Invalid reassessment based on unverified cash-deposit information cannot stand without tangible material linking belief to escapement.

Reassessment under section 147 was invalid where the Assessing Officer recorded reasons on an incorrect cash-deposit figure without first verifying the bank statement. The reopening was based on unverified information suggesting higher deposits, but the later bank statement showed a lower amount and no preliminary enquiry had been made to turn suspicion into a legally sustainable belief that income had escaped assessment. In the absence of tangible material with a live link to the formation of belief, the notice and reassessment proceedings could not be sustained and were quashed.

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Issues: Whether the reassessment proceedings initiated under section 147 of the Income-tax Act, 1961 were valid when the Assessing Officer recorded reasons on an incorrect cash-deposit figure without first verifying the bank statement.

Analysis: The reassessment was founded on information suggesting cash deposits of Rs. 25,89,000, whereas the bank statement later obtained showed deposits of Rs. 13,39,000. The material relied upon for reopening was not verified before the reasons were recorded, and no preliminary enquiry was made to convert the initial suspicion into a legally sustainable belief that income had escaped assessment. In the absence of tangible material having a live link with the formation of belief, the reopening could not rest merely on suspicion.

Conclusion: The reassessment was quashed and the validity of the notice and proceedings under section 147 was held against the Revenue and in favour of the assessee.

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