Judgment :- N. V. BALASUBRAMANIAN J. Pursuant to the directions of this court under section 26(3) of the Gift-tax Act, 1958 (hereinafter to be referred to as "the Act"), in T. C. P. Nos. 270 to 272 of 1982, dated April 4, 1983, the Appellate Tribunal has stated a case and referred the following common question of law with reference to three assessees who are respondents before us for our opinion "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the reassessment made under section 16(1)(b) of the Gift-tax Act, 1958, for the assessment year 1964-65 as bad in law ?" The assessees are the owners of certain shares in some private limited companies known as Southern Roadways Private Limited and Sundaram Industries Private Limited. The Gift-tax Officer in the original assessment made on the assessees for the assessment year 1974-75 adopted the value of the shares adopting the principles of valuation stipulated under rule 1D of the Wealth-tax Rules, 1957. The Gift-tax Officer, adopted the provisions of 1D of the Wealth-tax Rules on the basis of the circular issued by the Central Board of Direct Taxes dated March 26, 1968. Subsequently, the Gift-tax Officer came to know about the Board's circular dated October 29, 1974, issued on the same subject of valuation of shares for gift-tax purposes and the said circular of the Board directed the Assessing Officer to adopt the provisions of rule 10(2) of the Gift-tax Rules for valuation of the shares for the purpose of gift-tax. The relevant portion of the Board's circular dated October 29, 1974, reads as under: "As the language of rule 10(2) of the Gift-tax Rules is identical to that of section 37 of the Estate Duty Act, the valuation of shares under rule 10(2) of the Gift-tax Rules, 1958, will be governed by the Board's letters dated May 3, 1965, issued from F. No. 25A/3/65-ED which prescribe the method of valuation of shares under section 37 of the Estate Duty Act, 1953." Consequently, the Gift-tax Officer felt that the valuation of the shares has to be made under rule 10(2) of the Gift-tax Rules. He found that in the original assessment, the valuation of the shares has not been done in accordance with rule 10(2) of the Gift-tax Rules and, therefore, he issued notices for reassessment under section 16(1)(b) of the Gift-tax Act to the assessees. The assessees, in response to the notices issued to them, raised several objections. But, the Gift-tax Officer overruled all objections and computed the value of the share at Rs. 237.30 as against Rs. 135.56 adopted in the original assessment. In this manner, he completed the reassessment and determined the value of taxable gift The assessees preferred separate appeals before the Commissioner of Gift-tax (Appeals) against the orders of reassessment. The Commissioner of Gift-tax (Appeals) held that the order of the Gift-tax Officer in following the method prescribed under rule 1D of the Wealth-tax Rules for the purpose of gift-tax was legally correct and it was not vitiated by any error. The Commissioner of Gift-tax (Appeals), therefore, held that merely because adoption of another method would result in a higher or larger value that is not a ground for reopening the assessment. In this view of the matter, he held that the provisions of section 16(1)(b) of the Gift-tax Act did not apply and as a consequence, he held that the Gift-tax Officer did not validly assume the jurisdiction under section 16(1)(b) of the Act to reopen the assessment The Revenue, aggrieved by the order of the Commissioner of Gift-tax (Appeals), preferred separate appeals before the Income-tax Appellate Tribunal. Several contentions were raised by the Revenue and also on behalf of the assessee before the Appellate Tribunal. The Appellate Tribunal after noticing all the contentions found that nothing was placed before the Tribunal to establish the basis on which the Gift-tax Officer came to the conclusion that the market value of the lands and buildings was much more than what was shown in the balance-sheet. The Tribunal also found that there was no information on the basis of which the Gift-tax Officer could have formed the reasonable belief that there was an underassessment of taxable gift amount. The Appellate Tribunal also noticed that there was nothing in evidence to show that the value of the lands and buildings noted in the reassessment proceedings by the Gift-tax Officer was the real market value and it was in excess of the respective value shown in the balance-sheet. The Appellate Tribunal also noticed that there was nothing in evidence to show that the value of the lands and buildings noted in the reassessment proceedings by the Gift-tax Officer was the real market value and it was in excess of the respective value shown in the balance-sheet. Accordingly, the Appellate Tribunal came to the conclusion that the Gift-tax Officer has no information before him to enable him to form an opinion that the value of the lands and buildings shown in the balance-sheet was less than the value adopted in the reassessment proceedings. Therefore, the Appellate Tribunal held that the assessments were reopened on the basis of some suspicion and mere suspicion would not give him the power to reopen the assessment already made. The Tribunal also noticed another contention raised on behalf of the assessee that if the provision for gratuity is taken into account, there would not have been any underassessment. The Tribunal also noticed that it is not permissible for the Gift-tax Officer to pick and choose certain assets and then determine the market value of the shares. The Tribunal held that the Gift-tax Officer must have taken into account the sundry debts and other liabilities also before coming to the conclusion that there was underassessment and in this view of the matter, the Appellate Tribunal held that there was no information before the Gift-tax Officer as to the market value of the individual assets and in the absence of any information, to form a reasonable belief that there was underassessment, it was not open to the Gift-tax Officer to come to the conclusion that there was underassessment in the levy of gift-tax. The Revenue has come before us challenging the findings of the Appellate Tribunal and, as stated above, the Tribunal has stated a case and referred the question of law set out supraMr. The Revenue has come before us challenging the findings of the Appellate Tribunal and, as stated above, the Tribunal has stated a case and referred the question of law set out supraMr. C. V. Rajan, learned counsel for the Revenue, submitted that the Tribunal was not correct in holding that there was no underassessment and he relied upon the circular of the Central Board of Direct Taxes, dated October 29, 1974, and submitted that the Board has clearly indicated that the provisions of rule 10(2) of the Gift-tax Rules would be applicable in the matter of valuation of shares held by the assessees in the private limited companies and when the provisions of rule 10(2) of the Gift-tax Rules are applied there is an underassessment of the taxable amount of gift made by the assessee. He also submitted that the Board's circular dated October 29, 1974, was before the Gift-tax Officer at the time of making the original assessment dated April 30, 1976, and the Gift-tax Officer overlooked the circular dated October 29, 1974, and had he applied the Board's circular at the time of original assessment, there would have been no loss of revenue and the Gift-tax Officer failed to follow the Board's circular dated October 29, 1974, and so, there was underassessment of taxable gift. He submitted that the Gift-tax Officer was not aware of the fact that the earlier Board's circular was withdrawn at the time of making the original assessment and the assessment made on the basis of the withdrawn circular could not be regarded as a valid assessment and the correct method of valuation is prescribed under rule 10(2) of the Gift-tax Rules. He also submitted that it is not a case of change of opinion by the Gift-tax Officer and the Gift-tax Officer has no knowledge of the fact that the earlier circular was withdrawn at the time of completion of the original assessment and when the Gift-tax Officer came into possession of the subsequent circular after the completion of the assessment, the Gift-tax Officer has the jurisdiction to reopen the assessment under section 16(1)(b) of the Act since he felt that the taxable gift had escaped assessment by way of underassessmentMr. Janarthana Raja, learned counsel for the assessee, on the other hand, submitted that the Tribunal has given a categorical conclusion that there was no information before the Gift-tax Officer that the market value of the assets of the company was higher than the value shown in the balance-sheet and in view of the finding of the Appellate Tribunal that there was no information before the Gift-tax Officer that the taxable gift had escaped assessment, the Appellate Tribunal has come to a correct conclusion in holding that the provisions of section 16(1)(b) of the Act were not attracted on the facts of the case We have carefully considered the rival, submissions of counsel for the respective parties. We have seen that the Appellate Tribunal has recorded a clear finding that the Revenue has not placed any material before the Appellate Tribunal to show that there was any information coining into the possession of the Gift-tax Officer subsequent to the completion of the original assessment that the market value of the land and building of the companies was much higher than the value shown in the balance-sheet of the companies. The Appellate Tribunal also recorded a finding that in the absence of any information, the Gift-tax Officer proceeded only on the basis of suspicion and surmises that the taxable gift had escaped assessment. It is in the light of the finding of the Appellate Tribunal, the question whether it is permissible for the Gift-tax Officer to invoke the provisions of rule 10(2) of the Gift-tax Rules in the reassessment proceedings has to be considered. It is in the light of the finding of the Appellate Tribunal, the question whether it is permissible for the Gift-tax Officer to invoke the provisions of rule 10(2) of the Gift-tax Rules in the reassessment proceedings has to be considered. Rule 10(2) of the Gift-tax Rules, reads as under: "Where the articles of association of a private company contain restrictive provisions as to the alienation of shares, the value of the shares, if not ascertainable by reference to the value of the total assets of the company, shall be estimated to be what they would fetch if on the date of gift they could be sold in the open market on the terms of the purchaser being entitled to be registered as holder subject to the articles, but the fact that a special buyer would for his own special reasons give a higher price than the price in the open market shall be disregarded." The conditions for the applicability of the provisions of rule 10(2) of the Gift-tax Rules are (i) the articles of association of a private company should contain restrictive provision as to the alienation of shares, (ii) the Gift-tax Officer must form an opinion that the value of the shares is not ascertainable by reference to the value of the total assets of the company, and (iii) he must come to a conclusion that the value of the shares is not ascertainable by reference to the value of the total assets of the company, and then it is open to him to estimate the value of the assets of the company on the basis of the market values of the assets. The pre-condition for the applicability of the provisions of rule 10(2) of the Gift-tax Rules is that the Gift-tax Officer must come to a conclusion that it is not possible to ascertain the value of the shares by reference to the value of the total assets of the company. We have perused the order of reassessment made by the Gift-tax Officer. The Gift-tax Officer has merely stated that in the original assessment, the value of the shares gifted was determined on the basis of rule 1D of the Wealth-tax Rules and the valuation has not been done in accordance with rule 10(2) of, the Gift-tax Rules. We have perused the order of reassessment made by the Gift-tax Officer. The Gift-tax Officer has merely stated that in the original assessment, the value of the shares gifted was determined on the basis of rule 1D of the Wealth-tax Rules and the valuation has not been done in accordance with rule 10(2) of, the Gift-tax Rules. But, the Gift-tax Officer has not recorded any finding to the effect that it is not possible for him to ascertain the value of the shares by reference to the value of the total assets of the company and in the absence of any such finding, it is not open to the Gift-tax Officer to value the shares on the basis of the market value of the assets of the company. The Appellate Tribunal also recorded a finding that there was no information before the Gift-tax Officer to form an opinion that the value of the land and building as shown in the balance-sheet was lower than the market value of the assets. There are no evidence or materials to the effect that the market value of the assets of the company was higher than the value of the same as shown in the balance-sheet and in the absence of any evidence, it is not possible for the Gift-tax Officer to come to the conclusion that it was not possible for him to ascertain the value of the shares by reference to the value of the total assets of the company. Therefore, when the pre-requisite condition for the applicability of the rule 10(2) is missing, we have to hold that, even assuming that it is open to the Gift-tax Officer to apply rule 10(2) of the Gift-tax Rules, it is not open to him to value the shares by reference to the market value of the assets of the company on the date of the giftFurthermore, this court in CGT v. Sundaram Industries Ltd. has held that the method of valuation adopted under the Wealth-tax Act would be equally applicable for gift-tax purposes and rule 1D of the Wealth-tax Rules which prescribes a well-known method of ascertaining the value of the unquoted equity shares held in a private company would be equally applicable for the purpose of gift-tax also. This court also held that the method of valuation adopted for the purpose of wealth-tax can equally be adopted for gift-tax purposes and the method of valuation prescribed by the Wealth-tax Rules cannot be held to be arbitrary. The original assessment in this case was made applying the principles of rule 1D of the Wealth-tax Rules and if rule 10(2) of the Gift-tax Rules is not applicable, we are of the opinion that the same result arrived at in the original assessment would be achieved in the reassessment proceedings. In CGT v. Madanlal Patodia the Calcutta High Court held that the provisions of rule 10(2) of the Gift-tax Rules are mandatory in nature, but the provisions of rule 10(2) of the Gift-tax Rules also provide an option to the Gift-tax Officer to value the shares going by the break-up value method and if it is not possible to adopt the break-up value method, it is permissible for him to adopt the market value of the shares on the basis of the market value of the assets of the company. As already seen, there is no finding by the Gift-tax Officer that it was not practicable to value the shares by the break-up value method and then, he can adopt the valuation method prescribed under rule 10(2) of the Gift-tax Rules. In the absence of any such finding by the Gift-tax Officer that the only method that was available to him would be the break-up value method in the matter of valuation of unquoted shares held by the assessee in a private company whose articles of association contained restrictive provisions as to the alienation of its sharesFurther, the Supreme Court in a series of decisions in CGT v. S. P. Godrej [1991] 189 ITR(St) 121-122, CGT v. Anarkali Sarabhai [1989] 179 ITR(St) 62 CGT v. Bhola Nath [1990] 186 ITR(St) 27 and CIT v. N. P. Godrej [1990] 186 ITR(St) 76, dismissed the special leave petitions filed by the Revenue on the question of valuation of unquoted shares gifted and the Supreme Court approved the break up value method of valuation of shares applying rule 10(2) of the Gift-tax Rules. In this view of the matter, the Tribunal has come to the correct conclusion in holding that there was no information before the Gift-tax Officer to form a belief that there was underassessment and in the absence of any information before the Gift-tax Officer the Gift-tax Officer was not correct in holding that there was underassessment of a taxable gift. Therefore, the Gift-tax Officer has no valid jurisdiction to reopen the assessment. Accordingly, we answer the common question of law referred to us in the affirmative and against the Revenue. There will be no order as to costs, in the circumstances of the case.