Assessment reopening fails without supporting material for split-up business allegation and unsupported reassessment reasons

Reopening of assessment was held invalid where the recorded reasons alleged that the assessee's industrial undertaking was not manufacturing activity and had been formed by splitting up an existing business, but the file contained no material to support that inference. In the absence of fresh or supporting material, the reassessment could not be founded on a mere allegation. The fact that the deduction claim had not previously been disallowed on that ground further showed that the stated basis for reopening was unsustainable. The decision confirms that reassessment must rest on relevant material and cannot proceed on unsupported assumptions.

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Issues: Whether the reopening of assessment was valid when there was no material on record to support the allegation that the assessee's industrial undertaking was formed by splitting up of an existing business, and the claim for deduction had not been disallowed on that basis.

Analysis: The reopening was founded on the premise that the assessee's activity was not manufacturing activity and that the industrial undertaking had been formed by splitting up of an existing business. The record did not contain any material enabling such a conclusion. In the absence of fresh or supporting material, the basis for reopening could not be sustained. The fact that the claim had not been disallowed on that ground also meant that the stated reason for reopening failed.

Conclusion: The reopening of assessment was invalid.

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