Landmark Cases on Reassessment and Section 148

An assessment or reassessment order is considered bad in law and without legal sanction if its completion is not in accordance with prescribed legal procedures or timelines.

The Assessing Officer is justified in reopening assessment proceedings based on information received from the Investigation Wing, even when recording findings also rely on documents already on record, provided all procedural requirements for reassessment are met.

Non-compliance with the GKN Driveshafts procedure, specifically not passing a speaking order on objections to reassessment before completing the assessment, is a curable procedural irregularity and does not nullify the assessment, particularly if the assessee did not request a speaking order.

A decree or proceeding initiated by an authority without jurisdiction is a nullity, void ab initio, and its invalidity can be raised at any stage, including in collateral proceedings or for the first time on appeal, as a defect of jurisdiction cannot be cured even by consent.

The Supreme Court, by dismissing the department's SLP, affirmed that the supply of reasons to the assessee is mandatory for reassessment proceedings. Failure to provide reasons before proceeding with reassessment renders such proceedings liable to be quashed.

A notice issued under Section 148 by a jurisdictional Assessing Officer is valid and not rendered bad in law by Section 151A or the CBDT Notification dated March 29, 2022. This applies even with the introduction of the faceless assessment regime for reassessment proceedings.

Information received from the CIB (Central Information Branch) wing constitutes valid material for the assessing officer to reopen an assessment under Section 147, as a CIB letter provides fresh tangible material for initiating reassessment proceedings.

Reopening an assessment after four years is invalid under the proviso to section 147, unless the assessee failed to disclose true and material facts necessary for assessment. The assessee has a fundamental duty to disclose all primary facts.

The Assessing Officer has valid reason to believe that income has escaped assessment when the assessee fails to file a return, especially if the assessee is known to have multiple income sources such as business income and income from house property. This justifies the initiation of reassessment proceedings.

Reassessment notices under Section 148A, issued in the context of faceless assessment proceedings, must be issued by the designated Faceless Assessing Officer and not by a Jurisdictional Assessing Officer.

The Assessing Officer has jurisdiction to reopen assessment under sections 147 and 148 if specific and reliable information forms a bona fide 'reason to believe' that income has escaped assessment. This power can be exercised even before the expiry of the time limit for issuing a notice under section 143(2).

The non-furnishing of recorded reasons for reopening an assessment under Section 147, even if partially, is a jurisdictional requirement. Failure to provide these reasons to the assessee upon request renders the reassessment proceedings and order bad in law, leading to their quashing.

An assessment cannot be reopened beyond four years from the end of the relevant assessment year unless the assessee failed to make a full and true disclosure of all material facts necessary for assessment.

Reassessment under Section 147 requires fresh tangible material to form a reason to believe that income has escaped assessment. It cannot be initiated on a mere change of opinion, reappraisal of existing records, or as a fishing enquiry.

Reassessment proceedings initiated under Section 147 are invalid if the Assessing Officer records reasons without proper application of mind, such as repeating alleged accommodation entries, indicating a mechanical or callous approach. The reasons recorded must establish a genuine belief that income has escaped assessment, not a borrowed or superficial one.

An Assessing Officer can reopen assessment proceedings based on information received from the Investigation Wing, provided the officer applies an independent mind, records reasons for belief, and establishes a live link between the information and the belief that income has escaped assessment.

Failure to issue notice under section 143(2) before finalizing a reassessment order under section 147 is a fatal jurisdictional error, and this defect cannot be cured by invoking section 292BB of the Income-tax Act. Consequently, such a reassessment order is not sustainable in law.

Sanction required under Section 151(2) for initiating reassessment proceedings under Section 147 is a jurisdictional requirement affecting the assessee's rights and liabilities. This differs from an administrative approval under Section 153D.

A faceless assessment, particularly one framed under the income escaping assessment provisions or an order issued under Section 148A(d), can be quashed where found to be invalid, allowing the assessee's appeal.

Reopening of assessment requires specific and non-vague reasons; it cannot be based on scanty or non-specific grounds. Where the reasons for reopening are found to be factually incorrect or based on a misunderstanding of the assessee's disclosed records, the reopening may be invalid.

The validity of reassessment proceedings under Section 147 is judged solely by the reasons recorded, which cannot be supplemented or improved upon by any subsequent material or order rejecting objections.

The second proviso to Section 34(3) of the Income-tax Act, 1922 is unconstitutional for violating Article 14, as it allowed reassessment notices to be issued to "any person" without limit. The limitation period for issuing a reassessment notice is determined by the law prevailing on the date of issuance, including the retrospective effect of the 1948 amendment for assessing foreign income under Section 4(2).

For initiating reassessment proceedings under Section 147, the Assessing Officer must possess fresh tangible material or specific information, often from the investigation wing, which forms a direct nexus with the reason to believe that income has escaped assessment, demonstrating the application of mind. A prima facie reason, rather than a final verdict, is sufficient to assume jurisdiction for issuing a notice under Section 148.

Even if income has escaped assessment, the Assessing Officer lacks jurisdiction to reopen an assessment under Section 147 if the 'reasons to believe' are not based on cogent material. Meeting this jurisdictional pre-condition is essential for a valid reassessment.

Failure to issue a mandatory notice under Section 143(2) of the Income Tax Act is a fatal and incurable defect, rendering the assessment or reassessment order invalid. Section 292BB does not cure the complete non-issuance of such a notice, especially in reassessment proceedings.

Reassessment notices issued on or after April 1, 2021, relying on Notifications extending the applicability of unamended Sections 148 to 151 beyond March 31, 2021, are invalid because the unamended provisions ceased to exist.

The Supreme Court's judgment in Ashish Agarwal does not allow for the issuance of a fresh reassessment notice under the new regime if the initial notice under the pre-amended Section 148 was already time-barred under the old law, even considering the benefit of extended limitation periods, prior to April 1, 2021. Consequently, any subsequent notice issued under the new Section 148 in such a scenario is invalid.

The non-furnishing of reasons for reopening a concluded assessment vitiates reassessment proceedings, especially when the assessee requests them. Furthermore, if a reassessment relies on a third-party statement, it must be provided to the assessee for proper explanation.

For reassessment proceedings to be valid, especially after a return is merely processed under Section 143(1), the Assessing Officer must have a genuine "reason to believe" that income escaped assessment, based on correct facts and proper application of mind. If the assessee disputes the facts, the order on objections must address and establish their correctness, and sanction under Section 151 cannot be mechanical.

A notice under section 148 of the Income-tax Act, 1961, is a jurisdictional notice and a condition precedent for reassessment. Such a notice issued against a deceased person is valid if the legal representative submits to the Assessing Officer without raising any objection.

An Additional Commissioner's sanction is valid for issuing a notice under Section 148, as the definition of 'Joint Commissioner' in Section 2(28C) is inclusive and encompasses an Additional Commissioner. Therefore, a notice issued with such sanction is not without jurisdiction.

A reassessment notice issued under Section 148 is illegal if it is issued more than four years after the end of the relevant assessment year, provided the original assessment was completed under Section 143(3) and the assessee had made a full and true disclosure of all material facts. This principle applies in the interpretation of the proviso to the 'new' Section 147.

For initiating reassessment proceedings, the Assessing Officer is not required to have conclusive evidence that income has escaped assessment. A 'reason to believe' based on fresh facts or information, such as from the Sales Tax Department regarding bogus purchases or accommodation entries, is sufficient, provided it establishes a link to the escapement of income.

Reassessment proceedings under Section 147/148 are invalid if the Assessing Officer's recorded reasons for believing income has escaped assessment are based on factually incorrect premises or do not exist on record, as such reasons cannot confer jurisdiction.

The date of issuance of a notice under Section 148 of the Income-tax Act is reckoned not from the date it was issued by the authority, but from the date it was actually delivered to the assessee.

For an addition to income or issuance of a reassessment notice under Section 148, there must be a valid 'reason to believe' that income has escaped assessment; mere suspicion cannot form the basis for such action, as 'reason to believe' is not the same as 'reason to suspect'.

When reopening an assessment beyond four years under the proviso to Section 147, the reasons recorded for the notice must explicitly allege that income escaped assessment due to the assessee's failure to fully and truly disclose all material facts; otherwise, the reassessment proceedings are without jurisdiction.

The validity of a notice for reopening an assessment is determined by the provisions of the Income-tax Act in force on the date the notice under section 148 is issued. It is not governed by the law applicable when the income originally escaped assessment.

Reassessment under Section 147 is not permissible solely on a mere change of opinion or a reconsideration of the same material. The Assessing Officer loses jurisdiction to proceed with reassessment if the initial grounds for believing income has escaped assessment are subsequently found to be incorrect or non-existent.

When reassessment proceedings are initiated under Section 147 by issuing a notice under Section 148, and the assessee does not file a return in response, the non-issuance of a notice under Section 143(2) is a procedural irregularity that does not invalidate the reassessment.

Reopening of an assessment beyond four years from the end of the relevant assessment year is invalid if it is based on a mere change of opinion or borrowed satisfaction, or if the reasons recorded do not explicitly allege the assessee's failure to truly and fully disclose all material facts necessary for assessment.

The retrospective application of Section 149(1)(c) of the Income Tax Act is considered when assessing reassessment proceedings, potentially overriding prior High Court decisions that did not account for this amendment.

If reassessment proceedings are initiated for a specific issue, the Assessing Officer cannot make additions on other issues discovered during reassessment unless an addition is also made on the original issue for which the assessment was reopened. If the foundation for reopening fails (i.e., no addition on the original issue), the entire reassessment on other issues cannot be sustained.

During reassessment proceedings under Section 148, the Assessing Officer cannot sustain additions for items that were not part of the initial "reasons to believe" for issuing the notice. If the original reasons are found invalid, then other additions not related to those reasons are also unsustainable.

Information received from the Investigation Wing constitutes a valid 'reason to believe' for the Assessing Officer to initiate reassessment proceedings under Section 147 of the Income-tax Act.

Reassessment proceedings under Section 147 cannot be initiated based on a mere change of opinion or having second thoughts on the same material that was available during the original assessment. The Assessing Officer's omission to draw a correct legal presumption or inference from disclosed facts, without any failure to disclose fully and truly all material facts, does not warrant reopening.

The Assessing Officer cannot mechanically reopen assessment under Section 147 solely on information from the Investigation wing about accommodation entries without applying an independent mind to form a reason to believe. Such reassessment is unjustified where the assessee has made a full and true disclosure of material facts.

The reopening of assessment cases is valid when conducted following due process, including obtaining prior approval from the Principal Commissioner of Income Tax, especially when based on specific information regarding foreign bank accounts received from the FT&TR Division of CBDT.