with that conclusion. The appeals are accordingly dismissed. The parties shall bear their respective costs.