Reassessment is invalid where based on incorrect facts and no new tangible material despite full disclosure.

The petitioner filed its income-tax return for AY 2013–14 on 27.09.2013, declaring total income of ₹23,08,270.

The return was scrutinised, and an assessment order under Section 143(3) of the Income-tax Act, 1961 (“the Act”) was passed on 30.12.2015 accepting the declared income.

Subsequently, the respondent issued a notice under Section 148 dated 28.03.2019 to reopen the assessment.

The reasons relied upon information from the ADIT/DDIT (Investigation) concerning an alleged deposit of ₹16,14,883 by the petitioner in the bank account of M/s Manibhadra Textile Company, followed by cash withdrawals by its proprietor.

The petitioner contended that no payment of ₹16,14,883 had been made during AY 2013–14 and that the amount represented an opening balance; in fact, ₹2,00,000 had been returned to the petitioner during the year.

The petitioner’s objections to the reopening were rejected by the Assessing Officer on 11.12.2019.

Whether the notice under Section 148 was based on a valid “reason to believe” that income had escaped assessment, or merely on incorrect information and suspicion regarding an alleged transaction.

Whether reopening an assessment completed under Section 143(3), in the absence of new tangible material and despite full disclosure of the relevant transaction, amounted to a change of opinion and an impermissible fishing and roving inquiry.

Whether the alleged deposit of ₹16,14,883 constituted income escapement when the amount was in fact an opening balance and no corresponding payment was made during the relevant assessment year.

The Court applied Sections 143(3), 147 and 148 of the Act and the settled principles governing reassessment.

A notice under Section 148 must be founded on a bona fide and legally sustainable “reason to believe” that income has escaped assessment; mere suspicion, borrowed satisfaction, or information not independently evaluated by the Assessing Officer is insufficient.

Reassessment cannot be used for a fishing or roving inquiry or to revisit an issue already examined in scrutiny proceedings in the absence of fresh tangible material, as that would constitute a change of opinion.

Where the assessee has fully and truly disclosed the relevant material and the alleged basis of reopening is factually incorrect, reassessment is impermissible.

The Court found that the reopening proceeded on the incorrect assumption that the petitioner had deposited ₹16,14,883 with M/s Manibhadra Textile Company during AY 2013–14.

The petitioner had specifically demonstrated that the amount was an opening balance and that no such payment was made during the relevant year; this position was not disputed by the respondent.

Since there was no payment during the year, the foundational fact relied upon for alleging escapement of income did not exist.

Further, the original assessment had been completed under Section 143(3), and the relevant business transactions had been disclosed.

The investigation information did not constitute new tangible material independently establishing escapement of income; at most, it raised suspicion based on the cash withdrawals made by the third party’s proprietor.

Accordingly, the Court held that the reopening amounted to a change of opinion and an impermissible fishing and roving inquiry, rather than a valid exercise of reassessment jurisdiction.

It held that there was no valid reason to believe that income had escaped assessment, as the reopening was based on incorrect facts, did not disclose any new tangible material, and followed full disclosure of the relevant transactions in the original scrutiny assessment.

The writ petition was allowed, and the notice issued under Section 148 dated 28.03.2019 was quashed and set aside.