Reassessment fails without valid underassessment: final share valuation cannot be reopened by changing the valuation method.

Reassessment under section 16(1)(b) of the Gift-tax Act could not be sustained where the original valuation of gifted shares had attained finality and no valid underassessment existed. The court applied the valuation principles of rule 1D of the Wealth-tax Rules to gift-tax valuation and held that the earlier 15 per cent deduction, not challenged by the assessee, could not be reopened merely by adopting a different valuation method. As the foundational condition for reassessment was absent, the reassessment was held invalid.

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Issues: Whether the reassessment made under section 16(1)(b) of the Gift-tax Act, 1958, for the assessment year 1974-75 was valid in law.

Analysis: The assessment had originally allowed a 15 per cent deduction in valuing the gifted shares, and that allowance had attained finality as it was not challenged by the assessee. The Court held that the principles applicable under rule 1D of the Wealth-tax Rules governed valuation of shares for gift-tax purposes as well, and on that basis there was no underassessment in the original assessment justifying reopening under section 16(1)(b). Since the foundational condition for reassessment was absent, the reassessment could not be sustained.

Conclusion: The reassessment under section 16(1)(b) of the Gift-tax Act, 1958, was invalid and the question was answered in favour of the Revenue.

Ratio Decidendi: Reassessment under section 16(1)(b) cannot be sustained unless there is a valid underassessment in the original assessment, and a final valuation adopted in the original assessment cannot be reopened merely by adopting a different method of valuation.

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