Reassessment notice fails where the sole basis is a retracted statement and the reason to believe is no longer sustainable.

A reassessment notice under section 148 must be based on a subsisting and legally sustainable reason to believe. On the first point, the assessee had received only the gist of the recorded reasons, not the full reasons, but the reassessment was not faulted on that ground. On the second point, the sole basis for the reopening was a statement by a director that had already been retracted before the notice was issued, and that retraction had been accepted in appellate proceedings. The foundation for belief of escapement was therefore absent, and the notice was unsustainable. The Tribunal's order was upheld and the Revenue's appeal was dismissed.

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Issues: (i) Whether the reassessment notice was sustainable when the assessee was supplied only the gist of the recorded reasons and not the complete reasons; (ii) Whether the reassessment could stand when the sole basis for belief of escapement was a statement subsequently retracted before issuance of notice under section 148.

Issue (i): Whether the reassessment notice was sustainable when the assessee was supplied only the gist of the recorded reasons and not the complete reasons.

Analysis: The reassessment proceedings were founded on recorded reasons that were not fully supplied to the assessee at the relevant stage. The complete reasons were brought on record only later, before the Tribunal. On the facts, the assessee had received only a gist of the reasons, not the full basis for the reopening.

Conclusion: The reassessment could not be faulted on this ground, and no interference with the Tribunal's decision was warranted.

Issue (ii): Whether the reassessment could stand when the sole basis for belief of escapement was a statement subsequently retracted before issuance of notice under section 148.

Analysis: The recorded belief of escapement rested entirely on an alleged admission by a director of the assessee. That statement had already been retracted before the notice under section 148 was issued, and the retraction had also been accepted in appellate proceedings. In these circumstances, the foundation for the required belief was absent.

Conclusion: The notice under section 148 was unsustainable on this ground as well.

Final Conclusion: The appeal raised no substantial question of law and the Tribunal's order was upheld, resulting in dismissal of the Revenue's appeal.

Ratio Decidendi: A reassessment notice under section 148 must rest on a subsisting and legally sustainable reason to believe, and where the sole basis is a statement already retracted before issuance of notice, the reopening cannot be sustained.

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