Reopening of assessment can stand on valid prima facie grounds even if one recorded reason is unsustainable.

Reopening under Section 147 read with Section 148 of the Income-tax Act, 1961 depends on a prima facie belief of escapement of income supported by material with a live nexus to that belief. The note states that services rendered by an Indian subsidiary exclusively to the assessee could prima facie support business connection and permanent establishment for reopening purposes, and the interest-related ground was not shown to be wholly untenable at that stage for the relevant year. By contrast, the reason that seconded employees' salaries constituted fees for technical services lacked supporting material and was treated as conjectural. The reopening was said not to fail merely because one recorded reason was unsustainable if other reasons independently furnished valid prima facie grounds.

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Issues: Whether the notices for reopening assessments under Section 148 of the Income-tax Act, 1961, and the orders rejecting objections thereto were valid on the grounds of business connection, permanent establishment, interest income, and fees for technical services.

Analysis: Reopening under Section 147 read with Explanation 2(a) requires only a prima facie belief of escapement of income founded on material having a live nexus with the belief formed by the Assessing Officer. On the material before him, the subsidiary in India rendering services exclusively to the assessee furnished prima facie support for the view that there was a business connection in India and that the subsidiary could be regarded as a permanent establishment for reopening purposes. The interest-related reason was also not shown to be wholly untenable at the reopening stage, at least for the assessment year in which interest had been charged. However, the finding that salary paid to seconded employees represented fees for technical services was unsupported by material and rested on conjecture.

Conclusion: The reopening could not be invalidated merely because one of the recorded reasons was unsustainable, since other reasons furnished valid prima facie grounds for action under Sections 147 and 148 of the Income-tax Act, 1961. The petition was therefore liable to fail.

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