Validity of reopening of assessment found vitiated due to arbitrary reasons and improper sanction, reassessment quashed.

Review addresses validity of reopening assessments where reasons recorded, satisfaction note and sanction are defective and arbitrary; arbitrariness and non-application of mind in recording reasons render the reasons-taking process unlawful, therefore reassessment initiated on that basis is vitiated and liable to be quashed. The requirement that statutory acts be performed in the prescribed manner (expressio unius est exclusio alterius) was applied to reject post-facto or improper sanctioning; a perfunctory statement of satisfaction was held inadequate, producing nullity of the reassessment proceedings.

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Issues: (i) Whether the delays in filing the appeals (by Revenue and Assessee) falling during the COVID-19 period should be condoned and the appeals admitted; (ii) Whether the reassessment proceedings initiated under sections 147/148 read with section 151(1) are valid, having regard to the reasons recorded, sanction/approval and application of mind by the authorities, and whether consequent additions for bogus purchases sustain.

Issue (i): Whether the delay in filing appeals by both Revenue and Assessee during the COVID-19 period is to be condoned.

Analysis: The delay periods for the Revenue and the Assessee fall within the COVID-19 pandemic period. Reliance is placed on the suo moto proceedings by the Supreme Court in Writ Petition No.3 of 2020 and MA No.21 of 2022 dated 10.01.2022 which addressed condonation of delay for filings affected by the pandemic.

Conclusion: The delays are condoned and the appeals are admitted for hearing on merits.

Issue (ii): Whether reassessment proceedings under sections 147/148 (with sanction under section 151(1) where applicable) are valid in view of the reasons recorded, the authority granting sanction and whether there was application of mind (i.e., whether the satisfaction was genuine or a borrowed/mechanical satisfaction), and whether additions for alleged bogus purchases survive.

Analysis: The reopening was examined against the statutory scheme, including the temporal requirement for higher-level sanction under section 151(1). For the relevant assessment years the reopening fell within four years from the end of the assessment year, making higher-level sanction unnecessary; yet sanction/approval processes manifested defects and inconsistencies in chronology and authorship. The recorded satisfaction consisted of brief or conclusory language without explanation of how the approving authority formed satisfaction. The reasons relied substantially on material from the investigation wing without demonstration of independent application of mind by the assessing authority or an articulation linking the material to a reason to believe that income had escaped assessment. The sequence and attachment of reasons and sanction letters showed arbitrariness and lack of conformity with the statutory mode of exercise of power. In consequence the initiation of reassessment proceeded on borrowed or mechanical satisfaction and the exercise of power was procedurally defective.

Conclusion: The reassessment proceedings are quashed as procedurally invalid; all consequential additions and assessments based on the reassessment are rendered academic and are not sustained.

Final Conclusion: The appeals by the Assessee are allowed and the appeals by the Revenue are dismissed, with the overall effect that the reassessment proceedings and consequent additions are quashed on procedural grounds.

Ratio Decidendi: Where reopening under sections 147/148 is initiated, the reasons recorded and sanction/approval must demonstrate a genuine application of mind and a discernible nexus between tangible material and the formation of a reason to believe; mechanical, conclusory or borrowed satisfactions and procedural arbitrariness in sanction render reassessment proceedings invalid.

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