Reassessment once validly opened can cover all escaped income, even if the original reopening ground later fails.

Once reassessment is validly initiated on the basis of reason to believe existing at the time of notice, the proceeding is not confined to the item originally recorded and extends to all escaped income or excessive relief for that assessment year. A later failure of the original reopening ground does not invalidate the initiation or restrict the taxing authority to that single issue. The validity of reopening is judged at the time the notice is issued, and a subsequent Supreme Court decision stating the correct legal position does not retrospectively render the reassessment bad in law. The reference was answered in favour of the Revenue, and the reassessment was upheld.

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Issues: (i) Whether reassessment proceedings validly initiated on the original ground could continue even after that basis ceased to survive, so as to bring to tax other escaped items or withdraw excessive relief. (ii) Whether the reassessment proceedings were bad in law because the belief underlying the reopening was said to have disappeared after a later Supreme Court decision.

Issue (i): Whether reassessment proceedings validly initiated on the original ground could continue even after that basis ceased to survive, so as to bring to tax other escaped items or withdraw excessive relief.

Analysis: Once reassessment is validly initiated, the jurisdiction of the Income-tax Officer is not confined to the item mentioned in the notice. The reassessment proceeding starts afresh and extends to all escaped income and reliefs for the relevant year. The fact that the original reopening ground later fails does not erase the validity of the initiation or limit the officer to that single item.

Conclusion: The question was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether the reassessment proceedings were bad in law because the belief underlying the reopening was said to have disappeared after a later Supreme Court decision.

Analysis: The validity of reopening must be judged at the moment the notice is issued. At that time, the Income-tax Officer had material and a legally sustainable basis to form the requisite belief. A later decision declaring the correct legal position does not retrospectively invalidate an otherwise lawful initiation of reassessment.

Conclusion: The reassessment proceedings were held to be validly initiated and not bad in law, against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered for the Revenue, and the reassessment was upheld as lawfully initiated with power to assess all escaped items in the reopened proceedings.

Ratio Decidendi: If reassessment is validly initiated on the existence of reason to believe at that point of time, the entire assessment for that year is reopened and the authority may assess all escaped income or withdraw excessive relief, even if the original ground for reopening later fails.

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