COMMISSIONER OF INCOME TAX Vs. RASIKLAL MANEKLAL HUF

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Indian Income -tax Act, 1922 (hereinafter referred referred to as 'the Act'), at the instance of the revenue. The question referred for our determination relates to the assessment year 1961 -62, for which the corresponding accounting year ended on March 31, 1961.

(2.) THE assessee is a Hindu undivided family deriving income from interest on securities, dividends, property and dealing in shares, both ready and forward. In or about the year 1941, the assessee purchased one share of the Shorrock Spinning and . (hereinafter referred to as 'the Shorrock company') of the face value of Rs. 1,000 for Rs. 3,307. Later on, this share was split up into 10 shares of Rs. 100 each and 30 shares of the face value of Rs. 100 each were issued to the assessee from time to time by way of bonus shares by the Shorrock company. As a result of this splitting up and the issue of bonus shares, on December 31, 1959, the assessee owned 90 shares in the Shorrock company of the face value of Rs. 100 each.

(3.) THE Income -tax Officer at the time of the assessment, though he was apprised of the fact of the scheme of amalgamation and of acquisition of 45 shares by the assessee of the New Shorrock company, did not consider the matter from the point of view of the applicability of section 12B of the Act. On January 21, 1964, the Commissioner of Income -tax, Bombay City II, issued a notice under section 33B of the Act to the assessee, inter alia, informing him that upon sanctioning of the scheme of amalgamation of the two companies he received 45 shares of New Shorrock company in exchange of his original holding of 90 shares in Shorrock company in December, 1960; that this exchange of shares resulted in a considerable amount of profit to him, which was not considered by the Income -tax Officer in the regular assessment; that the order of the Income -tax Officer is erroneous and prejudicial to the interests of the revenue and that in exercise of the powers conferred by section 33B(1) he proposed to direct the Income -tax Officer to revise the assessment and include in the total income the profits arising to the assessee in the transaction. By this notice an opportunity was given to the assessee to show cause why such an order should not be passed. By the attorney's letter, dated January 23, 1964, the assessee objected to the proposed action on the part of the Commissioner of Income -tax. After hearing the assessee on January 29, 1964, the Commissioner of Income -tax passed an order directing the Income -tax Officer to revise the assessment and include an amount of Rs. 49,350 which according to him was capital gain in the transaction resulting in acquisition of 45 shares of New Shorrock company in place of 90 shares held by him in Shorrock company.