Recorded reasons control reassessment: additions beyond reopening grounds invalidate the assessment and consequential penalty.

Reassessment under section 147 cannot survive where the completed assessment departs from the recorded reasons for reopening and proceeds on a different basis; the jurisdictional foundation then fails, and the reassessment is unsustainable. Penalty under section 271(1)(c), when wholly consequential to that reassessment, also falls once the reassessment is annulled. The article states that the assessment additions travelled beyond the original reopening reason, so the reassessment was quashed and the related penalty set aside as dependent on an invalid reassessment.

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Issues: (i) Whether the reassessment initiated under section 147 could survive when the final assessment travelled beyond the reason recorded for reopening; (ii) Whether the penalty proceedings under section 271(1)(c) could stand once the reassessment failed.

Issue (i): Whether the reassessment initiated under section 147 could survive when the final assessment travelled beyond the reason recorded for reopening.

Analysis: The reopening was founded on one proposed basis, but the assessment order ultimately proceeded on a different footing and brought to tax a different set of additions. Since the final assessment deviated from the recorded reason, the foundation of the reassessment ceased to match the basis on which jurisdiction had been assumed.

Conclusion: The reassessment was held to be unsustainable and was quashed.

Issue (ii): Whether the penalty proceedings under section 271(1)(c) could stand once the reassessment failed.

Analysis: The penalty was purely consequential to the reassessment and depended on the validity of the addition made in the reassessment order. Once the reassessment itself was annulled, the penalty could not independently survive.

Conclusion: The penalty proceedings were set aside as consequential to the invalid reassessment.

Final Conclusion: The assessee succeeded in both appeals, with the reassessment quashed and the associated penalty appeal also failing on consequence.

Ratio Decidendi: A reassessment cannot survive where the completed assessment departs from the recorded reasons that supplied the jurisdictional basis for reopening, and any penalty founded solely on such reassessment falls with it.

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