2026 (1) TMI 1037 - AT - Income Tax

Validity of reopening of assessment on non-searched person requires demonstrated application of mind or notice may be invalidated

Validity of reopening assessments in third-party (non-searched) cases requires a clear application of mind and specific linkage between the predicate ... Validity of reopening of assessment on non-searched person - Third-party / non-searched case - mandation of application of mind - HELD THAT:- Undisputedly and admittedly present case is of non-searched case (third party case) so when reopening u/s 148 of the Act is made directly on non-searched person same has different nature and has scope is to be strictly. As evident from cursory look to notice u/s 148 it is totally without application of mind as it is stated assessee is searched and non searched person both. As the impugned assessment order passed u/s 147/144 of the Act is considered we find that the assessment is conclude refering to some search action u/s 132 on Deepak Aggarwal and Mukesh Kumar dated 17.12.2021, and there is no mentionas to how this search is related to search dated 17/09/2021 referred in the impugned notice. This thus leaves no doubt in the mind of this bench that impugned notice is outcome of utter casualness and not just non-application of mind. Corresponding ground deserves to be sustained. Issues: Whether the notices under section 148 issued for AYs 2016-17 and 2019-20 (reopening of assessment) are valid, having regard to alleged non-application of mind, inconsistency in the stated basis (searches/information), and the special requirement when reopening is made in respect of a non-searched person.Analysis: The Tribunal examined the impugned notices and the assessment orders and found material inconsistencies between the grounds stated in the notices/SCNs and the facts relied upon in the resulting assessment orders. In both years, the notices referenced search actions or information in an inconsistent or vague manner (including conflicting search dates and different named searches) and treated the assessee as both a searched and a non-searched person. The Tribunal applied the principle that reopening under section 148 in respect of non-searched persons requires strict and clear application of mind and cannot be based on casual or contradictory references to search or investigative material. On the facts, the notices and subsequent assessment were held to be outcomes of casualness and lack of application of mind rather than a reasoned jurisdictional exercise.Conclusion: The notices under section 148 (and consequent assessment orders) are invalid for lack of application of mind and for material inconsistency in the stated basis; the appeals are allowed and the impugned orders are quashed in favour of the assessee.Ratio Decidendi: A reopening under section 148 of the Income-tax Act, 1961 in respect of a non-searched person must be supported by a clear, reasoned and consistent application of mind; notices and assessments based on casual, contradictory or vague references to search/investigative material are invalid.