Reassessment validity depends on verified prior approval and consideration of borrowing expenditure objections before completion.

Reassessment under Section 148 could not be sustained where the mandatory prior approval required for initiation was not produced or duly verified, because compliance with that prerequisite went to the root of the proceedings. The assessing authority also had to consider the taxpayer's objection that borrowing expenditure could remain allowable even if the related interest income was assessed as income from other sources. As the authority had not examined that material contention before completing reassessment, the impugned reassessment orders were quashed and the matter was remanded for reconsideration of the objections and additional objections.

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Issues: (i) Whether the reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961 could be sustained without production and due verification of the prior approval required before commencement of reassessment; (ii) Whether the petitioner's objection that borrowing expenditure remained allowable even if the interest income was assessed under the head "Income from other sources" required consideration before finalising the reassessment.

Issue (i): Whether the reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961 could be sustained without production and due verification of the prior approval required before commencement of reassessment.

Analysis: The record showed that the petitioner had not been shown the prior approval said to be mandatory for initiation of reassessment. Since the validity of the reopening depended upon compliance with that prerequisite, the absence of demonstrated approval went to the root of the proceedings.

Conclusion: The reassessment proceedings could not be sustained without due consideration and verification of the prior approval requirement.

Issue (ii): Whether the petitioner's objection that borrowing expenditure remained allowable even if the interest income was assessed under the head "Income from other sources" required consideration before finalising the reassessment.

Analysis: The assessing authority had not examined the petitioner's contention that, even on a different head of income, the expenditure incurred on borrowing could still qualify for allowance under the relevant provision. That issue was material to the justification of the assessment and had to be decided before the reassessment was completed.

Conclusion: The objection regarding allowance of borrowing expenditure required fresh consideration by the assessing authority.

Final Conclusion: The impugned reassessment-related orders were quashed and the matter was sent back to the assessing authority for reconsideration of the petitioner's objections and additional objections.

Ratio Decidendi: A reassessment cannot be sustained unless the mandatory precondition for its initiation is shown to have been complied with, and material objections affecting the allowability of expenditure must be adjudicated before reassessment is concluded.

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