Reassessment over alleged bogus LTCG from third-party portal data u/ss147/148 struck down for lack of independent evidence

The dominant issue was whether reassessment under ss. 147/148 could be initiated on "reason to believe" based merely on third-party portal information alleging bogus LTCG. The HC held that the AO formed no independent nexus between the assessee and the alleged transactions, failed to verify the return and disclosed LTCG particulars, and ignored documentary material supporting genuineness (exchange contract notes, demat records, regulator confirmations, and banking trail). As the recorded reasons reflected suspicion rather than tangible material, and no undisclosed income was shown to have escaped assessment, the notice issued beyond limitation was invalid; the reassessment notice and consequential action were set aside in favour of the assessee.

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Issues Involved:
1. Validity of the second notice under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer to reopen a completed assessment beyond the prescribed period.
3. Requirement of fresh tangible material for reopening the assessment.
4. Application of mind by the sanctioning authority under Section 151 of the Act.
5. Legal precedents supporting the petitioner's case.

Summary:

Issue 1: Validity of the Second Notice under Section 148
The petitioner challenged the notice dated 31.03.2021 issued by the Revenue under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2013-14. The petitioner argued that the notice was issued without proper application of mind and was based on incorrect facts, making it impermissible at law. The court held that the reasons for reopening, cited in the communication dated 09.11.2021, were based on suspicious transactions observed from ITD, ITBA, and Insight portals, without actual examination of the information. The court found the notice to be based on suspicion rather than concrete evidence, thus lacking jurisdictional facts.

Issue 2: Jurisdiction to Reopen Assessment Beyond Prescribed Period
The petitioner contended that the reopening of assessment for the second time was done without fresh and tangible material and beyond the period of four years from the end of the Assessment Year 2013-14. The court noted that the reasons for reopening did not demonstrate any independent application of mind and were mechanically approved by the sanctioning authority, thus vitiating the entire process.

Issue 3: Requirement of Fresh Tangible Material
The petitioner argued that the reopening was done without any fresh tangible material. The court observed that the reasons for reopening were based on information from the Insight portal, which was not independently verified by the Assessing Officer. The court emphasized that the reopening of an assessment requires a direct nexus between the material and the belief that income has escaped assessment, which was not established in this case.

Issue 4: Application of Mind by Sanctioning Authority
The petitioner questioned the validity of the sanction granted under Section 151 of the Act. The court found that the approval under Section 151 was granted in a mechanical fashion without any independent application of mind, which is required to ensure that the reopening of assessment is not arbitrary.

Issue 5: Legal Precedents
The petitioner relied on several judgments, including Sheo Nath Singh Vs. Appellate Assistant Commissioner of Income Tax, Commissioner of Income Tax Vs. Smt. Paramjit Kaur, and others, to support their case. The court referred to these precedents to emphasize the importance of having concrete reasons for reopening an assessment and the necessity of the Assessing Officer to act on direct or circumstantial evidence rather than mere suspicion.

Conclusion:
The court quashed and set aside the impugned notice dated 31.03.2021 and the order disposing of the petitioner's objections dated 30.12.2021, declaring them arbitrary and issued without requisite jurisdiction under Section 148 of the Act. The rule was made absolute in terms of prayer clause A & B of the petition, with no costs.

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