Jurisdictional defect in reassessment: failure to issue notice and borrowed satisfaction led to quashing of reopening and deletion of section 68 addition.

In reassessment, failure to issue and serve notice under section 143(2) after notice under section 148 was treated as a mandatory jurisdictional defect; section 292BB was held not to cure complete non-issuance of notice, and the reassessment was quashed. The reopening was also invalid because the recorded reasons were based on borrowed satisfaction from Investigation Wing information without independent application of mind or adequate underlying material, so the section 147 jurisdictional requirement of bona fide reasons to believe was not met. For the share application money addition under section 68, the assessee furnished evidence of identity and financial status of the investing companies and the Revenue made no effective rebuttal, so the addition was deleted.

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Issues: (i) Whether the reassessment was invalid for non-issuance or non-service of notice under section 143(2) after notice under section 148, and whether section 292BB cured the defect; (ii) Whether the reasons recorded for reopening were vitiated as being based on borrowed satisfaction and lacking bona fide application of mind; (iii) Whether the addition under section 68 in respect of share application money was sustainable.

Issue (i): Whether the reassessment was invalid for non-issuance or non-service of notice under section 143(2) after notice under section 148, and whether section 292BB cured the defect.

Analysis: The assessment record was not produced despite direction, and an adverse inference was drawn that notice under section 143(2) had not been issued or served. The procedural requirement of issuing notice under section 143(2) in reassessment proceedings was treated as mandatory and jurisdictional. The protection under section 292BB was held to relate to service defects and not to the complete failure to issue notice.

Conclusion: The reassessment was invalid and was quashed in favour of the assessee.

Issue (ii): Whether the reasons recorded for reopening were vitiated as being based on borrowed satisfaction and lacking bona fide application of mind.

Analysis: The recorded reasons merely referred to information from the Investigation Wing and concluded that accommodation entries had been taken, without identifying the underlying material, the relevant dates, or the manner in which the entries were reflected. The jurisdiction to reopen under section 147 requires bona fide reasons to believe based on relevant material and independent application of mind.

Conclusion: The reopening was held to be invalid in favour of the assessee.

Issue (iii): Whether the addition under section 68 in respect of share application money was sustainable.

Analysis: The assessee furnished supporting evidence regarding the investing companies, including identity and financial status, while the Assessing Officer made no effective enquiry or contrary material finding. In the absence of such rebuttal, the initial burden under section 68 stood discharged and the addition could not be sustained in the assessee's hands.

Conclusion: The addition under section 68 was deleted in favour of the assessee.

Final Conclusion: The assessment was annulled, the reopening was held unsustainable, and the Revenue's addition was rejected, resulting in overall relief to the assessee.

Ratio Decidendi: In reassessment proceedings, failure to issue notice under section 143(2) after notice under section 148 is a jurisdictional defect, section 292BB does not cure non-issuance of notice, and reopening must rest on independently formed bona fide reasons based on tangible material.

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