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Issues: Whether the reopening of the assessment under section 147(a) of the Income-tax Act, 1961 was valid when it was founded on material seized during search relating to a different assessment year, after the original assessment had been completed under section 143(3).
Analysis: The original assessment for the relevant year had been completed after examination of the books of account and acceptance of the disclosed gross profit. The material relied upon for reopening arose from a search and related to a much later assessment year. Such material did not have a direct nexus with the assessment year sought to be reopened. The reasoning that the assessee may have followed a similar method in earlier years was treated as insufficient, because reopening under section 147(a) requires relevant material giving rise to a proper basis for belief that income had escaped assessment. Material belonging to another year, especially one far removed in time, could not justify reopening and amounted to a mere change of opinion.
Conclusion: The reopening of the assessment was invalid and was rightly set aside in favour of the assessee.
Ratio Decidendi: Material relating to one assessment year cannot, without a direct nexus to the relevant year, constitute a valid basis for reopening an assessment under section 147(a) of the Income-tax Act, 1961.
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