Incorrect factual basis for reassessment notices under the Income-tax Act led to quashing of reopening.

Reassessment notices under Sections 148 and 147 of the Income-tax Act were quashed because the reopening rested on an incorrect factual premise about the assessee's share transactions. The record showed that the assessee had disclosed long-term capital gain on listed securities of Bagra Partishtan Ltd., not on the alleged penny stock scrip said to have been routed through an entry operator, and that discrepancy was not disputed. As the very basis for initiating reassessment was factually wrong, the notices and preliminary orders could not be sustained and the challenge succeeded for the assessee.

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Issues: Whether the reassessment notices issued under Section 148 of the Income-tax Act, 1961, read with Section 147 of the Income-tax Act, 1961, were liable to be quashed on the ground that the reopening was founded on an incorrect factual premise regarding the assessee's share transactions.

Analysis: The reassessment was predicated on the allegation that the assessee had sold shares of M/s. 21st Century through an entry operator and had claimed exempt long-term capital gain. However, the return of income and the objections showed that the assessee had disclosed long-term capital gain on listed securities of Bagra Partishtan Ltd., and not on the alleged penny stock scrip. The respondents did not dispute this factual discrepancy. Since the very basis of the reopening was an factual assumption, the notice could not be sustained.

Conclusion: The reassessment notices and the preliminary orders were liable to be quashed, and the challenge succeeded in favour of the assessee.

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