Reassessment needs relevant material and a valid transfer under part performance; a mistaken premise cannot sustain reopening.

Reassessment requires relevant material supporting a bona fide belief that income has escaped assessment; where the recorded reasons rest on a mistaken assumption and lack a rational nexus with the material, the reopening is without jurisdiction and invalid. The court also held that a writ petition need not be declined merely because an alternate statutory remedy exists when the petition has already been entertained and the assessing authority's jurisdiction is under challenge. On capital gains, section 2(47)(v) applies only where the requirements of part performance under section 53A are satisfied in the relevant year; a later step taken only to complete an earlier agreement does not by itself create a fresh transfer.

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Issues: (i) Whether the writ petition should be declined on the ground of availability of an alternate statutory remedy. (ii) Whether the notice for reassessment was validly issued on the basis of material showing escapement of income. (iii) Whether the agreement and subsequent events constituted a transfer within section 2(47)(v) of the Income-tax Act, 1961, read with section 53A of the Transfer of Property Act, 1882.

Issue (i): Whether the writ petition should be declined on the ground of availability of an alternate statutory remedy.

Analysis: The petition had already been entertained and an interim course had been adopted permitting the assessment to proceed while keeping the demand subject to the Court's order. In those circumstances, and where the jurisdiction of the Assessing Officer itself was under challenge, the Court declined to dismiss the petition merely because appellate remedies were available.

Conclusion: The preliminary objection based on alternate remedy was rejected.

Issue (ii): Whether the notice for reassessment was validly issued on the basis of material showing escapement of income.

Analysis: Reopening requires relevant material giving rise to a bona fide belief that income has escaped assessment. The Court held that the reasons recorded proceeded on a misconceived premise that a fresh agreement to sell had come into existence in the relevant year, whereas the only agreement was of 1984 and the later letter merely sought completion of formalities. There was no rational or intelligible nexus between the material and the belief that income had escaped assessment for the assessment year concerned.

Conclusion: The reassessment notice was held to be without jurisdiction and invalid.

Issue (iii): Whether the agreement and subsequent events constituted a transfer within section 2(47)(v) of the Income-tax Act, 1961, read with section 53A of the Transfer of Property Act, 1882.

Analysis: For section 2(47)(v) to apply, the transaction must fall within the requirements of part performance under section 53A. The Court held that the original agreement had been entered into in 1984, possession had already been given then, and the purchaser's later exercise of option did not create a new agreement or a fresh transfer in the relevant assessment year. The essential ingredients for treating the transaction as a transfer in the relevant year were absent.

Conclusion: The transaction did not amount to a transfer in the relevant assessment year under section 2(47)(v).

Final Conclusion: The reassessment action and consequential orders were quashed, and the assessee succeeded on merits as well as on jurisdiction.

Ratio Decidendi: Reassessment is invalid where the reasons recorded rest on no relevant material or on a legally untenable assumption, and a later step taken only to complete an earlier agreement does not by itself create a fresh transfer for capital gains purposes under section 2(47)(v) unless the statutory requirements of part performance are satisfied in the relevant year.

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