Reassessment based on mistaken assumption of withdrawn fund approval invalid where no earlier effective date was recorded.

Reassessment based on the assumption that a superannuation fund approval had already been withdrawn was invalid where the withdrawal order was passed later and did not specify any earlier effective date. Rule 2 of Part B of Schedule IV to the Income-tax Act requires withdrawal of approval to be communicated with the date from which it takes effect. Because the reopening notice did not establish any deemed earlier withdrawal or record a valid factual basis for treating the fund as unapproved on the notice date, the reopening proceeded on a mistaken factual premise. The reassessment notice was quashed and the reassessment order was set aside.

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Issues: Whether the reassessment notice and consequential reassessment order were valid when the notice proceeded on the assumption that the superannuation fund approval had already been withdrawn, although the withdrawal order was passed later and did not specify any earlier effective date.

Analysis: The reassessment was founded on the premise that the fund was not an approved fund on the date of issuance of notice. The record, however, showed that the withdrawal order was passed subsequently and did not state any date from which withdrawal would operate. Rule 2 of Part B of Schedule IV of the Income-tax Act, 1961 requires withdrawal of approval to be communicated with the date on which the withdrawal is to take effect. The notice did not record the basis of deemed withdrawal from an earlier date arising from violation of conditions, and the reopening was therefore supported by an incorrect factual assumption. Reopening on such a mistaken assumption of facts is invalid.

Conclusion: The reassessment notice was quashed and the reassessment order was set aside; the issue was decided in favour of the assessee.

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