Reassessment under section 148A fails without supplying relied-upon material; business expenditure disallowances also fell for lack of proof.

Reassessment under section 148A was held invalid where the Revenue did not supply the material and working basis for the proposed escapement, did not fairly consider the assessee's reply, and relied on fresh material in the final order that had not been confronted in the show-cause notice. On the merits, the disallowance of contingency expenses was deleted because the assessee produced invoices, work orders, bills, confirmations and related records, while the Revenue brought no positive evidence that the expenditure was bogus or non-business. The disallowance of fees for technical services was also deleted, as agreements, invoices, correspondence and other project records supported actual rendering of services and a blanket disallowance under section 37(1) was unsustainable.

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Issues: (i) Whether reassessment proceedings initiated under section 148A were invalid for want of supply of relevant material, non-consideration of the assessee's reply, and reliance on fresh material in the order under section 148A(d); (ii) Whether disallowance of contingency expenses was sustainable; (iii) Whether disallowance of fees for technical services was sustainable.

Issue (i): Whether reassessment proceedings initiated under section 148A were invalid for want of supply of relevant material, non-consideration of the assessee's reply, and reliance on fresh material in the order under section 148A(d).

Analysis: The notice under section 148A(b) did not furnish the material or working basis for the amounts alleged to have escaped assessment, although the assessee specifically sought the break-up and objected to the figures. The order under section 148A(d) also relied upon additional statements and material not confronted in the show-cause notice. In reassessment proceedings, the material forming the foundation of the proposed action must be supplied and the assessee's reply must be considered before jurisdiction is assumed.

Conclusion: The reassessment notices and consequential proceedings were held invalid.

Issue (ii): Whether disallowance of contingency expenses was sustainable.

Analysis: The seized CTC and project documents showed only internal cost estimation and management reporting for infrastructure projects. The assessee produced invoices, work orders, measurements, bills, confirmations, and other supporting material. The adverse inference drawn from retracted statements, absence of some SOP compliance, and non-response to section 133(6) notices was insufficient to establish that the expenditure was bogus. No positive evidence of cash generation or non-business expenditure was brought on record, and the ad hoc restriction to 5% lacked basis.

Conclusion: The entire disallowance of contingency expenses was deleted in favour of the assessee.

Issue (iii): Whether disallowance of fees for technical services was sustainable.

Analysis: The assessee furnished technical service agreements, work orders, invoices, correspondence, minutes of meetings, design review material, affidavits, and replies to section 133(6) notices. The project was a large specialised infrastructure contract requiring pooled expertise of the joint venture participants. The material on record supported actual rendering of services, and the absence of some ancillary details did not justify a blanket disallowance under section 37(1).

Conclusion: The disallowance of fees for technical services was deleted in favour of the assessee.

Final Conclusion: The assessee succeeded on both the reassessment challenge and the merits of the additions, while the Revenue's appeals failed.

Ratio Decidendi: For valid reassessment under section 148A, the Revenue must supply the material forming the basis of the proposed action and consider the assessee's reply before proceeding; additions cannot rest on fresh or undisclosed material introduced for the first time in the final order, and disallowance of business expenditure cannot be sustained without positive evidence that the claim is non-genuine.

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