Reassessment on mistaken non-filing assumption held invalid, and consequential penalty could not survive after assessment was quashed.

Reassessment under section 147 was invalid where the reopening was based on the mistaken assumption that no return of income had been filed, although the record showed that a return had in fact been filed. Because the reassessment was initiated beyond four years without a proper nexus between tangible material and a valid belief of escapement of income, the jurisdiction to reopen failed. Once the reassessment was quashed, the penalty under section 271(1)(c), being consequential to that assessment, could not survive independently.

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Issues: Whether the reassessment initiated under section 147 on the footing that the assessee had not filed a return of income was valid, and whether the penalty under section 271(1)(c) could survive if the assessment was quashed.

Analysis: The reasons recorded for reopening proceeded on the assumption that no return had been filed, although the record showed that the return had in fact been filed. The reopening, which was beyond four years, therefore lacked the necessary nexus between the tangible material and the formation of belief regarding escapement of income. Since the reassessment was founded on a wrong premise, the jurisdiction to reopen was held to be invalid. Once the assessment failed, the penalty levied as a consequence of that assessment could not stand independently.

Conclusion: The reassessment was quashed and the penalty did not survive.

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