Gift-tax reassessment cannot rest on audit objection, retrospective valuation change, or post-valuation goodwill inclusion.
Reassessment of gift-tax valuation was held invalid where it was founded on a revenue audit objection and a different method of valuing unquoted shares. The prevailing Board circular for the relevant year governed the original assessment, and a later revision could not be applied retrospectively to withdraw that benefit. The audit note expressed only a view on the legal position and did not amount to "information" for reopening under section 16(1)(b). Reopening based on a new valuation approach that would merely increase tax was treated as a change of opinion. Goodwill arising after the relevant valuation date also could not be included to enhance share value, so the reassessment was annulled.
Issues: Whether the reassessment under section 16(1)(b) of the Gift-tax Act, 1958 was valid when it was based on a revenue audit objection and on a different method of valuing unquoted shares, and whether the original valuation made in accordance with the then prevailing Board circular could be reopened on the ground that goodwill had to be included.
Analysis: The reassessment was initiated after the original assessment had been made in accordance with the Board's prevailing instructions for the relevant assessment year. The later revision of the circular could not be applied retrospectively so as to withdraw a benefit already available to the assessee. The audit objection only reflected a view on the legal position regarding valuation and did not constitute "information" within section 16(1)(b) for reopening. The adoption of a different valuation approach merely because it could yield a higher tax demand amounted to a change of opinion, which is not a permissible basis for reassessment. The Tribunal also accepted that, on the valuation issue, goodwill arising after the date relevant for gift valuation could not be brought in to enhance the share value.
Conclusion: The reopening was invalid and beyond jurisdiction. The reassessment was rightly annulled, and the assessee succeeded.
TaxTMI 
AI Drafter ✕
TaxTMI 
