Reassessment quashed where assessing officer relied solely on third-party portal/SEBI material without independent verification despite tax returns disclosing gains

HC allowed the appeal and quashed the reassessment notice, holding the AO relied on "borrowed satisfaction" from an insight portal/SEBI material without independent application of mind or verification. The court found the assessee had disclosed speculation profits in the return and regular assessment, and there was no basis to form a reasonable belief of escapement of income beyond the portal information. Reopening was therefore invalid as the AO mechanically relied on third-party data without forming an independent opinion.

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ISSUES:

Whether reopening of assessment under section 148 of the Income Tax Act, 1961 is justified on the basis of information received from an external source (insight portal) without independent application of mind by the Assessing Officer.Whether the petitioner has failed to disclose fully and truly all material facts necessary for assessment, thereby justifying reopening of assessment for escapement of income.Whether reliance solely on information from other agencies or portals, without verification against material on record, suffices to form a reason to believe for reopening assessment.Whether transactions in Futures & Options and derivatives, disclosed in the return of income and accepted in original assessment, can be treated as non-genuine for the purpose of reopening assessment.Whether the Assessing Officer's reason to believe for escapement of income was formed on "borrowed satisfaction" without independent opinion.

RULINGS / HOLDINGS:

The reopening of assessment under section 148 was held unjustified as the Assessing Officer did not form an independent opinion and relied solely on information from the insight portal, which amounted to "borrowed satisfaction."The petitioner was found to have disclosed "fully and truly all material facts relevant for assessment," including profits from Futures & Options and derivatives, which were accepted in the original assessment order under section 143(3).Reassessment proceedings cannot be initiated merely on the basis of information received from other agencies or portals unless the Assessing Officer, after considering such information with the material on record, forms an independent reason to believe that income has escaped assessment.The Assessing Officer's reliance on the SEBI report and the decision in SEBI vs. Rakhi Trading Private Limited did not substitute for an independent examination of the petitioner's case and material on record.The impugned notice dated 30.03.2021 issued under section 148 of the Act was quashed and set aside for lack of jurisdiction and absence of independent reason to believe escapement of income.

RATIONALE:

The Court applied the statutory framework under section 147 and 148 of the Income Tax Act, 1961, which require the Assessing Officer to have a "reason to believe" that income has escaped assessment based on material on record and after independent application of mind.Precedent from the Supreme Court and this Court was relied upon, including the principle that "information received by other assessing officers or investigation wings constitutes information on the basis of which reopening can be done only after forming reasons to believe."The Court emphasized that "borrowed satisfaction" or mechanical reliance on external information without verifying and reconciling it with the facts and records of the assessee's case is insufficient to assume jurisdiction to reopen assessment.The judgment referenced the decision in Harikishan Sunderlal Virmani vs. Deputy Commissioner of Income Tax, which supports the requirement of an independent opinion by the Assessing Officer before reopening assessment.No doctrinal shift or dissent was noted; the Court reaffirmed established principles requiring independent evaluation of material before reopening assessments.

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