Reassessment under section 147(b) failed where reopening was based only on a legal error in capital gains treatment.

Reopening under section 147(b) was held unsustainable where the original assessment had treated the gain as long-term capital gain, but the later legal position showed it to be short-term capital gain on undisputed facts. The reopening was based on an error in applying the law, rather than fresh material, and the later Supreme Court ruling had clarified that section 147(b) could not be used merely to correct oversight or inadvertence by the Income-tax Officer. Applying that governing law, the reassessment was invalid and the assessee succeeded.

---

---

Issues: Whether reassessment under section 147(b) was valid where the original assessment had treated the capital gain as long-term, but the later position, in light of the inserted definition of short-term capital asset, showed the gain to be short-term capital gain.

Analysis: The assessment was reopened because the original treatment of the gain as long-term capital gain had resulted from an error in applying the law to undisputed facts. The later Supreme Court ruling had disapproved the earlier view that section 147(b) could be used to reopen an assessment merely for an error attributable to oversight or inadvertence by the Income-tax Officer. By the time the appeal was decided, that later ruling represented the governing law and controlled the legality of the reassessment proceedings.

Conclusion: Reassessment under section 147(b) was not sustainable, and the reopening was invalid, in favour of the assessee.

---