Ajit Kumar Sengupta, J. - (1.) In this application under Article 226 of the Constitution of India, the petitioner challenged, inter alia, the legality and/or validity of a notice dated March 19, 1976, issued under Section 148 of the Income-tax Act, 1961, for the assessment year 1959-60. The case of the writ petitioner is that the petitioner is an investment company having income from dividends and interest on deposits. This application relates to the assessment of the petitioner under the Indian Income-tax Act, 1922 (hereinafter referred to as "the old Act"), for the assessment year 1959-60, for which the relevant accounting year ended on March 31, 1959. The petitioner maintained its accounts according to the mercantile system of accountancy.
(2.) As on March 31, 1949, the petitioner had 40,000 equity shares in Rajasthan Trading Co. Ltd. In March, 1949, Rajasthan Industries Ltd. (hereinafter referred to as ""the new company") came into existence with a share capital of 36,300 ordinary shares of Rs. 10 each, out of which 36,266 shares were acquired by the said Rajasthan Trading Co. Ltd. by paying Rs. 100 per share towards premium. In March, 1949, the said Rajasthan Trading Co. Ltd. (hereinafter referred to as "the defunct company") went into liquidation. On the liquidation of the said Rajasthan Trading Co. Ltd., the petitioner received 4,820 ordinary shares of the said new company which was duly disclosed in the balance-sheet of the petitioner as on March 31, 1950.
(3.) By a resolution passed at the meeting of the shareholders of the new company held on March 18, 1959, it was, inter alia, resolved that a sum of Rs. 32,67,000 standing to the credit of the share premium account be capitalised and the same be applied in paying up 36,300 ordinary unissued shares of Rs. 90 each and the said shares be issued to the members as fully paid bonus shares to rank pari passu in all respects with the existing ordinary shares and the said shares be allowed to the holder of 36,300 shares in the capital of the company in proportion to one ordinary share of Rs. 90 each for every one already issued ordinary shares held by such member on March 18, 1959, and that the ordinary shares so distributed for all purposes be treated as an increase of the nominal amount of the capital of the company held by each such person and not as income. Pursuant to the said resolution of the shareholders and the resolution of the board of directors of the new company, the petitioner received 4,840 bonus shares of Rs. 90 each fully paid in respect of the said 4,840 shares held by it. By the said resolution of the new company dated March 18, 1959, it was further resolved that the said 36,300 shares of Rs. 10 each and 36,300 bonus shares of Rs. 90 each be consolidated into 36,300 ordinary shares of Rs. 100 each and that every one share of Rs. 90 be consolidated with every one ordinary share of Rs. 10 into one share of Rs. 100 each.;