Reassessment based on a reversed earlier-year finding was unsustainable where no fresh material supported belief of escapement.

Reassessment under sections 147 and 148 was stated to be unsustainable where the reopening rested entirely on findings already rejected in the earlier year's appellate order. Once that order had been passed and was available to the Assessing Officer before recording reasons, the assessment for the earlier year had merged with it and no surviving material remained to form a valid belief of escapement of income. The analysis also emphasised judicial discipline: a subordinate authority had to follow the binding appellate order, and pendency of the Department's further appeal did not justify ignoring it. The reassessment proceedings and assessment under section 148 were therefore quashed.

---

---

Issues: Whether reassessment under sections 147 and 148 was valid when the reopening was founded on the very basis already struck down by the first appellate authority in the earlier assessment year.

Analysis: The reopening was based entirely on the findings recorded in the assessment for the earlier year. By the time notice under section 148 was issued, the appellate order for that year had already been passed and the assessment order had merged with it. The appellate order was also available to the Assessing Officer before the reasons for reopening were recorded. In such circumstances, there was no surviving material to form a valid belief that income had escaped assessment. The principle of judicial discipline required the subordinate authority to follow the binding appellate order, and the mere pendency of the Department's further appeal did not authorise disregard of that order.

Conclusion: The reassessment proceedings were invalid and the assessment made pursuant to notice under section 148 was quashed.

---