Reassessment under gift-tax law fails without tangible material and recorded preconditions for valuing unquoted shares differently.

Reassessment under section 16(1)(b) of the Gift-tax Act requires tangible post-assessment information creating a reasonable belief that taxable gift has escaped assessment; suspicion alone is insufficient. The note also states that rule 10(2) of the Gift-tax Rules can be invoked only when the officer first records that the share value cannot be ascertained by reference to the company's total assets, and that jurisdictional condition must be supported by material. On the facts described, no such material or recorded foundation existed, so the original break-up value valuation was not lawfully displaced and the reassessment could not be sustained.

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Issues: Whether the reassessment under section 16(1)(b) of the Gift-tax Act, 1958, was valid in the absence of material showing that the market value of the company's assets was higher than the balance-sheet values, and whether the Gift-tax Officer could invoke rule 10(2) of the Gift-tax Rules, 1958, to reopen the assessment.

Analysis: The reassessment power under section 16(1)(b) could be exercised only if the officer had information enabling a reasonable belief that taxable gift had escaped assessment. The Tribunal had found that no post-assessment material was placed before the officer to show that the market value of the assets was higher than the value shown in the balance-sheet, and that the reopening was based only on suspicion. Rule 10(2) of the Gift-tax Rules, 1958, could not be invoked unless the officer first recorded that the value of the shares was not ascertainable by reference to the total assets of the company. That foundational condition was not recorded or supported by evidence. The original valuation had been made on the break-up value basis consistent with the accepted method for unquoted shares, and the reassessment did not disclose any legally sustainable basis for a different valuation.

Conclusion: The reopening was invalid, and the cancellation of the reassessment was in law; the answer is in favour of the assessee and against the Revenue.

Final Conclusion: Reassessment could not be sustained because the statutory precondition for reopening was absent and the valuation could not be altered merely on suspicion without material.

Ratio Decidendi: Reassessment under section 16(1)(b) requires tangible information giving rise to a reasonable belief of escapement, and rule 10(2) valuation cannot be applied unless its jurisdictional preconditions are first satisfied and recorded.

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