Reassessment reopening must rest on recorded reasons alone; new grounds cannot validate a Section 148 notice after objections.

Reopening under Section 148 failed because the recorded reason was limited to alleged inflation of closing work in progress, and that basis did not support the asserted escapement of income. The HC also held that the objection-disposal order was invalid because it introduced a new ground of alleged suppression of sales or other income, which was outside the original recorded reasons. Reassessment proceedings must stand or fall on the reasons recorded when notice is issued, and those reasons cannot be substituted by a fresh ground at the objections stage. The notice and the order rejecting objections were quashed in favour of the assessee.

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Issues: Whether the notice for reopening under Section 148 of the Income-tax Act, 1961 and the order rejecting objections were valid when the recorded reason was confined to alleged inflation of closing work in progress and the authority later relied on a different basis of suppression of sales or other income.

Analysis: The reopening was founded on the allegation that the assessee had valued closing work in progress higher than the correct figure, resulting in alleged escapement of income. The Court held that reduction of closing work in progress, by itself, would not produce escapement of income in the manner alleged in the recorded reasons. It further held that the order disposing of objections travelled beyond the recorded reasons by introducing a new case that the assessee had suppressed sales or other income, which was not the basis on which jurisdiction was originally assumed. Reassessment proceedings must stand or fall on the reasons recorded at the time of issuance of notice, and those reasons cannot be substituted by a fresh ground in the objection-disposal order.

Conclusion: The reopening notice and the order rejecting objections were held unsustainable and were quashed in favour of the assessee.

Ratio Decidendi: Reassessment under Section 148 of the Income-tax Act, 1961 must be justified strictly on the reasons recorded at the time of reopening, and the authority cannot sustain the notice by shifting to a new or unrecorded ground while disposing of objections.

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