Reopening of assessment requires a live nexus to escapement of income; mere suspicion over cash deposits is insufficient.

Reopening under sections 148A(d) and 148 of the Income-tax Act was held unsustainable where the revenue relied on cash deposits during demonetisation but did not establish any foundational fact linking them to escapement of income. The assessee had already furnished audited books, cash book, bank statements and replies showing that the deposits were supported by existing business cash balance. A reassessment cannot be initiated on a general assumption that a prudent businessperson would not retain large cash; the material must show a live nexus with prima facie escapement and satisfy jurisdictional preconditions. On that basis, the reassessment proceedings failed in favour of the assessee.

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Issues: Whether the notice and order for reopening of assessment under sections 148A(d) and 148 of the Income-tax Act, 1961 were sustainable when the assessee had furnished audited books of account, cash book, bank statements and replies explaining the cash deposits made during the demonetisation period.

Analysis: The material on record did not disclose any foundational fact linking the cash deposits to escapement of income. The assessee had placed audited accounts, cash book and bank statements before the assessing authority, and the cash deposits were claimed to be supported by existing cash balance generated from business activities. The reopening was founded mainly on the view that a prudent business person would not keep large cash on hand, rather than on a live nexus between the information received and any prima facie escapement of income. The jurisdictional satisfaction required for reassessment was therefore not established.

Conclusion: The reassessment proceedings were not validly assumed and the challenge succeeded in favour of the assessee.

Ratio Decidendi: Reopening of assessment cannot be sustained unless the material relied upon by the revenue has a real nexus with escapement of income and establishes the foundational facts necessary for prima facie assumption of jurisdiction.

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