Reassessment without proper verification and bank-deposit addition fail where sale consideration reconciles the deposits.

Reassessment under sections 147 and 148 was held invalid because the belief of escaped income was formed solely on bank-deposit information without proper verification of the return, assessment record, or material explaining the source of deposits. The reopening was quashed for lack of proper application of mind. The addition for bank deposits was deleted because the bank statement and sale deed showed that the deposits matched sale consideration from transfer of a showroom property, with cheque numbers and transaction details reconciling the amounts with the disclosed capital transaction.

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Issues: (i) Whether the reassessment initiated under sections 147 and 148 was valid; (ii) Whether the addition made on account of deposits in the bank account was sustainable.

Issue (i): Whether the reassessment initiated under sections 147 and 148 was valid.

Analysis: The assessee had filed the return of income and disclosed long-term capital gain on sale of the property. The reassessment was initiated only on the basis of information regarding bank deposits, without proper examination of the return, the assessment record, or the material explaining the source of the deposits. The formation of belief that income had escaped assessment was therefore not supported by a proper application of mind.

Conclusion: The reassessment was held to be not valid and was quashed.

Issue (ii): Whether the addition made on account of deposits in the bank account was sustainable.

Analysis: The bank statement and sale deed showed that the deposits represented sale consideration received for the transfer of the showroom property. The cheque numbers and transaction details matched the sale consideration reflected in the documents, establishing a reconciliation of the deposits with the disclosed capital transaction.

Conclusion: The addition was deleted.

Final Conclusion: The appeal succeeded in full, with the reassessment annulled and the consequential addition set aside.

Ratio Decidendi: Reassessment cannot be sustained where the belief of escapement of income is formed without proper verification of the return and relevant records, and an addition based on bank deposits must fail when the deposits are reconciled with disclosed sale consideration.

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