Court rules in favor of appellants on reassessment validity but against on cost of acquisition.

The court ruled in favor of the appellants regarding the validity of reassessment proceedings for the assessment year 1989-90, stating that the reopening was based on a change of opinion, which is not permissible. However, the court ruled against the appellants regarding the correctness of the cost of acquisition as on April 1, 1974, for the assessment year 1990-91, upholding the valuation made by the DVO. The appeals were disposed of with no order as to costs.

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Issues Involved:
1. Validity of reassessment proceedings for the assessment year 1989-90.
2. Correctness of the cost of acquisition as on April 1, 1974, as adopted by the Assessing Officer for the assessment years 1989-90 and 1990-91.

Detailed Analysis:

Issue 1: Validity of Reassessment Proceedings for the Assessment Year 1989-90
The court first dealt with the question of whether the reassessment proceedings for the assessment year 1989-90 were validly initiated. The appellants argued that the reopening was based on a "change of opinion," which is not a valid ground for reassessment under Section 147 of the Income-tax Act. The court cited the Full Bench decision in CIT v. Kelvinator of India Ltd., which held that reopening on a mere change of opinion is impermissible. The court emphasized that the Assessing Officer must have "reason to believe" that income has escaped assessment, which must be based on "tangible material." The court found that the reasons recorded for reopening were simply that the cost of acquisition shown by the assessee was wrong based on the assessment order for the assessment year 1990-91. This constituted a change of opinion, making the reassessment proceedings invalid. Therefore, the court ruled in favor of the appellants, stating that the jurisdictional pre-conditions for reopening the assessment were not satisfied.

Issue 2: Correctness of the Cost of Acquisition as on April 1, 1974, for the Assessment Years 1989-90 and 1990-91
The second issue was whether the cost of acquisition as on April 1, 1974, as adopted by the Assessing Officer, was correct. The appellants had relied on a valuation report from a Government-approved valuer, which estimated the fair market value at Rs. 356 per square foot. However, the Assessing Officer preferred the valuation made by the District Valuation Officer (DVO) at Rs. 222.96 per square foot. The court noted that the property was a residential house as of April 1, 1974, and the valuation report relied upon by the appellants was based on commercial rates, which was incorrect. The court agreed with the Tribunal's finding that the DVO's report, which was based on a sale instance of a similar property, was a more accurate reflection of the fair market value. The court also noted that the DVO's report was used as relevant evidence and not as a binding report under Section 55A of the Act. Therefore, the court upheld the cost of acquisition as adopted by the Assessing Officer for the assessment year 1990-91 and ruled against the appellants.

Conclusion
The court ruled in favor of the appellants regarding the validity of reassessment proceedings for the assessment year 1989-90, stating that the reopening was based on a change of opinion, which is not permissible. However, the court ruled against the appellants regarding the correctness of the cost of acquisition as on April 1, 1974, for the assessment year 1990-91, upholding the valuation made by the DVO. The appeals were disposed of with no order as to costs.

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