This appeal has been filed by assessee on 14th Dec., 2005 against order of learned CIT(A)-XXVIII, New Delhi dt. 28th Nov., 2005 in case of assessee in relation to assessment order under s. 143(3) r/w s. 147 for asst. yr. 2001-02. Major disputes in this appeal relate to reopening of assessment under s. 147 and addition of sum of Rs. 10.80 crores, made by AO to declared income, under head "Income from other sources". Facts of case leading to this dispute briefly are that assessee is leading cardiac surgeon and was associated with M/s Escorts Heart Institute and Research Centre at New Delhi. assessee filed return of income for asst. yr. 2001-02 declaring total income at Rs. 5,81,19,929 on 31st Dec., 2001. AO first completed assessment order under s. 143(3) on 28th Feb., 2003 accepting return of income as filed by assessee. Thereafter communication was received by AO from A O having jurisdiction over case of M/s Escorts Ltd. that Escorts Heart Institute & Research Centre, Delhi (hereinafter referred to as EHIRC, Delhi ) had been taken over by company named and styled as M/s Escorts Heart Institute & Research Centre Ltd. (hereinafter to as EHIRL ) and assessee Dr. Naresh Trehan had acquired 10 per cent shares of EHIRL by investing only Rs. 20 lakhs whereas book value of EHIRL was Rs. 1,10,14,12,937. On that basis value of 10 per cent shares acquired by assessee worked out to Rs. 11,01,41,293. assessment of M/s Escorts Ltd., who acquired 80 per cent shares of EHIRL had been made and addition of Rs. 88,11,30,349 was assessed in their assessment in that respect. On that basis, notice under s. 148 was issued in case of assessee for reassessment of income for asst. yr. 2001-02. Thereafter, AO completed assessment order under s. 143(3) r/w s. 147 on 9th March, 2005 wherein addition of Rs. 10.80 crores was made as respects assessee s acquisition of 10 per cent shares of EHIRL. In assessment order, learned AO noted that EHIRC, Delhi was set up in Delhi on 3rd Dec., 1981 as charitable society and M/s Escorts Ltd. donated Rs. 60 lakhs to EHIRC, Delhi. That society obtained approval of Central Government under s. 35(1)(ii) of Act for its donors and its income was treated as exempt under s. 10(21) of Act. However, in November, 1999 another society with identical name was set up at Chandigarh (hereinafter referred to as EHIRC, Chandigarh ). only difference was that clauses relating to charitable activities as in case of EHIRC, Delhi were omitted in aims and objects of EHIRC, Chandigarh. On 1st April, 2000, EHIRC, Delhi purported to merge with EHIRC, Chandigarh. Subsequent to merger, EHIRC, Chandigarh was converted into company, viz. EHIRL. This mechanism was used by persons at control of affairs of EHIRC, Delhi in order to gain control and benefit over accumulated assets of EHIRC, Delhi which had enjoyed several tax exemptions and other benefits due to its charitable objectives in past. According to learned AO, setting up of EHIRL in this manner was not legal and not in order because EHIRC, Delhi was charitable society that had obtained various concessions from Central Government and IT Department. Merger of EHIRC, Delhi with EHIRC, Chandigarh that was commercial society set up for non-charitable purposes, without prior intimation to Delhi Development Authority from whom land was obtained for charitable purposes at concessional rate and IT Department from whom several tax exemptions had been obtained year after year was contrary to provisions of s. 13 of Societies Registration Act. Further s. 12 of Societies Registration Act required that every member of society was informed about proposed merger whereas Shri Anil Nanda in his statement recorded on oath by Investigation Directorate, Chandigarh had stated that he was never informed about proposed merger of EHIRC, Delhi with EHIRC, Chandigarh. Thus provisions of s. 12 violated. Thirdly, when EHIRC, Chandigarh was converted into company EHIRL, Registrar of Societies was informed by letter dt. 30th June, 2000 that assets of EHIRC, Chandigarh were to tune of Rs. 7,000 only. bank accounts of EHIRC, Delhi continued to be operated in name of old society at Delhi even subsequent to merger of EHIRC, Delhi with EHIRC, Chandigarh. Thus acquisition of assets of enormous value was not revealed to Registrar of Societies. Fourthly, while merger of all assets and liabilities of EHIRC, Delhi with EHIRC, Chandigarh was said to have taken place on 1st Oct., 2000, intimation of merger was given to Registrar of Societies on 14th March, 2001 only. Thus facts of merger were deliberately withheld for very long period. Fifthly, Shri O.P. Verma, Secretary, EHIRC, Delhi issued certificate on 1st April, 2000 that all assets of EHIRC, Delhi stood vested in EHIRC, Chandigarh as on 1st April, 2000. Contrary to this in letter dt. 30th June, 2000 from Director of EHIRL to Registrar of Societies at Chandigarh it was stated that pursuant to conversion of EHIRC, Chandigarh into EHIRL assets worth Rs. 7,000 only were received by EHIRL from EHIRC, Chandigarh. Sixthly, provisions of s. 12 of Societies Registration Act provided that fundamental principles of society could not be altered unless such power was specifically reserved Prasanna Venkatesa Rao vs. K. Srinivasa Rao AIR 1931 Mad 12. In instant case, EHIRC, Delhi altered its fundamental principle of being charitable society when it merged with EHIRC, Chandigarh. learned AO therefore held view that merger of EHIRC, Delhi with EHIRC, Chandigarh was sham and abusing law of land by providing wrong information to concerned parties with sole intention of obtaining assets of EHIRC, Delhi at nominal value as against real worth of those assets at time of conversion into company, EHIRL. In fact all assets of EHIRC, Delhi were not even legally routed through EHRIC, Chandigarh and same were directly transferred to EHIRL. assessee was among first directors of EHIRL as per Articles of Association of EHIRL and acquired 10 per cent shareholding on payment of Rs. 20 lakhs by cheque No. 446802, dt. 29th June, 2000 drawn on Standard Chartered Bank. That cheque was encashed on 20th July, 2000 whereas assessee was said to have acquired shares on 27th May, 2000. From available records book value of EHIRL at relevant time was Rs. 1,10,14,12,937 market value could be much more. Thus by investing only Rs. 20 lakhs assessee acquired 10 per cent shareholding which was of value of at least Rs. 110.14 crores. During course of assessment proceedings, learned AO issued show-cause notice to assessee on 21st Feb., 2005 and that was replied by t h e assessee as per letter dt. 28th Feb., 2005. salient features of assessee s reply and AO s comments in assessment order are as under: (i) assessee submitted that he was only promoter director of EHIRL and after formation of EHIRL he ceased to be director of that company. learned AO rejected this contention. assessee had not furnished his bank statement. Even cheque No. 446802 was admittedly dt. furnished his bank statement. Even cheque No. 446802 was admittedly dt. 29th June, 2000 whereas EHIRC, Chandigarh had been converted into EHIRL on 30th May, 2000. It was worth noticing that shares had been allotted to assessee on 27th May, 2000; (ii) According to assessee he had bought shares of EHIRC, Chandigarh and by virtue of being shareholder he became signatory to memorandum of articles of EHIRL. learned AO did not accept this contention because assessee had issued cheque for subscribing to share capital only on 29th June, 2000 when EHIRL had already been brought in existence EHIRC, Chandigarh had applied on 23rd May, 2000 to Registrar of Companies at Chandigarh and certification of incorporation of EHIRL had already been issued on 30th May, 2000. documents including Memorandum and articles of association were executed and signed on 19th May, 2000 and assessee was one of signatories to relevant documents. As per documents submitted assessee was part of governing body of EHIRC, Chandigarh. These facts showed that there was mala fide arrangement and connivance between Escorts group and assessee with object to have illegal benefit and control over assets of EHIRC, Delhi; (iii) assessee submitted that he was not involved in merger of EHIRC, Delhi and EHIRC, Chandigarh. learned AO did not accept this explanation. assessee was renowned doctor and had been working as Executive Director EHIRC, Delhi since beginning. He was only beneficiary other than Nanda family of Escorts group in EHIRL. That showed that assessee was fully involved in entire exercise; (iv) assessee argued that IT Department did not have jurisdiction over matters concerning Registrar of Societies and Registrar of Companies. learned AO did not accept this contention. It was well within jurisdiction of IT Department to investigate into affairs of transactions. Department was required to assess correct tax if any tax avoidance was made. (v) assessee argued that provisions of s. 2(24)(iv) of Act did not apply in case of assessee because assessee was not person who had substantial interest in company. As per definition in s. 2(32) only person who had 2096 or more of voting power could be said to be person having substantial interest in company. As assessee was having only 10 per cent of share capital he did not have substantial interest in EHIRL. learned AO did not accept this contention because under s. 2(24)(iv) any person who was director of company became chargeable to tax. assessee was director of EHIRL when benefit was derived by him. assessee was initial subscriber to memorandum and articles of association of EHIRL. He was also member of governing body of EHIRC, Chandigarh. assessee was among first directors of EHIRL. Therefore, benefit had arisen to assessee by virtue of his directorship. learned AO referred to judgment of Hon ble Madras High Court in case of CIT vs. S. Varadarajan (1997) 141 CTR (Mad) 10: (1997) 224 ITR 9 (Mad) that assets purchased at price less than fair market value by director resulted into benefit in terms of s. 2(24)(iv). Difference between fair market value of asset and price paid could be assessed as income chargeable to tax even if benefit was in nature of capital. It was also held in that judgment that fact that there was no receipt to assessee was not relevant. provisions of s. 2(24)(iv) were very wide and included benefits other than by cash or benefits of capital in nature. Therefore, plea of assessee that benefit was notional and should be taxed only when shares were actually sold was not tenable. provision was applicable at time when benefit was actually derived, whether convertible into money or not or whether it was on capital account or revenue account. In instant case benefit was derived at time assessee acquired 10 per cent shares by virtue of his directorship and by way of subscription to memorandum and articles of association. assessee in connivance with Escorts Ltd. benefited in controlling assets of erstwhile charitable society EHIRC, Delhi. As EHIRL was newly incorporated and had not done business, value of its shares could best be represented on basis of value of its assets. learned AO rejected contentions of assessee that if transaction was illegal then no income could be charged under s. 2(24)(iv). provisions of IT Act did not distinguish between income acquired through legal or illegal means. Fact of matter was that assessee had received shares of EHIRL at very meagre price; (vi) learned AO argued that definition of "income" under s. 2(24) was inclusive definition and therefore, even if sub-cl. (iv) did not apply that did not mean that transaction did not result into any income to assessee. Reliance was placed on judgment of Hon ble Supreme Court in case of CIT vs. G.R. Karthikeyan (1993) 112 CTR (SC) 302: (1993) 201 ITR 866 (SC). (vii) omission of provisions of s. 17(2)(iiia) did not help case of assessee. assessee was not employee of company at point of time when benefit accrued to him in form of concessional allotment of shares; and (viii) reliance placed by assessee on judgment of Hon ble Delhi High Court in case of R. Dalmia vs. CIT (1972) 84 ITR 661 (Del) was misplaced. That was case of amalgamation that did not change status of controlling interest in company. Further, point in that case was whether that company was company in which public was substantially interested. There was no such issue in case of assessee. Based on reasoning as aforementioned, learned AO held that assessee derived income by way of benefit or perquisite from EHIRL to extent of difference in intrinsic value of shares @ Rs. 550 per share as reduced by investment made by assessee @ 10 per share. He, therefore, assessed difference amounting to Rs. 10.80 crores as assessee s income from other sources. During course of proceedings before learned CIT(A) assessee raised five grounds of appeal. first ground challenged initiation of proceedings under s. 147. assessee argued that along with return of income filed originally assessee had annexed audited balance sheet and P&L a/c. One of schedules appended to annual accounts reflected assessee s investment in EHIRL. On this basis assessee argued that all material facts had been disclosed during course of original assessment proceedings and thereafter assessment order under s. 143(3) had been made. Hence initiation of proceedings under s. 147 was based on change of opinion on same facts and therefore initiation of proceedings under s. 147 was bad in law. Secondly, assessee argued that assessment in case of assessee was reopened on basis of assessment order in case of M/s Escorts Ltd. While doing so AO failed to realise that there was considerable difference between facts of case of Escorts Ltd. and facts of case of assessee. Escorts Ltd. had made initial contribution of Rs. 60 lakhs while setting up EHIRC, Delhi. assessee on contrary did not make any such contribution and therefore it was Escorts Ltd. who had nurtured EHIRC, Delhi and was instrumental in its merger with EHIRC, Chandigarh and subsequent conversion into EHIRL. It was Escorts Ltd., who dominated scene all along and even in EHIRL they acquired 8096 shares of that company at par. Escorts Ltd. was already in business of holding investments and therefore it was case of Revenue that M/s Escorts Ltd. had all along promoted EHIRC, Delhi as investment proposition. assessee was neither involved in formation of EHIRC, Delhi nor made any capital contribution to EHIRC, Delhi and assessee was also not in business of holding investments. Whatever investment assessee had made were not held as business and if any gains arose on sales thereof same had been offered for assessment under head "Capital gains". There was thus no parity on facts between Escorts Ltd. and assessee and learned AO erred in initiating proceedings under s. 147 in case of assessee as sequel to initiation of proceedings under s. 147 in case of Escorts Ltd. learned CIT(A) considered reasons recorded by AO for initiation of proceedings under s. 147 and he has reproduced them in para 3 of impugned order. learned CIT(A) held that it was true that in reason recorded AO had made reference to M/s Escorts Ltd. However, from that it did not follow those proceedings under s. 147 had been initiated in case of assessee for reason only that such proceedings had been initiated in case of M/s Escorts Ltd. fact of matter was that assessee also was allotted shares in EHIRL. book value of those shares worked out at Rs. 550 per share whereas assessee had got them at face value of Rs. 10 per share. That clearly indicated that assessee had got huge benefit on allotment of shares at par. learned CIT(A) did not find merit in contention of assessee that necessary material for assessment of assessee had already been disclosed in original assessment proceedings. mere fact that investment in shares was shown in balance sheet did not amount to full and true disclosure of all material facts. He referred to provisions of Expln. 1 to s. 147 that production before AO of account books or other evidence from which material evidence could with due diligence have been discovered by AO would not amount to disclosure within meaning of proviso to s. 147. Moreover other connected and relevant facts were not placed before AO when he completed original assessment. Therefore, it was not case of change of opinion because no opinion at all had been formed by AO at time of original assessment in respect of this particular issue. That being so only requirement for valid initiation of proceedings under s. 147 in case of assessee was that he had prima facie satisfaction that assessee s income chargeable to tax had escaped assessment. Based on this reasoning learned CIT(A) rejected assessee s grounds of appeal disputing initiation of proceedings under s. 147. On merits assessee argued that addition of Rs. 10.80 crores on ground that income to that extent resulted from purchase of 2,00,000 equity shares of EHIRL was not justified. To begin with, in assessment order learned AO had himself given finding that merger of EHIRG, Delhi with EHIRC, Chandigarh was not only illegal but sham also. These findings of AO were uncalled for and factually incorrect. EHIRC, Delhi was duly registered as society under Societies Registration Act, 1860 on 21st Oct., 1981. society obtained exemption under s. 10(21) and also enjoyed benefits under s. 35(1)(ii). society received contribution of Rs. 60 lakhs from Escorts Ltd. Several other companies, besides Escorts Ltd. such as Siemens Ltd., Tata Ltd., Parle Beverages Ltd., ANZ Grindlays Bank, Bank of America, Bata India Ltd. had made sizeable contributions to EHIRC, Delhi. However subsequently it was felt that objectives of undertaking research in medical field would be achieved in better way if said research was undertaken by corporate entity instead of its existing structure. It was believed that corporate entity would be able to effectively achieve objective of expansion and diversification of existing hospital and attract latest technology in medical field. To achieve that object EHIRC Delhi merged into EHIRC, Chandigarh and merged entity was converted into joint stock company EHIRL. rationale behind corporatisation of EHIRC, Delhi was to mobilise massive financial technical resources so as to achieve rapid expansion. For that purpose it was necessary that EHIRC, Delhi was backed by k and reputed industrial house that would generate confidence in potential collaborators. obvious choice was Escorts. assessee further argued that learned AO was not at all justified in holding view that amount of Rs. 60 lakhs that had been contributed by Escorts Ltd. on 30th Dec., 1991 constituted investment. said amount constituted expenditure for which deduction was claimed by Escorts Ltd. for asst. yr. 1982-83 under s. 35(1)(ii). By spending amount of Rs. 60 lakhs Escorts Ltd. obtained no rights whatsoever. There was no justification also for finding that amalgamation of EHIRC, Delhi with EHIRC, Chandigarh was on paper only and not legal. Amalgamation of EHIRC, Delhi with EHIRC, Chandigarh was made after complying with all formalities for which information was given to Registrar of Societies. Subsequent conversion of EHIRC, Chandigarh was also done after complying with all legal formalities. After relevant authorities entrusted with responsibility of ensuring compliance under respective statutory provisions had approved merger and conversion, AO had no jurisdiction in law to pronounce on legality of action taken in that respect. learned AO had no right to question legality of EHIRL. argument of AO that provisions of s. 13 of Societies Registration Act had been violated was not correct. provisions of s. 13 did not apply to facts of EHIRC, Delhi and therefore there was no need to obtain approval of Government. Sec. 13 applied to dissolution and not when one society amalgamated with another society. Hence, no consent of Government was required. Even otherwise Government was neither member nor contributor nor having any other interest in EHIRC, Delhi. As to land allotted to EHIRC, Delhi by DDA, from that it did not follow that DDA which was body corporate became contributor to or otherwise interested in EHIRC, Delhi. As to income-tax exemption allowed to EHIRC, Delhi same was done in accordance with law and by grant of exemption under s. 10(21) Government did not become "interested" in EHIRC, Delhi. As to contention of AO that provisions of s. 12 of Societies Registration Act were violated assessee argued that Shri Anil Nanda was not member either of EHIRC, Delhi or EHIRC, Chandigarh in his personal capacity. Therefore, question of officially informing Mr. Anil Nanda in his personal capacity did not arise. company named Goetz (India) Ltd. of which Shri Anil Nanda was chairman and managing director was member of EHIRC, Delhi. Like other members due notice of meeting was sent to Goetz Ltd. also. assessee had not been given any copy of statement of Anil Nanda that was referred to and relief upon by AO. assessee argued that reliance placed by learned AO on Madras High Court judgment in case of Prasanna Venkatesa Rao vs. K. Srinivasa Rao AIR 1931 Mad 12 was based on misconception. principle laid down in that decision was that members of association could not create internal rules or bye laws that were inconsistent or contrary to purpose for which association had been formed. said decision did not lay down that "purpose of association" could not be changed. principle that majority of body of persons could not after fundamental principle of body only meant that internal rules and regulations and bye laws governing relationship of members interest could not be altered in manner that was inconsistent or contrary to objects for which society was formed. Even that restriction was subject to exception where such power had especially been reserved. It therefore did not follow that objects of association could never be altered. learned AO was therefore not justified in holding that amalgamation of EHIRC, Delhi with EHIRC, Chandigarh was on paper only. All legal formalities that were required had been complied with. EHIRL had received Certificate of Incorporation from Registrar of Companies and that certificate was conclusive as provided for in s. 35 of Companies Act, 1956. assessee further argued that learned AO was not justified in taking view that amalgamation of EHIRC, Chandigarh with EHIRL was only facade meant to acquire control over assets of EHIRC, Delhi. AO was not justified in relying on principle of lifting corporate veil. In case of Union of India vs. Azadi Bachao Andolan (2003) 184 CTR (SC) 450: (2003) 263 ITR 706 (SC), apex Court had rejected similar arguments of tax authorities and held that they could not disregard transaction which was otherwise proper and legal. It was not permissible to treat certain intervening legal steps as non est based upon some hypothetical assessment of "real motive" of assessee. Therefore, EHIRL could not be loosely declared as facade merely on basis of some hypothesis of underlying motives as perceived by AO. It was well-settled principle of law that company was legal entity different from shareholder. During course of hearing before learned CIT(A) assessee kly objected to reliance placed by AO on provisions of s. 2(24)(iv). No profits could arise in law from mere purchase of or subscription to, shares. profits could arise only at time of sale of shares. Even if it was assumed for sake of argument that intrinsic value of shares of EHIRL was higher than price paid for shares of EHIRC, Chandigarh by assessee, said increase in value was purely notional and could not be assessed to tax if shares were not actually transferred and gain was not realised. As on date of acquisition of shares there could be nothing more than expectation of profit. profit expected was not chargeable to tax unless and until actually realised. Secondly, even if it was to be assumed that Escorts Ltd. had obtained control over assets of EHIRL that in itself did not generate any income. As explained in judgment of Hon ble Supreme Court in Mrs. Bacha F. Guzdar vs. CIT (1955) 27 ITR 1 (SC) and Calcutta Tramways Co. Ltd. vs. CWT 1972 CTR (SC) 405: (1972) 86 ITR 133 (SC) company was different legal entity from its shareholders. shareholders had no rights in assets of company except when dividends were declared or when assets of company were distributed on liquidation. fact that M/s Escorts Ltd. was substantial shareholder of EHIRL did not mean that it could enjoy benefit of those assets. At any rate assessee was having only 10 per cent shareholding in EHIRL. It could not therefore be said that difference in intrinsic value of shares and sum paid by assessee as purchase price was benefit received by assessee within meaning of s. 2(24)(iv) of Act. For purpose of application of provisions of s. 2(24)(iv) three conditions were required to be satisfied, viz., (a) benefit should be obtained from company; (b) benefit should be obtained by person, who had substantial interest in company; and (c) such person should be beneficial owner of at least 20 per cent of shares of company. In case of assessee none of aforesaid conditions were satisfied. EHIRC, Chandigarh that allotted shares to assessee for first time was not company as defined in s. 2(17) of Act. assessee did not hold any shares in EHIRC, Chandigarh prior to such allotment of shares. Therefore, on date on which shares were allotted by EHIRC, Chandigarh to assessee, assessee did not fall within definition of term "person who has substantial interest in company" and, therefore, provisions of s. 2(24)(iv) could have no application. learned CIT(A) did not accept arguments of assessee as enumerated by us in preceding paragraphs at some length. He held that though he was not immediately concerned with issue of merger of EHIRC, Delhi with EHIRC, Chandigarh and subsequent conversion of EHIRC, Chandigarh into EHIRL chain of events did show well-thought out strategy to achieve pre-meditated results. subsequent events unfolded that M/s Escorts Ltd. sold its shareholding in EHIRL to M/s Fortis Healthcare. It could safely be assumed that real motive was to encash what was hitherto charitable society by converting it into private earning company so that shareholders could reap benefit of concessional allotment of shares. stated reason that such exercise had been undertaken to mobilise financial and technical resources in order to achieve rapid expansion of activities being carried out by EHIRC, Delhi was obviously not true. According to learned CIT(A) there were two relevant questions in context of applicability of provisions of s. 2(24)(iv), i.e. whether assessee was director in EHIRL and if so whether he derived any benefit from company. facts of case indicated that assessee was member of EHIRC, Chandigarh and attended first meeting of Board of Directors of M/s EHIRL held on 16th June, 2000. Para 3 of Minutes of meeting held on 16th June, 2000 recorded presence of assessee in his capacity as first directors of company along with three other people, viz. Mr. Rajan Nanda Mr. Umesh Banerjee and Mr. G.B. Mathur. In that meeting chairman informed Board that Form No. 32 together with Form No. 29 under Companies Act, 1956 had already been filed with Registrar of Companies. Para 4 of Minutes recorded registration of assessee from Board Para 4 of Minutes recorded registration of assessee from Board w.e.f. 30th May, 2000. resignation of assessee from directorship of t h e company was accepted with retrospective effect from 30th May, 2000. Although assessee s resignation had been given retrospective effect, fact remained that assessee was one of first directors of company on 16th June, 2000 before his resignation was accepted on that day. 2,00,000 shares of company were allotted to assessee on that very date, i.e. 16th June, 2000. There was, therefore, very k and clear nexus between directorship of assessee and shares allotted to him. assessee s arguments that allotment of shares and his office as director of company were not related were therefore not acceptable. For that reason argument that assessee did not have substantial interest in company was not relevant. Once it was clear that assessee was director in company provisions of s. 2(24)(iv) were attracted. As to second issue whether assessee derived any benefit from company learned CIT(A) held that it was worthwhile to note that assessee was allotted shares @ Rs. 10 per share whereas book value on that date was Rs. 550. assessee was therefore beneficiary of getting shares at highly concessional rate. This difference in book value of shares and cost of investment to assessee constituted benefit to assessee. argument of assessee that benefit was only notional and could not be taxed unless shares were actually transferred was not valid. If person derived any advantage either monetary or otherwise it could be said that he had benefited. learned CIT(A) relied upon judgments in CIT vs. Smt. Kamalini Gautam Sarabhai (1993) 114 CTR (Guj) 244: (1994) 208 ITR 139 (Guj) and CIT vs. S. Varadarajan (1997) 141 CTR (Mad) 10: (1997) 224 ITR 9 (Mad). He held that benefit arose to assessee as soon as assessee got shares at book value of Rs. 550 for consideration of Rs. 10 only. It was not necessary for actual sale of shares to take place so as to say that benefit had arisen to assessee. learned CIT(A) emphasised that argument of assessee that he was not director of company when shares were allotted to him was not acceptable. Even after assessee s resignation had been accepted minutes of meeting of Board of Directors held on 16th June, 2000 showed that assessee had offered to provide guidance to company and Mr. Rajan Nanada was authorised to advise assessee to provide his guidance and support to company in certain specific areas and issue power of attorney in that regard. Para 9 further showed that assessee was one of few select persons authorised to transfer from and to any of companies bank accounts, individually, without any limit. As per memorandum of EHIRC, Chandigarh assessee had only 20,000 shares in EHIRC, Chandigarh. But he was allotted 2 lakh shares during Board meeting held on 16th June, 2000 while others were allotted only 100 shares against 100 shares held by them previously. All these facts indicated that for all practical purposes assessee did not loose his authority and status even after he had technically resigned from Board. That showed resignation from directorship was pre- determined or pre-ordained action which took form of colourable device. assessee s case was therefore not covered by exception provided by Hon ble apex Court in case of Azadi Bachao Andolan (supra). Merely by resigning on same day shares allotted at concessional rate assessee could not avoid liability under s. 2(24)(iv) of Act. Both ingredients of sub-section that there should be benefit obtained from company and beneficiary should be director were fulfilled in case of assessee. learned CIT(A) did not find merit in contention of assessee that benefit, if any, arose on account of allotment of shares when assessee was member of EHIRC, Delhi/Chandigarh. What happened before EHIRC, Delhi/Chandigarh was converted into company was not relevant. shares that allotted to assessee were shares of EHIRL. plea that shares in EHIRL were allotted in lieu of shares that assessee held in EHIRC, Chandigarh was not correct. While assessee had only 20,000 shares in EHIRC, Chandigarh he was allotted 2,00,000 shares in EHIRL on 16th June, 2000. In case of other shareholders also allotment of shares in EHIRL did not bear any direct relationship with their shareholding in EHIRC, Chandigarh. Sumesh Sawhney and Atul Sud had 100 shares each in EHIRC, Chandigarh on 16th June, 2000 but they received no shares of EHIRL in lieu of their shareholding in EHIRC, Chandigarh. Moreover in case of assessee 199000 shares in EHIRC, Chandigarh were allotted when EHIRC, Chandigarh had already filed application for being converted into company. Furthermore creation of EHIRC, Chandigarh, merger of EHIRC, Delhi thereafter in itself was colorable device to convert charitable society into company with profit motive so as to get benefit of allotment of shares at concessional rate. learned CIT(A) held that even if it was assumed for argument sake that assessee s case was not covered by provisions of s. 2(24)(iv) it was still covered by inclusive definition of "income" as provided under s. 2(24). Hon ble Supreme Court had held in case of CIT vs. G.R. Karthikeyan (1993) 112 CTR (SC) 302: (1993) 201 ITR 866 (SC) that even if receipt did not fall in any of sub-clauses of s. 2(24) it could still constitute income. benefit that was passed on to assessee in form of allotment of shares at concessional rate was benefit of nature of income. learned CIT(A) held that there was yet another angle to look at matter. As per minutes of first meeting of EHIRL held on 16th June, 2000 assessee had offered his services to company to provide guidance and support in certain specific areas, apart from his professional services for which remuneration was paid by company. It showed that assessee s profession was not limited to cardiac surgery. He also exercising position of pre-eminence in company and was involved in its management. assessee, along with few other select persons was authorised to transfer funds from and to any of companies bank accounts, individually, without any limit. Thus role of assessee was not limited to only conducting cardiac surgery. I t was matter of record that assessee attended subsequent meetings of board of directors of EHIRL as special invitee. assessee derived benefit by acquiring shares worth Rs. 550 for Rs. 10. That benefit was directly linked to exercise of profession by assessee. That benefit was given to retain services of assessee, who was eminent surgeon and efficient manager. benefit had therefore arisen to assessee from exercise of his profession of carrying out cardiac surgery as well as providing managerial n d consultancy service to EHIRL. Provisions of s. 28(iv) were therefore attracted. Once it was clear that benefit had arisen to assessee from attracted. Once it was clear that benefit had arisen to assessee from exercise of his profession, it did not matter whether benefit was capital in nature or that asset had not been sold. For that proposition learned CIT(A) relied upon judgment in case of CIT vs. S. Varadarajan (supra) and judgment in case of Addl. CIT vs. Ram Kripal Tripathi (1980) 17 CTR (All) 79: (1980) 125 ITR 408 (All). During course of proceedings before learned CIT(A) AO requested that value of shares of EHIRL taken at Rs. 550 per share should be enhanced to Rs. 745 per share. learned CIT(A) therefore granted assessee opportunity of being heard in that respect. assessee, in his reply dt. 31st Oct., 2005 submitted that enhancement request was based on assessment order in case of EHIRC, Chandigarh that was in turn based on valuation report received by Department on account of Delhi and Chandigarh property. assessment order in case of Chandigarh society was not challenged. Further Delhi Development Authority had issued notification cancelling land lease of EHIRL to which Delhi High Court had granted temporary stay until 22nd Nov., 2005. It was therefore contended that there was case to reduce value of shares drastically. learned CIT(A) held that property of EHIRC, Chandigarh as on 9th May, 2000 was determined by District Valuation Officer as result of which book value of shares increased to Rs. 745 per share. Assessment order in case of EHIRC, Chandigarh being under dispute did not make any difference. As to notification of DDA cancelling land lease, same had already been stayed by Delhi High Court. learned CIT(A) therefore ordered that book value of shares should be adopted @ Rs. 745 per share instead of Rs. 550 that resulted into enhancement of Rs. 3.90 crores. During course of hearing before us learned counsel for assessee submitted that assessee was eminent cardiac surgeon and in past he was honoured by IT Department as being one of highest taxpayers. For asst. yr. 2001-02 AO made assessment order on 28th Feb., 2003 after issuing detailed questionnaire, as mentioned by AO in body of that assessment order. Thereafter assessment completed on 28th Feb., 2003 was sought to be reopened under s. 147 by notice under s. 148 after recording of reasons on 19th July, 2004. learned counsel took us through reasons recorded by AO and argued that nowhere there was any allegation that assessee had not disclosed any material facts necessary for his assessment. That being so AO had incorrectly assumed jurisdiction to re- assess income of assessment year under provisions of s. 147 of Act. learned counsel argued that assessment order revealed confused state of mind. AO held at several places that conversion of EHIRC, Delhi into company EHIRL was sham. How could assessment proceedings be initiated and additions be made when AO himself viewed entire process to be sham and nullity? learned counsel argued that it was Delhi Society whose income was treated to be exempt under s. 10(21). From inception EHIRC, Delhi was granted approval for purposes of s. 35(1)(ii) also by CBDT. There was no allegation of violation of any of terms and conditions of exemption under s. 10(21) or approval under s. 35(1)(ii). Escorts Ltd. had donated sum of Rs. 60 lakhs to society during initial year. It was on 11th Nov., 1999 that EHIRC, Chandigarh was registered by Registrar of Society. That Society was constituted similarly as EHIRC, Delhi but Chandigarh society did not include any clauses pertaining to charitable activity. EHIRC, Chandigarh never applied for any exemption. By resolution it was decided to amalgamate EHIRC, Delhi with EHIRC, Chandigarh w.e.f. 1st April, 2000. Subsequently merged society EHIRC, Chandigarh got converted into corporate entity. EHIRC, Delhi did not violate any provisions of Act during period it obtained any tax exemptions/benefit. EHIRC, Chandigarh and subsequently EHIRL never availed any tax exemption. Under such circumstances there was no question of any illegal act being performed by EHIRL. learned counsel argued that no reasonable person could come to conclusion of any income having been made at time of purchase/acquisition of equity shares of company. During course of purchase and sale of shares transactions were frequently not made with reference to intrinsic value and book value of shares. If in given case assessee acquired shares on value smaller than book value, conclusion could not be drawn of any profit having been made at that stage itself. person made profit only when having been made at that stage itself. person made profit only when shares were sold or exchanged for value higher than cost of shares. conclusion that on allotment itself income was earned by shareholder was conclusion that could not have been drawn by any reasonable person properly instructed in law. It, therefore, followed that neither any income was received nor any accrued to assessee during previous year. assessment proceedings in case of assessee were reopened under s. 147 after A O had already made assessment order in case of Escorts Ltd. In that assessment order, AO had held that merger was not legal and was on paper only. After having held so, AO could not have had reasons to believe that in case of assessee any income chargeable to tax had escaped assessment. Secondly, AO should have realised difference between facts and circumstances of case of assessee and Escorts Ltd. AO should not have mechanically proceeded to initiate proceedings under s. 147 in case of assessee merely as sequel to huge addition made by him in assessment order in case of Escorts Ltd. Escorts Ltd. had invested Rs. 60 lakhs initially. They were in scheme of things in relation to EHIRC, Delhi from day one. assessee joined EHIRC, Delhi in limited capacity with no control or stake in management of affairs of EHIRC, Delhi. While Escorts Ltd. had made contribution of Rs. 60 lakhs in 1983 assessee had joined Escorts Ltd. on 11th Oct., 1988 as consultant. learned counsel for assessee referred to judgment of Hon ble Delhi High Court in case of CIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617: (2002) 256 ITR 1 (Del)(FB) and argued that in that judgment Hon ble Delhi High Court had held that AO had no power of review under provisions of s. 147 and therefore proceedings under s. 147 could not be initiated on mere change of opinion. learned counsel referred to list of investment in shares and mutual funds as on 31st March, 2001 annexed to balance sheet said to have been filed by assessee during course of assessment proceedings. He pointed out that as per item 16 of questionnaire dt. 2nd Dec., 2002 issued by AO details of all fresh investments made during year had been called for. In assessee s reply dt. 6th Jan., 2003 aforesaid list of fresh investment was once again submitted to AO. He pointed out that this list include investment of Rs. 20,03,000 in shares of EHIRC Ltd. learned counsel argued that thus AO was aware of shares purchased by assessee during previous year and since assessment had been completed under s. 143(3) it had to be assumed that then AO found investment as made by assessee in order and not resulting into any benefit or advantage as income chargeable to tax for asst. yr. 2001-02. That being so initiation of proceedings under s. 147 was bad in law and prohibited as per judgment of Hon ble Delhi High Court in case of Kelvinator of India Ltd. (supra). learned counsel relied upon judgment of Hon ble Delhi High Court in Jindal Photo Films Ltd. vs. Dy. CIT (1999) 154 CTR (Del) 355: (1998) 234 ITR 170 (Del) and he, in particular, relied upon p. 177 of 234 ITR. learned counsel for assessee argued that in reasons recorded t h e AO had considered incorporation of EHIRL to be illegal and sham arrangement. He could not therefore have reasons to believe that any income charitable to tax had escaped assessment. In case of Chhugamal Rajpal vs. S.P. Chaliha (1971) 79 ITR 603 (SC) Hon ble Supreme Court had held that vague finding or thought would be good basis for investigating but not for initiating proceedings under s. 147. In case of ITO vs. Lakhmani Mewal Das 1976 CTR (SC) 220: (1976) 103 ITR 437 (SC), Hon ble Supreme Court had laid down that there should be live link or rational nexus between material in possession of AO and his belief that income chargeable to tax had escaped assessment. That there could be any income chargeable to tax on allotment of shares was conclusion that no reasonable person properly instructed in law could have reached. Thus there was no rational nexus between material relied upon by AO and his belief that income chargeable to tax had escaped assessment. learned counsel emphasised that no honest person could arrive at belief that any income accrued to assessee on account of book value of shares of EHIRL. At that stage assessee did not acquire any interest in assets of EHIRL. He relied upon judgment in Mrs. Bacha F. Guzdar vs. CIT (supra) and Chainrup Sampatramv. CIT (1953) 24 ITR 481 (SC) in support of this contention. He pointed out that in case of Chainrup Sampatram vs. CIT (supra) Hon ble Supreme Court had held that valuation of stock in itself did not give rise to income if there was no sale. In support of these contention learned counsel also referred to judgments in Calcutta Discount Co. Ltd. vs. ITO (1961) 41 ITR 191 (SC), Sheo Nath Singh vs. AAC 1973 CTR (SC) 484: (1971) 82 ITR 147 (SC) and Ganga Saran & Sons (P) Ltd. vs. ITO (1981) 22 CTR (SC) 112: (1981) 130 ITR 1 (SC). During course of hearing before us learned counsel for assessee kly relied upon decision of Tribunal, "G" Bench, New Delhi dt. 31st Jan., 2006 in ITA Nos. 567 and 1562/Del/2005 in case of Escorts Ltd. vs. Asstt. CIT (2006) 102 TTJ (Del) 522: (2006) 8 SOT 167 (Del) for asst. yr. 2001- 02. He pointed out that while assessee was allotted only 10 per cent shares M/s Escorts Ltd. had acquired 80 per cent shares of EHIRL at same cost of Rs. 10 per share. In assessment of M/s Escorts Ltd. addition of Rs. 88,11,30,349 was made. amount was assessed in case of Escorts Ltd. (supra) in same manner as in case of assessee before us alleging benefit received by that assessee within meaning of s. 2(24)(iv). After elaborate discussion Tribunal had in case of Escorts Ltd. (supra) deleted addition holding that there was no income chargeable to tax in that case by virtue of allotment of shares on part to extent of 80 per cent share capital to that assessee. On that reasoning and for sake of parity as facts of case were identical addition was required to be deleted in case of assessee also. learned counsel pointed out that apart from provisions of s . 2(24)(iv) Tribunal had in case of Escorts Ltd. (supra) considered meaning and scope of "income" and had held that no income accrued to assessee under s. 2(24) of Act. learned counsel pointed out that Tribunal reached that conclusion in case of Escorts Ltd. (supra) relying upon judgment of Hon ble Delhi High Court in case of CIT vs. Bharat Development (P) Ltd. (1982) 29 CTR (Del) 161: (1982) 135 ITR 456 (Del) and host of Supreme Court judgments and therefore view taken by Tribunal in case of Escorts Ltd. (supra) was required to be followed in case of assessee also. learned counsel further argued that expression appearing in s. 2(24)(iv) was, "the value of any benefit of perquisite...obtained from company". For application of cl. (iv) assessee should have obtained benefit which was not case here. assessee before us did not obtain any benefit and shares were allotted to assessee in ordinary course. He referred to shares were allotted to assessee in ordinary course. He referred to minutes of meeting of Board of Directors of EHIRL held on 16th June, 2000 and pointed out that as per para 19 of those minutes assessee was issued share certificates of EHIRL in lieu of shares held by assessee in EHIRC, Chandigarh. Para 12 of said minutes of meeting authorised Mr. Rajan Nanda to finalise terms and conditions and remuneration payable to assessee for services rendered to company. Para 14 of minutes accepted suggestion of assessee that in addition to his paid professional services, he would willingly like to provide his guidance and support to company and for that Mr. Rajan Nanda was authorised to advise assessee to provide his guidance and support to company in certain specific area and to issue power of attorney in that regard to assessee. learned counsel thus emphasised that share certificates were received by assessee in lieu of share certificates held by assessee in EHIRC, Chandigarh. In case of Escorts Ltd. Tribunal had in its decision (supra) taken note of fact that cheque was in name of EHIRC and not in name of EHIRL. learned counsel relied upon photocopy of cheque issued by assessee being cheque drawn on Standard Chartered Bank, Parliament Street Branch, New Delhi dt. 15th April, 2000 bearing No. 446802 for sum of Rs. 20 lakhs. He pointed out that cheque was not in favour of Ltd. Co. He also referred to photocopy of share certificate for holding of 100 shares numbered from 401 to 500 issued by EHIRC, Chandigarh. learned counsel argued that assessee received shares in EHIRL by virtue of his holding of shares in EHIRC, Chandigarh. learned counsel also relied upon copy of minutes of meeting of Board of Governors of EHIRC, Chandigarh held on 27th May, 2000 to support his contention that assessee had acquired shares of EHIRC, Chandigarh first and shares of EHIRL were only consequence thereof. He pointed out that assessee had already held 100 shares of EHIRC, Chandigarh on 15th Nov., 1999 at time of registration of Chandigarh Society. On 27th May, 2000 EHIRC, Chandigarh allotted 1,99,900 shares to assessee. Thus in effect assessee neither obtained nor received any benefit from company EHIRL. That being so, provisions of s. 2(24)(iv) did not take off in case of assessee. learned counsel for assessee referred to letter of EHIRL dt. 17th Sept., 2003 addressed to Mr. K.K. Kapila, Director General-IT Investigation, Chandigarh. Para 7 of that letter read as under: "7. That management of organization is firm, that institution would continue to give its whole-hearted support to sick, poor and rural masses by providing free and subsidized medical care; and, therefore, to set all controversies at rest and with view to make it vehemently clear, Board of Directors of Company have decided to apply to Central Government under provisions of Companies Act to include charity as one of main objects and also to obtain license under s. 25 of Companies Act, 1956. For this purpose, following clause shall be included in main objects of company: company is charitable company and shall not distribute its profits in form of dividends to its shareholders. All income of company shall be utilized towards promotion of aims and objects of company. Further, word businesses in main objects shall be replaced by word activities . above changes are being made to allay misgivings, if any, with respect to objectives and functioning of company. It may kindly be noted that there has been no change in research activities of organization even during period then it has remained in form of company. We are sure that insertion of clause related to charity as one of main objects brings organization to level similar to its previous status. necessary formalities required for this purpose under provisions of Companies Act, 1956 are under process and shall be completed soon." learned counsel argued that on account of such representations made b y EHIRL assessee shall along bona fide believed that character of charitable society would continue even after conversion into limited company. learned counsel argued that much could not be made of assessee being authorised to operate bank account of EHIRL. He referred to para 9 of minutes of meeting of board on 16th June, 2000 and pointed out that as minutes of meeting of board on 16th June, 2000 and pointed out that as per resolution passed, there was monetary limit of Rs. 10 lakhs in respect of cheques to be drawn on bank accounts by assessee and cheques had to be drawn by assessee jointly with Mr. Umesh Banerjee or Mr. O.P. Verma whereas Mr. Rajan Nanda jointly with Mr. Umesh Banerjee was authorised to draw on bank accounts of EHIRL without any monetary limit. assessee was not made authorised signatory on behalf of EHIRL. assessee by its letter filed on 9th March, 2006 sought to raise following additional ground of appeal: "That on facts and circumstances of case, there was no justification in holding that addition can be made under s. 28(iv) of Act alternatively." learned counsel stated that as learned CIT(A) had supported addition made by AO by making reference to provisions of s. 28(iv) also assessee was advised by way of abundant caution to take specific ground of appeal in respect thereto. additional ground involved purely question of law that could be considered and decided on basis of facts already on record and it did not involve investigation of any new set of facts. He therefore argued that this additional ground deserved to be admitted and placed reliance on judgment of Hon ble Supreme Court in case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249: (1998) 229 ITR 383 (SC). On consideration we find that ground of appeal is legal ground and relates to grounds of appeal already taken by assessee. We, therefore, decided to admit this ground of appeal. In support of this additional ground of appeal learned counsel argued that pre-dominant fact was that until date of allotment of shares to assessee, assessee had rendered no service to EHIRL. While there was reference to services paid and otherwise to be rendered by assessee no specific decision had been taken in that respect. There was no basis for contention of learned CIT(A) that shares were allotted to assessee as assessee had offered his services to EHIRL to provide guidance and support in certain specific areas apart from his professional service for which remuneration was paid by EHIRL. assessee did not exercise position of pre-eminence in EHIRL as alleged by learned CIT(A). learned counsel argued that judgment in case of CIT vs. Varadarajan (supra) and Addl CIT vs. Ram Kripal Tripathi (supra) relied upon by learned CIT(A) were entirely distinguishable on facts. In case of assessee no tangible asset was received. On contrary learned counsel kly relied upon judgment of Hon ble Supreme Court in Mrs. Bacha F. Guzdar vs. CIT (supra), CIT vs. Krishnaram Baldeo Bank (P) Ltd. (1980) 19 CTR (MP) 284: (1983) 144 ITR 600 (MP) and Bharat Development (P) Ltd. vs. CIT (1982) 133 ITR 470 (Del). learned counsel argued that AO had made assessment order under s. 143(3) on 22nd July, 2005 in case of EHIRC, Delhi and levied heavy tax on ground of non-utilisation of accumulated funds. learned AO had made assessment order dt. 28th March, 2005 in case of Chandigarh society levying short-term capital gains on alleged transfer of assets by Chandigarh society to Delhi. learned counsel argued that if tax liability raised by these assessment orders was reduced from book value of assets of EHIRL, value of assessee s shares was reduced to Rs. 8.86 per share. learned counsel relied upon judgments in Kesoram Industries & Cotton Mills Ltd. vs. CWT (1966) 59 ITR 767 (SC); CWT vs. K.S.N. Bhatt (1983) 37 CTR (SC) 273: (1984) 45 ITR 1 (SC) and CWT vs. Vadilal Lallubhai (1983) 37 CTR (SC) 277: (1984) 145 ITR 7 (SC) and argued that assessee was entitled to raise plea based on subsequent events as same had direct bearing on question of income being determined in appeal before us. learned Departmental representative argued that in this case original assessment order under s. 143(3) had been made on 28th Feb., 2003. Notice u n d e r s. 148 was thereafter issued on 19th July, 2004. Proceedings for reassessment under s. 147 had been initiated within period of four years from end of assessment year i.e., on or before 31st March, 2006. That being so, proviso to s. 147 had no application and therefore argument as to whether or not assessee had disclosed its transactions with EHIRL was not of much relevance. But, learned Departmental Representative argued, even otherwise case of "change of opinion" could be made only if assessee could bring out with reasonable certainty that opinion was formed by AO in first instance. There was no material to suggest that AO while completing original assessment order had raised any question relating to completing original assessment order had raised any question relating to allotment of shares of EHIRL to assessee at par at any stage during course of original assessment proceedings. There was no material to suggest that learned AO considered this issue and formed any opinion thereon. If there was no opinion in first instance question of change of opinion did not arise at all. learned Departmental representative kly relied upon judgment of Hon ble Delhi High Court in Rakesh Aggarwal vs. Asstt. CIT (1997) 142 CTR (Del) 272: (1997) 225 ITR 496 (Del). learned Departmental representative pointed out that AO had put following office note while completing assessment order on 28th Feb., 2003: "The assessee has been conferred Regional Level Samman for asst. y r . 1999-2000. As per Scheme for Samman, assessee is entitled to exemption from scrutiny under s. 143(2) for period of three assessment years from end of assessment year in which assessee has been honoured with Samman. In view of above, returned income of assessee has been accepted without further query." He argued that aforesaid office note indicated that at time of original assessment proceedings AO did not go into any issue and accordingly it could not be imputed to him that while completing assessment order he formed opinion that allotment of shares of EHIRL to assessee did not give rise to any income chargeable to tax for asst. yr. 2001-02. learned Departmental representative argued that AO had recorded t length his reasons to believe that assessee s income chargeable to tax had escaped assessment. He referred to various events whereby EHIRC, Delhi that was hitherto being run as charitable society and enjoying all exemptions, benefits and support due to charitable society was converted into private profit-making organisation. It could not therefore be said that learned AO did not have any material before him that could give reasons to believe that assessee s income chargeable to tax had escaped assessment or that he had drawn conclusion that was not rationale or opposed to any legal principle. Once it was held that learned AO had material before him from which he bona fide concluded that there was escapement of assessee s income from assessment and if AO could not be said to have acted irrationally, all requirements for issue of valid notice under s. 148 were satisfied. He referred to judgment of Hon ble Delhi High Court in CIT vs. Kelvinator of India Ltd. (supra) at p. 19 and argued that if relevant information was received or noticed later on, it would give rise to material before AO for purpose of initiation of re-assessment proceedings under s. 147. learned Departmental representative then referred to judgment of Hon ble Supreme Court in case of Raymond Woollen Mills Ltd. vs. ITO (1999) 152 CTR (SC) 418: (1999) 236 ITR 34 (SC) and argued that in case like one before us bona fide action of AO could not be doubted and therefore sufficiency or adequacy of reasons recorded by him was not justiciable. On merits, learned Departmental representative kly relied upon assessment order, impugned order of learned CIT(A) particularly para 11 of impugned order and arguments of Special Counsel for Department in appeal filed by Escorts Ltd. i.e., ITA Nos. 567 & 1562/Del/2005 for asst. yr. 2001-02 (supra). In his rejoinder learned counsel for assessee argued that it was not case of Revenue that assessee had withheld any material facts necessary for his assessment. If all material facts were there, AO was entitled to draw his conclusions in relation to assessee s income chargeable to tax. In spite of all relevant material available if AO did not invoke provisions of s. 2(24)(iv), etc. it could be assumed that in his opinion at that time transactions had not given rise to any income chargeable to tax. learned counsel kly opposed to enhancement of income as made by learned CIT(A). He argued that AO had gone by book value of assets whereas learned CIT(A) had substituted book value of some of assets by valuation as made by Departmental valuer. learned CIT(A) committed error inasmuch as none of assets were there for sale and therefore there was no question of any market value of assets. At any rate while doing so learned CIT(A) did not reduce tax liability fastened upon assets of company in view of various orders made by Department and other authorities. authorities. We have carefully considered rival submissions. First ground in this appeal is directed against validity of initiation of reassessment proceedings under s. 147. First and foremost, learned counsel argued before us that initiation of proceedings was bad in law because there was no failure on part of assessee to disclose fully and truly all material facts necessary for his assessment for asst. yr. 2001-02. It is important to emphasise here that proceedings under s. 147 have been initiated in case of assessee by way of notice under s. 148 issued on 19th July, 2004 i.e. long before expiry of four years from end of asst. yr. 2001-02 under consideration. On these facts proviso to s. 147 does not apply and therefore for purpose of examining validity of initiation of reassessment proceedings it is really not necessary for us to go into question as to whether or not assessee had during course of original assessment proceedings made full and true disclosure of all material facts necessary for assessment of his income for asst. yr. 2001-02. We wish however to make it clear that even if provisions of proviso to s. 147 were applicable initiation of proceedings under s. 147 cannot be held bad in law because it cannot be said that during course of original assessment proceedings assessee had disclosed fully and truly all material facts necessary for his assessment. case of assessee at best is that among documents filed during course of original assessment proceedings list of investments made by assessee during relevant year mentioned purchase of shares of EHIRL. On these facts it cannot be said that there was full disclosure of all material facts necessary to enable AO to arrive at conclusion as to whether or not there was any income chargeable to tax. There are large number of judicial pronouncements as to what constitutes full and true disclosure of all material fact necessary for assessment. It would suffice to quote from celebrated judgment of Hon ble Supreme Court in case of Calcutta Discount Co. Ltd. vs. ITO (supra) wherein their lordships have, inter alia, observed as under: "In present case, question whether transactions were casual transactions of changing investments or regular trading in stocks and shares involved not merely inference, because inference depends upon fact that appellant company was formed to trade in stocks and shares. It was open to appellant company to contend that in spite of its business, particular transaction was this and not that. But, if appellant company was investment company dealing in stocks and shares, and knowing this for fact, did not disclose fact, statement was neither full nor true, as it involved suppression of material fact necessary for assessment. explanation is quite obviously meant to reach identical situation. appellant company might have placed evidence before ITO, but ITO had reason to believe that disclosure was neither full nor true, because fact that company was investment company trading in stocks and shares was not disclosed. ITO in his report meant no more than this." Secondly learned counsel has alleged that initiation of proceedings under s. 147 is bad in law, as same was based on mere change of opinion. We do not see from first assessment order under s. 143(3) made by AO on 28th Feb., 2003 and from entire material placed by assessee on record during those proceedings anything suggestive of application of mind by AO in relation to provisions of s. 2(24)(iv) on account of wide gap between break up value of shares of EHIRL as on date of allotment to assessee and price at which shares were acquired by assessee. It needs no argument that question of change of opinion arises only where any opinion was formulated earlier. opinion formulated for first time cannot be accused of "change of opinion". Authority for this proposition, if any needed, may be found in judgments of Hon ble Delhi High Court in case of Delhi Glass Works (P) Ltd. vs. CIT (1971) 81 ITR 95 (Del) and Nawabganj Sugar Mills Co. Ltd. & Ors. vs. CIT (1980) 17 CTR (Del) 194: (1980) 123 ITR 287 (Del). Thirdly learned counsel has disputed initiation of reassessment proceedings on ground that AO was in confused state of mind. On one hand he held that conversion of EHIRC, Delhi into company EHIRL was sham and nullity. At same time learned AO held that there was escapement of assessee s income arising from conversion of EHIRC, Delhi into EHIRL and consequent allotment of shares of EHIRL to assessee. In our opinion for purpose of determining validity of initiation of reassessment proceedings under s. 147 in this respect we are primarily concerned with reasons as recorded by AO before issue of notice under s. 148. In reasons as recorded in writing on 19th July, 2004, learned AO has nowhere held that conversion of EHIRC, Delhi into EHIRL was nullity. learned AO has held that by this exercise assets of charitable society were eventually taken over by entity with no charitable objectives. assessee being 10 per cent shareholder at cost of Rs. 20 lakhs therefore gained tremendously on allotment of shares but he did not offer that income in his IT return for asst. yr. 2001-02. We are therefore unable to accept argument that insofar as initiation of reassessment proceedings is concerned there is any self- contradiction in belief formulated by AO that assessee s income chargeable to tax had escaped assessment. We are also unable to accept argument of learned counsel of assessee that no honest person could arrive at belief that any income accrued to assessee on allotment of shares itself. learned AO has sought support in this respect from provisions of s. 2(24)(iv) and it cannot be said that belief entertained by learned AO in this respect is based on no material at all or on inadequate material or it is irrational belief that no reasonable person properly instructed in law could have reached. Whether provisions of s. 2(24)(iv) of Act apply or not on facts and in circumstances of case is different matter but it cannot be said that if while initiating proceedings under s. 147 learned AO held that they applied, he acted as irrational person in relation to material available with him. It is well-settled legal position that at stage of initiation of proceedings under s. 147 it is belief entertained by AO that counts as long as same has live link or rationale nexus with material in possession of AO. Once that condition is satisfied adequacy or sufficiency of material cannot be called in question and ultimate correctness or otherwise of belief entertained by AO would not have bearing upon validity of initiation of proceedings by him. Reference in this behalf is invited to judgments of Hon ble Supreme Court in Calcutta Discount Co. Ltd. vs. ITO (supra); S. Narayanappa vs. ITO (supra); ITO vs. Lakhmani Mewal Das (supra); and Raymond Woollen Mills Ltd. vs. ITO (supra). In view of discussion in foregoing paragraphs we do not see much merit in ground of appeal No. 1 taken by assessee. same is accordingly rejected. We have carefully considered rival submissions. We have in earlier paragraphs summarized assessment order and impugned order of learned CIT(A) thereupon. It is seen that in assessment order AO has rejected contention of assessee that he was awarded shares of EHIRL in lieu of shares of EHIRC, Chandigarh held by him. learned AO has noted in this context that when EHIRC, Chandigarh was converted into Company EHIRL Registrar of Societies was informed by letter dt. 30th June, 2000 that assets of EHIRC, Chandigarh were to tune of Rs. 7,000 only. bank accounts of EHIRC, Delhi continued to be operated in name of old society at Delhi even subsequent to merger of EHIRC, Delhi with EHIRC, Chandigarh. assessee was among first Directors of EHIRL. assessee claimed that he acquired 10 per cent shares of EHIRC, Chandigarh on payment of Rs. 20 lakhs by cheque No. 446802, dt. 29th June, 2000 drawn on Standard Chartered Bank. cheque was admittedly dt. 29th June, 2000, whereas EHIRC, Chandigarh had already been converted into EHIRL on 30th May, 2000 and it was worth noticing that shares of EHIRC, Chandigarh had been allotted to assessee on 27th May, 2000. cheque as aforesaid was encashed only on 20th July, 2000. documents including memorandum and articles of association were executed and signed on 19th May, 2000 and assessee was one of signatories to those documents. Thus, on these facts AO has held that provisions of s. 2(24)(iv) of Act applied. Even if assessee was not person who had substantial interests in EHIRL, he was Director of Company and for that reason caught in mischief of s. 2(24)(iv). Relying upon judgment of Hon ble Madras High Court in case of S. Varadarajan (supra), learned AO has held that difference between fair market value of assets and price paid could be assessed as assessee s income chargeable to tax. assessee derived benefit within meaning of s. 2(24)(iv) at time of allotment of shares of EHIRL because as against intrinsic value of shares at rate of Rs. 550 per share, he had acquired shares at rate of Rs. 10 per share. learned AO, therefore, assessed difference amounting to Rs. 10.80 crores as assessee s Income from other sources. During course of hearing before learned CIT(A), assessee vehemently argued that he had received shares of EHIRL on account only of conversion of EHIRC, Chandigarh into EHIRL and shares that he had held in EHIRC, Chandigarh were exchanged for shares of EHIRL. assessee, inter alia, argued that there could be no profit at time of acquisition of shares. profit could arise only at time of sale of shares. Even if, it was assumed for sake of argument that intrinsic value of shares of EHIRL was higher than price paid for shares of EHIRC, Chandigarh by assessee said increase in value was purely notional because it was settled position in law that Company was different legal entity from its shareholders. shareholders had no rights in assets of company and had only right to receive dividend when declared or to receive assets when distributed on liquidation of Company. CIT(A) held that on 16th June, 2000 when 2,00,000 shares of EHIRL were allotted to assessee, he was Director of EHIRL. It was different matter that on that very date his resignation from Directorship of EHIRL was accepted with retrospective effect from 30th May, 2000. There was very k and clear nexus between directorship of assessee of EHIRL and allotment of shares of EHIRL to assessee. learned CIT(A) further held that there was benefit derived by assessee from EHIRL inasmuch as assessee was allotted shares at rate of Rs. 10 per share whereas break up value on that date was Rs. 550. Subsequently, learned CIT(A) accepted request of Department to adopt break up value at Rs. 745 per share in stead of Rs. 550 per share on account of market value of assets of EHIRL. learned CIT(A) did not accept also argument of assessee that he had received shares of EHIRL on conversion of EHIRC, Chandigarh into EHIRL. As per memorandum of EHIRC, Chandigarh, assessee had only 20,000 shares in EHIRC, Chandigarh but he was allotted 2,00,000 shares of EHIRL directly in meeting held on 16th Feb., 2000, while others were allotted only 100 shares against 100 shares held by them previously. Furthermore, according to learned CIT(A) creation of EHIRC, Chandigarh and merger of EHIRC, Delhi and thereafter conversion of merged entity into EHIRL was colourable device. In addition to these arguments, learned CIT(A) also held view that amount assessed by AO under s. 2(24)(iv) of Act was covered by provisions of s. 28(4) also. During course of hearing before us learned counsel for assessee placed k reliance upon decision of Tribunal, G Bench, New Delhi dt. 31st Jan., 2006 in ITA Nos. 567 and 1562/Del/2005 in case of Escorts L t d . (supra) where on identical facts Tribunal ordered deletion of assessment of income of Rs. 88,11,30,349 made by AO, We see considerable guidance as respects this appeal before us from that order wherein facts of case have been recorded in following words: "5. Society by name Escorts Heart Institute and Research Centre, was formed and registered under Societies Registration Act, XXI of 1860 on 21st Oct., 1981. This Society was registered with Registrar of Societies, Delhi. ... income of this Society was exempt from tax under s. 10(21) of IT Act, 1961 (hereinafter referred to as Act ). This Society had obtained approval of Central Government under s. 35(1)(ii) of Act. During previous year relevant to asst. yr. 1982-83, assessee had made payment of Rs. 60 lakhs to this Society and claimed deduction in respect of such payment, which was allowed by AO. assessee and its group companies were subscribers to memorandum of association of society at time of its formation. This Society will hereafter be referred to as Delhi Society . Another society by same name of Escorts Heart Institute and Research Centre was formed and registered under Societies Registration Act, XXI of 1860 on 11th Nov., 1999. This Society was registered with Registrar of Firms and Societies, U.T. Chandigarh. objects of this Society were identical with that of Delhi Society except that its object did not include object of relief to poor and object of society being charitable society not carrying on of any activity for profit... Delhi Society proposed to amalgamate with Chandigarh Society and necessary resolution was passed in meeting of its members held on 15th Jan., 2000. Chandigarh Society had in its members meeting held on 7th Feb., 2000, resolved to accept amalgamation of Delhi Society with it and for vesting of assets of Delhi Society in it and also take over of its liabilities by it. necessary formalities in this regard were complied with and Registrar of Societies, Delhi, ordered dissolution of Delhi Society consequent to its merger with Chandigarh Society. ... it is claimed that Delhi Society stood merged with Chandigarh Society w.e.f. 1st April, 2000. On 24th May, 2000, Chandigarh Society made application with Registrar of Companies, Chandigarh for registration of Chandigarh Society as limited company in this regard. On 30th May, 2000, Chandigarh Society was registered as Company limited by shares.... name of Company is mentioned in this certificate as Escorts Heart Institute and Research Centre Limited.... Thus, Chandigarh Society also ceased to exist w.e.f. 30th May, 2000. Even prior to incorporation of EHIRC Limited, Chandigarh Society, h d on 27th May, 2000, after amalgamation of Delhi Society, issued 16,00,000 equity shares of Rs. 10 each in share capital of Chandigarh Society, to assessee. This constituted 80 per cent of share capital of paid up capital of Chandigarh Society. Authorised share capital of Society was 25,00,000 shares of Rs. 10 each. cheque for Rs. 1,60,00,000 dt. 27th May, 2000, drawn on Deutsche Bank, had been issued by assessee, in favour of Chandigarh Society, copy of same is placed at page 81 of assessee s paper book. This cheque was presented for payment only on 20th July, 2000. Bank Statement of assessee with Deutsche Bank for period from 1st May, 2000 to 20th July, 2000, has been filed before us to show that at all material time from date of issue of cheque till it s realization, assessee had to credit of its Bank a/c with Deutsche Bank, balance which was far in excess of Rs. 1,60,00,000. case of assessee is that though cheque was encashed only on 20th July, 2000, same relates back to date of issuance of cheque, viz., 27th May, 2000." We find that not only facts of case of M/s Escorts Ltd. are more or less identical to facts of case of assessee before us, assessment order and order passed by CIT(A) and arguments of parties before Tribunal have also been more or less same. In assessment order of M / s Escorts Ltd., AO made similar comments in relation to eventual conversion of EHIRC, Delhi into company EHIRL. AO in that case also took view that what EHIRC, Chandigarh received on merger of EHIRC, Delhi was paltry amount of Rs. 7,000 and some stationery etc. of Rs. 5,250 and Rs. 745 only. learned AO further held that intention of M/s Escort Ltd. throughout was to gain control over assets of EHIRC, Delhi. From initial investment of Rs. 60 lakhs, assessee made huge profit represented in intrinsic value of assets of EHIRL. price for which shares of EHIRL were acquired by M/s Escorts Ltd. was far below intrinsic value. learned AO made addition of Rs. 88,11,30,349 on account of huge difference between intrinsic value of shares and price paid by Escorts Ltd. therefor. learned CIT(A) in that case held that it was not relevant whether conversion of Delhi Society into company was legal or not. He did not see force in contention also of AO that M/s Escorts Ltd. had made investment of Rs. 60 lakhs given as donation to EHIRC, Delhi in year 1982. Those findings of CIT(A) in case of M/s Escorts Limited became final as same were not challenged by Revenue. Learned CIT(A) held also that on taking-over of EHIRC, Delhi by EHIRC, Chandigarh only assets worth Rs. 7,000 were received. M/s Escorts Ltd. gave EHIRC, Chandigarh cheque for Rs. 1.6 crores but that was encashed only on 20th July, 2000 when EHIRL had already allotted shares to them on 16th June, 2000. On these facts, learned CIT(A) concluded that M/s Escorts Ltd. had already purchased shares of M/s EHIRL and same were not issued to them in lieu of any holding of shares of EHIRC, Chandigarh. According to learned CIT(A), because Chandigarh Society had not possessed any assets, there was no question of Escorts paying Rs. 1.60 crores towards its capital. Learned CIT(A) emphasized definition of income under s. 2(24) of Act and held that just as benefit received is taxed in hands of Director of Company in terms of s. 2(24)(iv) likewise any benefit received by any person other than director should also be taxed under s. 2(24) of Act. sequence of events and facts clearly showed that M/s Escorts Ltd. was controlling affairs of EHIRC, Delhi; EHIRC, Chandigarh and EHIRL. During course of hearing of appeal before Tribunal, M/s Escorts Ltd. contended that there could be no benefit at stage of purchase of shares and for that purpose they placed heavy reliance upon judgment of Hon ble Delhi High Court in case of CIT vs. Bharat Development (P) Ltd. (1982) 29 CTR (Del) 161: (1982) 135 ITR 456 (Del) and judgment of Hon ble Orissa High Court in case of B.P.R. Construction vs. CIT (1992) 102 CTR (Ori) 6: (1991) 192 ITR 534 (Ori) and contended that EHIRC, Chandigarh had acquired all assets and liabilities of EHIRC, Delhi and they had not purchased shares of M/s EHIRL directly. They had issued cheque of Rs. 1,60,00,000 in name o f EHIRC, Chandigarh on 27th May, 2000 and though that cheque was encashed by Chandigarh Society on 20th July, 2000, they had maintained in its account, balance of Rs. 1.6 crores during entire intervening period. M/s Escorts Ltd. argued that there was no question of any assessment under s. 2(24) or 2(24)(iv) because shares were originally obtained from EHIRC, Chandigarh. learned Special Counsel for Department highlighted facts that Mr. H.P. Nanda/Rajan Nanda in his capacity as representative of M/s Escorts Ltd. always controlled and managed affairs of EHIRC, Delhi; EHIRC, Chandigarh and EHIRL. He argued that benefit, in form of concessional price, accrued to beneficiary when offer at concessional price was made. There was no force in contention that benefit would accrue to Escorts only when shares of EHIRL shall be sold by them. In support of that contention, learned special counsel for Revenue relied upon large number of case law. learned special counsel also distinguished, on facts, judgment of Hon ble Delhi High Court in case of Bharat Development (P) Ltd. (supra). In case of Escorts Ltd. (supra) Tribunal has examined question s to whether assessee acquired shares of EHIRL directly or in lieu of its holding of shares in EHIRC, Chandigarh. Tribunal has held that findings of learned CIT(A) that on conversion of EHIRC, Chandigarh into EHIRL asset worth only Rs. 7,000 were received was not correct because on acceptance of scheme of amalgamation of EHIRC, Delhi with EHIRC, Chandigarh by Registrar of Societies, Delhi by order dt. 6th June, 2001 EHIRC, Delhi was dissolved and amalgamated with EHIRC, Chandigarh. share certificate dt. 27th May, 2006 for 16 lakh shares of Rs. 10 each was issued by EHIRC, Chandigarh in favour of M/s Escorts Ltd. who had issued cheque dt. 27th May, 2000 as given at p. 81 of that assessee s paper book. cheque was in name of "Escorts Heart Institute and Research Centre". It was therefore clear that cheque was not in name of Company EHIRL. It was also clear that on 27th May, 2000 EHIRC, Delhi had no existence as it already stood amalgamated with EHIRC, Chandigarh. From date of issue of cheque on 27th May, 2000 and encashment on 28th July, 2000 there were enough funds in relevant bank account of M/s Escorts Ltd. to cover amount of Rs. 1.60 crores throughout that period. encashment of cheque therefore related back to date of cheque. Tribunal has therefore held that M/s Escorts Ltd. purchased shares of EHIRC, Chandigarh and not of EHIRL directly. Hence reasoning of CIT(A) for concluding that income under s. 2(24) accrued to M/s Escorts Ltd. based on presumption that M/s Escorts Ltd. purchased shares of EHIRL directly was without any basis. Tribunal has further held that prior to issue of 16 lakh shares of Rs. 10 each M/s Escorts Ltd. never held any shares in E H I R C , Chandigarh. No other consideration like employer employee relationship or any other business association/considerations for offer and allotment of shares of Escorts Ltd. existed. Only shares at concessional price to person having substantial interest could be considered as income. When there was no pre-existing relationship between M/s Escorts Ltd. and EHIRC, Chandigarh it could not be said that allotment of shares at concessional price by EHIRC, Chandigarh resulted into benefit which was chargeable to tax under s. 2(24)(iv) of Act. On account of abolition of GT Act there was no liability of gift tax either. Tribunal, relying upon judgment of Hon ble Delhi High Court in case of CIT vs. Bharat Development (P) Ltd. (supra) has held also that normally at time of acquisition or purchase at concessional price no income accrues. For that reason also no income could be said to have accrued or arisen to Escorts Ltd. at time of purchase of shares at price less than its book value. Tribunal, in case of Escorts Ltd. (supra) considered contention of Revenue based on provisions of s. 28(iv) of Act also. It was contended that there was systematic or organized course of activity of holding investment in certain companies. EHIRC, Delhi, was brought in existence as non-profit organization by M/s Escorts Ltd. but after successful establishment as reputed institute, was amalgamated with EHIRC, Chandigarh, profit-making organization and thereafter converted into EHIRL. assessee objected to these submissions of Revenue on ground that Revenue was not entitled to adduce afresh evidence. Tribunal held that whether M/s Escorts Ltd. was in business of holding investment or not was inferential fact that could not be decided without detailed inquiry into relevant facts. For that reason Tribunal declined permission to revenue to raise new plea for first time before Tribunal. We find in order of Tribunal G Bench, Delhi dt. 31st Jan., 2006 in case of Escorts Ltd. (supra) negation of case made out by AO and learned CIT(A) in case of present assessee before us for assessment of income of Rs. 10.80 crores and enhancement of Rs. 3.90 on account of allotment of shares of EHIRL to assessee. In case of Escorts Ltd. (supra) Tribunal has already rejected contention of Revenue that on merger of EHIRL, Delhi into EHIRC, Chandigarh, entire assets and liabilities of EHIRL, Delhi were not received by EHIRC, Chandigarh. Tribunal has also not accepted contention of revenue that provisions of s. 28(iv) were applicable on account of there being systematic pre-meditated activity to make profit out of running of charitable organization in name of M/s EHIRC, Delhi. major plank in assessment order as also in order of learned CIT(A) is that at time when shares of EHIRL were allotted to assessee before us, he was one of directors of assessee company and therefore provisions of s. 2(24)(iv) of Act applied. similar argument was taken in case of Escorts Ltd. (supra). In that case Tribunal has given clear finding of fact that M/s Escorts Ltd. did not purchase shares of EHIRL directly and they received shares of EHIRL on conversion of EHIRC, Chandigarh into company EHIRL in lieu of shares that M/s Escorts Ltd. already held in EHIRC, Chandigarh. same argument has been taken by assessee before us as well. We find that if like Escorts Ltd. present assessee before us did not purchase shares of M/s EHIRL directly and instead was allotted shares of EHIRL in lieu of shares that assessee already held in EHIRC, Chandigarh case made out by Revenue under provisions of s. 2(24)(iv) would become unsustainable in light of view already taken by Tribunal in case of Escorts Ltd. (supra). However, we find that there is no uniformity of facts between as enumerated in orders of IT authorities below and contention of assessee during course of proceedings before us. We find that there are following variations: (i) According to assessment order, assessee was allotted 10 per cent shares of EHIRC, Chandigarh, "admittedly" on payment of Rs. 20 lakhs by cheque No. 446802, dt. 29th June, 2000 drawn on Standard Chartered Bank. assessee has, however, represented before us that he had issued cheque drawn on Standard Chartered Bank, Parliament Street Branch, New Delhi that was dt. 15th April, 2000 bearing No. 446802 for sum of Rs. 20 lakhs in favour of M/s EHIRC, Chandigarh. (ii) learned CIT(A) has stated that as per memorandum of EHIRC, Chandigarh, assessee had been allotted only 20,000 shares for EHIRC, Chandigarh, but assessee was allotted 2,00,000 shares of EHIRL. During Board Meeting held on 16th June, 2000 while others were allotted only 100 shares against 100 shares held by them previously. (iii) In case of Escorts Ltd. it was represented that, that assessee had issued cheque of Rs. 1.60 crores in name of EHIRC, Chandigarh on 27th May, 2000 and though that cheque was encashed by Chandigarh Society on 20th July, 2000 M/s Escorts Ltd. had maintained in its account balance of Rs. 1.60 crores throughout intervening period. In case of assessee before us, there is no information as to what is date of encashment of cheque of Rs. 20 lakhs issued by assessee and whether assessee had maintained balance of Rs. 20 lakhs in corresponding bank account throughout intervening period. To sum up, respectfully following order of Tribunal, G Bench, Delhi in case of Escorts Ltd. (supra) we hold that if there is parity of facts between case of assessee and M/s Escorts Ltd. whereupon it may be held that assessee before us purchased shares of M/s EHIRC, Chandigarh only and made payment to EHIRC, Chandigarh only and that assessee for that purpose had issued cheque drawn in favour of M/s EHIRC, Chandigarh on date prior to conversion of EHIRC into EHIRL and assessee had maintained in relevant bank account balance of Rs. 20 lakhs or more throughout intervening period from date of issue of cheque to date of its encashment by EHIRC, Chandigarh, in that event it cannot be said that provisions of s. 2(24)(iv) are attracted in case of assessee before us. If, however, facts are found to be different in this behalf from facts of case of M/s Escorts Ltd. and it is found that assessee before us, unlike M/s Escorts Ltd., purchased or was allotted shares of M/s EHIRL directly or shares of EHIRC, Chandigarh were purchased or paid for by assessee on date subsequent to conversion of EHIRC, Chandigarh into EHIRL in that event provisions of s. 2(24)(iv) of Act may apply because assessee was director of EHIRL on 16th June, 2000 when 2,00,000 shares of EHIRL were allotted to assessee. We make it clear on this point that we do not see much force in plea of assessee that on that very date resignation of assessee from directorship of EHIRL was accepted with retrospective effect from 30th May, 2000. fact of matter is that assessee s resignation has been accepted on 16th June, 2000 only and not on any earlier date. It is also note worthy that simultaneously to acceptance of resignation of assessee from directorship of EHIRL, his wife Mrs. Madhu Trehan was inducted as director on Board of Directors of EHIRL. We therefore hold that as on date shares of EHIRL were allotted to assessee he was director of EHIRL and, therefore, if allotment or acquisition of shares of EHIRL by assessee is construed to be direct transaction between assessee and M/s EHIRL, provisions of s. 2(24)(iv) would apply. But if it is held, on similarity of facts between facts of case of assessee in this behalf and facts of case of M/s Escorts Ltd. that assessee did not purchase or was not allotted shares of M/s EHIRL directly but only in lieu of shares that assessee already held in M/s EHIRC, Chandigarh, in that event it would not be open to Revenue to take recourse to provisions of s. 2(24)(iv) of Act. As pointed out earlier there are certain variations in this respect between facts as recorded in assessment order, order of learned CIT(A) and version of assessee before us. We, therefore, consider it necessary that facts of case are ascertained first. For that purpose, we restore this issue to AO for decision afresh after ascertaining correct facts. Respectfully following order of Tribunal in case of Escorts Ltd. (supra) we further direct AO that if assessee had issued cheque of full amount of Rs. 20 lakhs drawn in favour of EHIRC, Chandigarh on date prior to conversion of EHIRC, Chandigarh into EHIRL and assessee had maintained sufficient balance in relevant bank account from date of issue of cheque until date of encashment thereof by EHIRC, Chandigarh and if assessee did not make any direct payment in favour of EHIRL and if assessee was allotted shares of EHIRL in lieu of shares of EHIRC, Chandigarh in same ratio as M/s Escorts Ltd. in that even no addition to declared income of assessee shall be made on account of acquisition of 2,00,000 shares of EHIRL by assessee. If, however, facts of case of assessee are found different, learned AO shall be entitled to decide this issue as he may consider being in accordance with law. We direct AO to decide this issue afresh by way of speaking order in this respect in light of our directions after allowing assessee reasonable opportunity of being heard in matter. Ground of appeal No. 4 (wrongly typed 5) is directed against levy of interest under s. 234B. In this regard learned CIT(A) has passed following order: "Ground No. 4 challenges charging of interest under s. 234B. No arguments have been advanced in support of this ground. AO is, however, directed to recompute interest while giving effect to this order". During course of hearing before us no specific arguments have been made in relation to this ground of appeal. It has been held by Hon ble Supreme Court in case of CIT vs. Anjum M.H. Ghaswala (2001) 171 CTR (SC) 1: (2001) 252 ITR 1 (SC) that levy of interest under ss. 234A, 234B and 234C is mandatory. We therefore do not see any force in this ground of appeal taken by assessee. same is accordingly rejected. Ground of appeal No. 5 (wrongly typed 6) is directed against initiation of penalty under s. 271(1)(c). As no appeal is provided against initiation of penalty proceedings, this ground of appeal is rejected as not admitted. In result, for statistical purposes this appeal shall be treated as partly allowed. *** DR. NARESH K. TREHAN v. DEPUTY COMMISSIONER OF INCOME TAX