Reopening of assessment for alleged escapement of income challenged where reliance on unrelated third-party statement failed to establish escaped income; notices quashed.

Reopening of assessment under Section 147 was challenged on grounds that the only material was a third-party statement which did not refer to the deceased assessee or his debenture investments; the assessee had produced bank records, ledger entries, debenture certificates and financial statements explaining the source of funds. The court found the statement did not constitute tangible material against the deceased and that the revenue neither doubted the source nor identified how the investment constituted escaped taxable income; consequently the jurisdictional precondition for reopening was not met and the notices/orders under Sections 148 and 148A(3) were unsustainable.

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Issues: Whether the notice issued under Section 148 and the order passed under Section 148A(3) of the Income-tax Act, 1961 for reopening assessment for Assessment Year 2019-20 are legally sustainable.

Analysis: The Court examined whether tangible material existed to form a belief that income had escaped assessment as required by Section 147. The reopening rested on a statement which did not refer to the deceased assessee or to his investment; the Assessing Officer did not doubt the source of the investment which was supported by documentary evidence (bank statements, debenture certificates, ledger entries); the impugned order under Section 148A(3) did not reflect consideration of these materials and relied solely on the statement. An investment made out of explained funds, without any finding of income chargeable to tax having escaped assessment, does not meet the jurisdictional threshold for invoking Section 147.

Conclusion: The notice under Section 148 and the order under Section 148A(3) are unsustainable and are quashed. The decision is in favour of the assessee.

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