Reassessment based on borrowed satisfaction fails where recorded reasons lack independent application of mind and factual correlation.

Reassessment under sections 147 and 148 was invalid because the recorded reasons rested on third-party information about alleged reversal trades in illiquid stock options, while the assessee's original scrutiny assessment under section 143(3) reflected disclosed income from currency derivative transactions. The material was not independently matched with the assessee's record, and the reasons were treated as borrowed satisfaction without application of mind. As there was no live link between the information and a bona fide belief of escapement of income, and the relevant profit had already been disclosed, the statutory conditions for reopening after scrutiny were not met. The reopening was quashed.

---

---

Issues: Whether reopening of the assessment under section 147 of the Income-tax Act, 1961 was valid where the recorded reasons were founded on information from the Investigation Wing alleging reversal trades in illiquid stock options, although the assessee had declared income from currency derivative transactions in the original scrutiny assessment.

Analysis: The original return had already been assessed under section 143(3) of the Income-tax Act, 1961. The recorded reasons proceeded on the premise that the assessee had dealt in illiquid stock options and engaged in premeditated reversal trades, but the transaction details showed dealings in currency derivatives, not identical buy-sell transactions with the same counterparty. The material relied on was not shown to be independently examined against the record of the assessee, and the reasons were treated as a reproduction of third-party information without application of mind. In the absence of a live link between the material and the belief of escapement of income, and where the profit had already been disclosed in the return, the statutory conditions for reopening after scrutiny were not satisfied.

Conclusion: Reopening under sections 147 and 148 was held invalid and quashed.

Ratio Decidendi: Reassessment cannot be sustained where the recorded reasons are based on borrowed satisfaction or incorrect facts and the Assessing Officer does not form an independent belief on the basis of material showing escapement of income after full and true disclosure in the original scrutiny assessment.

---