Reassessment invalid for inconsistent recorded reasons and lack of coherent basis to believe income had escaped assessment.

Reassessment under sections 147 and 148 was invalid where the recorded reasons were internally inconsistent and failed to show a clear basis for belief that income had escaped assessment. The reasons said no return had been filed, yet also acknowledged that a return was filed and only no scrutiny assessment under section 143(3) had been made. Cash deposits in a bank account, without more, were not treated as sufficient to establish escapement of income. A reopening must rest on coherent, objective reasons to believe, not a vague or contradictory premise; the reassessment was therefore quashed in favour of the assessee.

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Issues: Whether the reassessment initiated under sections 147 and 148 of the Income-tax Act, 1961 was valid when the recorded reasons were internally inconsistent and did not disclose a categorical basis for belief that income had escaped assessment.

Analysis: The recorded reasons stated that the assessee had not filed a return, but also noted that a return had in fact been filed and only no scrutiny assessment under section 143(3) had been made. The basis for reopening was cash deposits in a bank account, yet such deposits by themselves were not treated as sufficient to establish escapement of income. The requirement under section 147 is that the Assessing Officer must have reasons to believe that income chargeable to tax has escaped assessment, and those reasons must rest on a clear and coherent factual foundation. An enquiry cannot be undertaken on a vague or inconsistent premise.

Conclusion: The reopening was held to be bad in law and the reassessment order was quashed in favour of the assessee.

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