High Court affirms Assessing Officer's decision on share acquisition cost, emphasizing importance of considering original & bonus shares for capital gains.

The High Court upheld the Assessing Officer's decision regarding the cost of acquisition of shares, rejecting the appellant's argument and affirming the Tribunal's ruling. The court emphasized the importance of considering the cost of acquisition for both original and bonus shares in calculating capital gains, in line with principles established in previous court decisions. The appellant's reliance on a Division Bench decision was deemed inapplicable, leading to the dismissal of the appeal.

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Issues:
- Issue 1: Acceptance of cost of acquisition of shares by the Tribunal.

Analysis:
1. The appellant filed a return of income for the assessment year 1990-91, declaring a total income. The Assessing Officer issued a notice under section 148 of the Income-tax Act, 1961, regarding the sale proceeds of bonus shares. The appellant opted for the original cost of acquisition of shares and not the fair market value, invoking section 55(2)(b)(i) of the Act.

2. The assessing authority applied the ratio from a previous court decision and calculated the capital gains differently. The appellant appealed to the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, but both rejected the appellant's stand. The appellant then approached the High Court challenging the decisions.

3. The appellant argued that a Division Bench decision supported their method of calculating capital gains for both original and bonus shares. However, the respondent contended that the method should be based on the value as on April 1, 1974, as per the previous court decision.

4. The High Court analyzed the principles laid down in the previous court decision and found that the method adopted by the Assessing Officer was correct. The court emphasized the importance of considering the cost of acquisition for both original and bonus shares when determining the value of the shares sold.

5. The High Court distinguished a subsequent Division Bench decision that was cited by the appellant, stating that it did not apply to the facts of this case. The court concluded that the Tribunal's decision, affirming the Assessing Officer's order, was justified. Therefore, the question of law was answered against the appellant, and the appeal was dismissed.

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