Reassessment invalid for incorrect assumption of scrutiny assessment and non-application of mind in reopening reasons.

Reassessment was invalid where the Assessing Officer invoked Explanation 2(b) to section 147 on the mistaken assumption that the return had only been processed under section 143(1), although the assessee had already been scrutinised under section 143(3). The recorded reasons were based on an incorrect factual and legal premise and showed non-application of mind. On that basis, the reassessment machinery was held to be vitiated, and the reassessment proceedings were quashed in favour of the assessee.

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Issues: Whether reassessment proceedings were valid where the Assessing Officer invoked Explanation 2(b) to section 147 despite the assessee having already been subjected to scrutiny assessment under section 143(3).

Analysis: The original assessment had been completed under section 143(3), yet the reasons recorded for reopening proceeded on the premise that the return had merely been processed and not scrutinised. The reopening thus proceeded on an incorrect factual and legal assumption and reflected non-application of mind. In these circumstances, the reassessment machinery was held to be vitiated.

Conclusion: The reassessment proceedings were invalid and liable to be quashed; the issue was decided in favour of the assessee.

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