Subscription rights as capital assets and later legal information can justify reassessment for escaped income.

A right to subscribe for shares was treated as property of transferable value and therefore a capital asset; the amount realised on renunciation could fall within capital gains taxation under the statutory framework for transfer or relinquishment of capital assets. For reassessment, information could include a later judicial or appellate exposition of law, and that material could support a belief that income had escaped assessment. Income assessed under an erroneous legal head was also treated as escaped assessment, so the reassessment notice was valid and not without jurisdiction.

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Issues: (i) Whether the right to subscribe for shares constituted a capital asset so that the amount realised on renunciation could be treated as capital gains. (ii) Whether the notice issued for reassessment under section 34(1)(b) was without jurisdiction for want of information and reason to believe that income had escaped assessment.

Issue (i): Whether the right to subscribe for shares constituted a capital asset so that the amount realised on renunciation could be treated as capital gains.

Analysis: The expression "capital asset" under section 2(4A) was construed broadly as property of any kind held by an assessee, subject to the stated exclusions. A right to subscribe for shares was treated as property having transferable value. The court also noted that section 12B covered profits arising from relinquishment or transfer of a capital asset, and the receipt on renunciation of subscription rights fell within that statutory framework.

Conclusion: The right to subscribe for shares was a capital asset and the amount realised on its renunciation was capable of being assessed as capital gains.

Issue (ii): Whether the notice issued for reassessment under section 34(1)(b) was without jurisdiction for want of information and reason to believe that income had escaped assessment.

Analysis: Section 34(1)(b) was read as requiring information in the possession of the Income-tax Officer after the original assessment and a resultant belief that income had escaped assessment or been under-assessed. The court held that information as to the true legal position, including an appellate or judicial pronouncement, could constitute information within the provision. On the facts, the Tribunal's decision supplied such information, and escaped assessment included a case where income had been assessed under an erroneous head.

Conclusion: The reassessment notice under section 34(1)(b) was valid and not without jurisdiction.

Final Conclusion: The petitions failed in substance, and the challenge to the reassessment proceedings was rejected.

Ratio Decidendi: For purposes of reassessment under section 34(1)(b), information may include a later judicial or appellate exposition of law, and income already assessed under an erroneous legal head may be treated as having escaped assessment.

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