Assessment validity compromised where cancelled sale deeds and reversal entries show no true accrual; reassessment quashed.

Failure to verify and consider documentary evidence of cancellation of registered sale deeds and reversal of transaction consideration vitiated the reassessment process under the reassessment procedure; where transactions were cancelled and accounting reflected reversal, income was held not to have truly accrued and reassessment based on hypothetical accrual was impermissible, accordingly the impugned assessment orders were quashed and set aside and the matter was remanded for verification of the documents which were not available during the original proceedings.

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Issues: Whether the impugned assessment orders passed without considering cancellation of registered sale deeds and reversal of payments are sustainable.

Analysis: The assessment proceeded without verification of documents showing cancellation of registered sale deeds and reversal of transaction consideration which were produced before the Court for the first time. Relevant legal framework includes reassessment procedure under Section 148A of the Income-tax Act, 1961 and judicial precedent addressing when transactions are found to be terminable or cancelled and whether income truly accrued. The cited precedent holds that if transactions are cancelled and accounting reflects the reversal, income may not have truly accrued and reassessment based on hypothetical accrual is impermissible. The respondent admitted non-possession of those documents during the 148A proceedings and sought remand for verification.

Conclusion: The impugned assessment orders are quashed and set aside; decision is in favour of the assessee.

Ratio Decidendi: An assessment or reassessment cannot be sustained where the assessing authority failed to consider documentary evidence showing cancellation of transactions and reversal of consideration such that income did not truly accrue.

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