Internal audit opinion on a pure question of law cannot justify reopening under the Gift-tax Act; initiation was invalid.

Proceedings under section 16(1) of the Gift-tax Act could not be validly initiated where the only basis was an internal audit party's opinion on a pure question of law. The audit note treated retirement of the assessee without charging goodwill as giving rise to a deemed gift, but such a legal view did not amount to information enabling the assessing authority to assume jurisdiction. The reopening was therefore without jurisdiction and invalid, with the reference answered in favour of the assessee.

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Issues: (i) Whether proceedings under section 16(1) of the Gift-tax Act, 1958, could be initiated on the basis of an internal audit report that raised only a question of law.

Analysis: The notice under section 16(1) was founded entirely on the internal audit party's view that the retirement of the assessee without charging for goodwill resulted in a deemed gift. The basis of the audit objection was a pure question of law. Such an audit opinion on law does not amount to information enabling the assessing authority to assume jurisdiction to initiate proceedings.

Conclusion: The initiation of proceedings under section 16(1) was invalid and the answer is in favour of the assessee.

Final Conclusion: The reference was answered against the Revenue, and the attempted reopening was held to be without jurisdiction because the audit note on a legal issue could not furnish the requisite information.

Ratio Decidendi: An internal audit party's opinion on a question of law does not constitute information for the purpose of initiating reassessment or analogous proceedings.

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