Reopening beyond three years requires specified documentary evidence; absent it, reassessment and ad hoc income estimation are invalid.

Reopening assessment beyond three years is permissible only where the assessing officer possesses specified books, documents or other evidence showing escaped income represented as an asset, expenditure or book entry meeting the statutory threshold; absence of identification of such material renders reassessment invalid and leads to quashment. Separately, estimating income by applying an ad hoc percentage of turnover without formally rejecting the books of account and following the statutory procedure is impermissible; such ad hoc estimation lacks evidentiary and statutory foundation and is set aside.

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Issues: (i) Whether reopening of assessment by issuance of notice under section 148 was valid where the case was reopened after more than three years and the statutory conditions under section 149(1)(b) were not specified; (ii) Whether estimation of income by applying an ad hoc rate without rejecting books of account under section 145(3) was permissible.

Issue (i): Whether the reassessment proceedings initiated by notice under section 148 are sustainable in the absence of specified materials satisfying the conditions of section 149(1)(b).

Analysis: The case was reopened beyond three years from the end of the relevant assessment year. The statutory scheme introduced by the Finance Act, 2023 permits reopening after three years only where the assessing officer possesses books of account or other documents or evidence revealing escaped income represented as an asset, expenditure, or book entry amounting to or likely to amount to fifty lakh rupees or more. The record does not identify or specify any such qualifying material relied upon to invoke clause (b) of section 149(1). The notice and the 148A(d) record refer to large financial transactions and non-filer categorisation but do not demonstrate the specific condition precedent required by section 149(1)(b).

Conclusion: Reopening of assessment is quashed and the reassessment proceedings under section 148 are unsustainable.

Issue (ii): Whether the assessing officer could estimate income by applying a percentage of turnover without rejecting the books of account under section 145(3).

Analysis: The assessing authority applied a uniform 15% rate on turnover to estimate income without recording rejection of the books of account under the statutory procedure. Established legal principle prohibits ad hoc estimation of income where books are not formally rejected; estimation in such circumstances lacks the necessary statutory and evidentiary foundation.

Conclusion: The ad hoc estimation of income without rejecting the books of account is impermissible and is set aside.

Final Conclusion: The appeal is allowed on the grounds that the reassessment was invalid for non-compliance with the condition precedent in section 149(1)(b) and that the impugned ad hoc estimation of income without rejecting books of account is unsustainable.

Ratio Decidendi: Reopening of assessment beyond three years is valid only if the assessing officer possesses specified books, documents, or evidence meeting the statutory threshold; absent such specified material, reassessment is liable to be quashed, and income cannot be ad hoc estimated where books of account have not been rejected under the statutory scheme.

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