The assessment was reopened on the ground that the firm had revalued its assets and transferred the revalued reserve to its partners’ accounts and the assessee being a partner had received a certain sum of money on account of such revaluation reserve and that such income had escaped assessment. The Assessing Officer held that section 45(3) was applicable in respect of such transfer made during the previous year relevant to the assessment year 2008-09, that the revaluation sum recorded in the books of account of the firm as on March 31, 2008 was to be deemed the full value of consideration received or accruing as a result of transfer of the capital asset by way of capital contribution, that the revaluation amount was the profit which accrued to the three assessees and that each of them was liable to tax on one-third of the revaluation profit as short-term capital gains. The Commissioner (Appeals) held that revaluation of an asset was not a business transaction resulting in any pecuniary gain which could form subject matter of taxation and allowed the assessees’ appeals. The Tribunal held on the facts that, if at all any income accrued or arose owing to revaluation of the assessee it was an issue which had to be dealt with in the assessment of the firm which was a separate taxable entity and that invoking of section 45(3) which had no application in the assessment year 2008-09 was unjustified since the year of transfer of reserve was the financial year ended March 31, 2006 and that notwithstanding that the State Government had revised the guideline value for the purpose of stamp duty between 2004-and 2007, in accordance with the accounting principles the land held as inventory was shown at its cost and therefore no undervaluation was done by the assessee, that after conversion of inventory into fixed asset the firm revalued the developed land including the construction thereon in order to bring it in line with the current market value to justify the business assistance secured by the firm from the banks to the extent of Rs. 250 crores and that therefore, the revaluation of the asset was not a colourable device. On appeal  the High court affirmed the order of the Tribunal.(AY.2008-09)