Reassessment under Gift-tax law fails where it rests on later circulars and the same material, while fair market value remains the test.

Reassessment under the Gift-tax Act could not be sustained on the basis of a later Board circular and a reappraisal of the same material, because the original assessment had been completed under the then prevailing guidance and no new material was shown; the reopening was therefore without jurisdiction. On valuation, the statutory test remained fair market value, and the original break-up method, supported by recognised administrative guidance and comparable share transactions, was not shown to be contrary to that test. The substituted higher valuation was accordingly rejected, and the cancellation of reassessment was sustained in favour of the assessee.

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Issues: (i) Whether reassessment could be sustained under section 16(1)(b) of the Gift-tax Act, 1958 on the basis of a subsequent change in Board instructions and a reappraisal of the same material; (ii) whether the reassessment was correct on merits in substituting a higher valuation of the gifted shares.

Issue (i): Whether reassessment could be sustained under section 16(1)(b) of the Gift-tax Act, 1958 on the basis of a subsequent change in Board instructions and a reappraisal of the same material.

Analysis: The original assessment had been completed in accordance with the then prevailing Board circular and on a recognised method of valuation. The later circular could operate only prospectively and could not destroy the legal effect of the completed assessment. A mere change of opinion, based on reconsideration of the same material, does not furnish jurisdiction for reopening when no new material is shown. The reassessment was therefore not supportable on jurisdictional grounds.

Conclusion: The reassessment was invalid for want of jurisdiction and the finding is in favour of the assessee.

Issue (ii): Whether the reassessment was correct on merits in substituting a higher valuation of the gifted shares.

Analysis: The governing standard was fair market value under section 6(1) of the Gift-tax Act, 1958. The original valuation was based on a recognised break-up value approach adopted under the prevailing administrative guidance. The later valuation, resting on a different method and on revaluation of the company's assets, did not establish that the original assessment was contrary to the statutory test. The record also contained comparable share transactions supporting the original valuation.

Conclusion: The reassessment was not justified on merits and the finding is in favour of the assessee.

Final Conclusion: The Departmental appeal failed, and the cancellation of reassessment was sustained.

Ratio Decidendi: Reassessment cannot be founded merely on a subsequent change of opinion or a later administrative instruction when the original assessment was made on the then prevailing circular and on a recognised method of valuation; the statutory test remains fair market value in the open market.

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