1981 (8) TMI 40

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....arket. The assessee had sold the shares in the previous year relevant to the assessment year 1972-73 and disclosed capital loss in his return on the basis of the market value of those shares as on January 1, 1954. The value of the shares as on January 1, 1954, was worked out by an approved valuer and the assessee had submitted the valuer's report which showed the method of valuation adopted by him. The ITO accepted the report of the valuer and computed capital loss on its basis. The assessment order was passed by the ITO on March 29,1975. On March 12, 1979, the ITO with the previous approval of the Commissioner of Income-tax issued a notice under s. 148 read with s. 147(a) of the Act stating to the effect that income chargeable to tax has e....

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....nt year, namely, (i) the ITO must have reason to believe that income, profits or gains chargeable to income-tax had been under-assessed; and (ii) he must have reason to believe that such " under-assessment " had occurred by reason of either, (a) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the ITO acquires jurisdiction to issue notice under the said section. If there are in fact some reasonable grounds for the ITO to believe that there had been any non-disclosure as regards any fact which would have a material bearing on the question of under-assessment, that would be sufficient ....

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....n. It is not in dispute that the assessee, while disclosing the capital loss in the return, filed the approved valuer's report in support of the claim for capital loss. The approved valuer had, in his report, disclosed the method which he had adopted for valuing the shares. This method was later on approved by the CBDT. However, whether or not this method was approved by the CBDT is not material; what is material and what is not disputed is that the method adopted by him was a recognised method of valuation. The ITO, while making the assessment, could have questioned the valuation made by the valuer and adopted a different method. He, however, did not choose to do so and proceeded to complete the assessment on the basis of the approved v....