Reassessment based on tangible information upheld, but addition failed for lack of cogent evidence of accommodation entry.

Reassessment is valid where the recorded reasons are based on specific tangible information and show a live link to the belief that income has escaped assessment; an inadvertent wrong reference to the earlier assessment stage does not by itself vitiate the reopening. On merits, an addition cannot be sustained without cogent material proving that the assessee actually received the alleged accommodation entry, and a consistent denial remains effective if unrebutted by evidence. The reopening was upheld, but the impugned addition was deleted, giving the assessee partial relief.

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Issues: (i) Whether the reassessment notice and proceedings were validly initiated under the Income-tax Act, 1961; (ii) Whether the addition of Rs. 25,00,000 on merits could be sustained.

Issue (i): Whether the reassessment notice and proceedings were validly initiated under the Income-tax Act, 1961.

Analysis: The reopening was founded on specific information received from another income-tax authority based on a survey conducted under section 133A of the Income-tax Act, 1961. The recorded reasons reflected a live link between the information and the belief that income had escaped assessment. The incorrect reference to the earlier assessment being under section 143(1) instead of section 143(3) was treated as an inadvertent error that did not invalidate the reopening. The conditions for formation of reason to believe and recording of reasons were found satisfied.

Conclusion: The reassessment notice and reopening were held to be valid.

Issue (ii): Whether the addition of Rs. 25,00,000 on merits could be sustained.

Analysis: The material relied upon for the addition was not furnished or established with sufficient cogency against the assessee. The record did not show that the assessee had in fact received the alleged accommodation entry, and the assessee's consistent denial remained unrebutted by supporting evidence. The addition was therefore found unsustainable on merits.

Conclusion: The addition of Rs. 25,00,000 was deleted and this issue was decided in favour of the assessee.

Final Conclusion: The challenge to reopening failed, but the addition on merits was deleted, resulting in partial relief to the assessee.

Ratio Decidendi: Reassessment is valid where it rests on specific tangible information forming a prima facie belief of escapement of income, and an addition cannot survive without cogent material establishing the alleged transaction against the assessee.

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