RAMANUJAM, J.

The assessee who was carrying on business as a bus operator, formed a (P) Ltd. company under the name of P.S.S. transport (P) Ltd. on 21st March, 1959. He transferred 20 buses belonging to him to the company on 1st July, 1959 for a total consideration of Rs. 2, 58, 604/- which was the written down value of these buses in the assessee's account's accounts. On 1st July, 1959 the amount of Rs. 2, 58, 604/- was credited to his account in the company's books and later on Rs. 90, 000/- out of the said amount was adjusted towards the shares allotted to him and the balance together with the value of the sundry assets sold by him aggregating to Rs. 1, 83, 133/-, continued to his credit in the company's accounts.

2. The assessee, his wife and two of his close relatives were shareholders in the company. The assessee held shares to the value of Rs. 90, 000/- while the paid-up capital of the company was Rs. 1, 00, 000/-. The ITO, in the IT assessment for the asst. yr. 1960-61 relevant to the accounting year ending 13th December, 1959, felt that the assessee was substantially interested in the company and applied the first proviso to s. 12B(2) of the Indian IT Act, 1922,