Reassessment notice invalid without material linking escapement of income to the relevant assessment year.

Reassessment under section 148 requires relevant material showing a bona fide reason to believe that income chargeable to tax escaped assessment for the specific year. Transactions from an earlier period, by themselves, could not support reopening for the relevant assessment year, and the amended definition of transfer under section 2(47) did not establish taxable capital gains in that year on the facts stated. Alleged notional interest on an advance was also outside section 147 because tax cannot be levied on income that neither accrued nor was received during the assessment year. In the absence of a nexus between the material and escapement of income in the relevant year, the reopening was without jurisdiction and was set aside.

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Issues: Validity of notice issued for reassessment under section 148 of the Income-tax Act, 1961, on the basis that income had escaped assessment for the relevant assessment year.

Analysis: Reassessment can be initiated only where the Assessing Officer has reason to believe, on relevant material, that income chargeable to tax has escaped assessment for the year in question. Transactions that occurred much prior to the relevant assessment year could not, on the facts, support any belief that income had escaped assessment in that year. The proposed reliance on the amended definition of transfer in section 2(47), including transactions in part performance under section 53A of the Transfer of Property Act, 1882, did not show that any taxable capital gain arose during the assessment year. The alleged notional interest on an advance was also outside the scope of section 147, because tax cannot be levied on income that was neither received nor accrued during the assessment year. In the absence of material connecting the transactions to escapement of income in the relevant year, the jurisdictional condition for reopening was not satisfied.

Conclusion: The notice under section 148 was without jurisdiction and was set aside.

Ratio Decidendi: Reassessment notice is invalid unless the Assessing Officer has relevant material giving rise to a bona fide reason to believe that income chargeable to tax has escaped assessment for the specific assessment year; notional or pre-year transactions cannot, by themselves, justify reopening.

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