Reassessment based on one reason cannot sustain an addition on a different ground; the reopening was quashed.

Reassessment is invalid where the reasons recorded for reopening concern alleged fictitious loans, but the final addition is made on a materially different basis, such as alleged bogus long-term capital gain from penny stock transactions. The recorded belief must correspond to the income ultimately brought to tax, and a reassessment cannot be sustained when the foundation for reopening and the basis of the assessment diverge. On this ground, the reassessment was held legally infirm and the reassessment order was quashed in favour of the assessee.

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Issues: Whether reassessment proceedings were valid when the reasons recorded for reopening referred to alleged fictitious loans, but the reassessment addition was ultimately made on the different footing of alleged bogus long-term capital gain from penny stock transactions.

Analysis: The additional ground was admitted as it raised a pure legal issue on the validity of reassessment and the relevant facts were already on record. The reasons recorded for reopening showed a belief that the assessee had received accommodation entries in the nature of fictitious loans from concerns controlled by the named entry operators. The reassessment order, however, did not proceed on that basis and instead made an addition by treating the sale consideration from share transactions as unexplained credit on the allegation of bogus long-term capital gain. Since the foundation for reopening and the basis of the final addition were different, the reassessment suffered from a legal infirmity.

Conclusion: The reassessment proceedings were held invalid in law and the reassessment order was quashed, in favour of the assessee.

Ratio Decidendi: Reassessment fails where the completed addition is made on a ground materially different from the reason recorded for reopening, because the recorded belief must correspond to the basis on which escaped income is ultimately assessed.

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