Reassessment based on unverified accommodation entry allegations fails absent independent application of mind to the assessee's return.

Reassessment under section 148 was invalid where the recorded reasons referred only to alleged accommodation entries on the basis of an investigation report, without independent application of mind to the assessee's return or financial material. The assessee also showed that no transactions or receipts existed with the named concerns and that the company was in its first year of operation. On those facts, the reopening was not sustained and the reassessment order was quashed in favour of the assessee.

---

---

Issues: Whether the reassessment proceedings were validly initiated on the basis of the recorded reasons alleging accommodation entries, and whether the reassessment order was liable to be quashed.

Analysis: The reasons recorded for issuance of notice under section 148 of the Income-tax Act, 1961 merely referred to alleged accommodation entries without specifying their nature. The assessee placed material showing that no transactions were entered with the named concerns, that no amounts were received from them, and that the company was in its first year of operation. The recorded reasons also showed that the Assessing Officer proceeded principally on the investigation wing report and did not undertake an independent examination of the return or financials before reopening the assessment. Reopening based only on such unverified third-party information, without independent application of mind, was not sustained on the facts.

Conclusion: The reassessment proceedings were invalidly initiated and the reassessment order was quashed in favour of the assessee.

Ratio Decidendi: Reassessment cannot be sustained where the recorded reasons are based only on an investigation report and do not reflect independent application of mind to the assessee's return and material before issuing notice.

---