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Issues: (i) whether reassessment could be sustained on the ground of change of opinion and without treating the search material as incriminating material under the new reassessment regime; (ii) whether the addition of unsecured loans under section 68 was sustainable where the core reliance was on third-party statements and post-search enquiries, but the assessee was not afforded cross-examination and the issue also included the effect of repayments and partial overlap with earlier additions.
Issue (i): whether reassessment could be sustained on the ground of change of opinion and without treating the search material as incriminating material under the new reassessment regime.
Analysis: The opening of reassessment was held not to be a mere change of opinion because the later search proceedings yielded fresh information, including a sworn third-party statement and field verification results, which were treated as new tangible material. The Tribunal held that the post-1 April 2021 scheme under sections 147 and 148, read with Explanation 2, operates differently from the erstwhile search assessment regime and does not require the same incriminating-material test at the stage of reopening. On that basis, the jurisdictional challenge to reopening was rejected.
Conclusion: The challenge to reassessment on the ground of change of opinion and absence of incriminating material at the reopening stage failed.
Issue (ii): whether the addition of unsecured loans under section 68 was sustainable where the core reliance was on third-party statements and post-search enquiries, but the assessee was not afforded cross-examination and the issue also included the effect of repayments and partial overlap with earlier additions.
Analysis: The addition rested mainly on a statement recorded under section 131 and on enquiries suggesting non-existence or non-cooperation of some alleged lenders. At the same time, the statement was not independently corroborated, the alleged emails and intermediary trail were not brought on record, no effective cross-examination was granted despite specific reliance on the statement, and the issue also involved the need to separate opening balances and exclude amounts already assessed earlier. The Tribunal held that the evidentiary foundation was incomplete and that the matter required further enquiry with an opportunity of cross-examination before a fresh decision could be taken.
Conclusion: The addition under section 68 was set aside and restored to the Assessing Officer for fresh adjudication after providing cross-examination and carrying out further enquiries.
Final Conclusion: The reassessment jurisdiction was upheld, but the substantive additions relating to unsecured loans were not finally sustained and were remitted for reconsideration, resulting in partial relief to the assessee.
Ratio Decidendi: In a reassessment based on post-search information under the amended regime, reassessment may be validly initiated on fresh tangible material, but an addition founded substantially on an uncorroborated third-party statement cannot be sustained without affording the assessee effective cross-examination and proper verification of the underlying evidence.
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