Reassessment after 143(1) processing survives on tangible material, while cash-credit additions require fresh evidence-based adjudication.
Reassessment after processing under section 143(1) remains permissible where tangible material gives the Assessing Officer reason to believe that income escaped assessment, because such processing involves no scrutiny assessment or prior opinion. Information on cash deposits preceding unsecured loans provided a sufficient basis for reopening; conclusive proof of escapement was unnecessary at the notice stage. Cash-credit additions require examination of identity, creditworthiness and transaction genuineness, and were restored for fresh adjudication with a reasonable opportunity to produce evidence. The long-term capital-gain addition and denial of exemption remained sustained because the records did not substantiate the claimed valuation.
Issues: (i) Whether reassessment initiated after processing the return under section 143(1) was invalid for want of reason to believe and on account of alleged borrowed satisfaction; (ii) Whether additions for unexplained cash credits required fresh adjudication; (iii) Whether the addition relating to long-term capital gain from sale of gold and denial of exemption was sustainable.
Issue (i): Whether reassessment initiated after processing the return under section 143(1) was invalid for want of reason to believe and on account of alleged borrowed satisfaction.
Analysis: A return processed under section 143(1) does not involve a scrutiny assessment or formation of an opinion. Reopening under sections 147 and 148 remains permissible where tangible material gives the Assessing Officer reason to believe that taxable income escaped assessment; at the notice stage, conclusive proof of escapement is not required. The information concerning cash deposits preceding unsecured loans provided sufficient basis for the reopening.
Conclusion: The reassessment notice was valid. The issue is decided against the assessee.
Issue (ii): Whether additions for unexplained cash credits required fresh adjudication.
Analysis: The appellate order had not dealt with one addition of Rs. 50,000. The remaining disputed credit additions had been sustained for absence of material establishing the identity, creditworthiness and genuineness of the transactions. A fresh opportunity to furnish evidence was warranted.
Conclusion: The cash-credit issues were restored to the Assessing Officer for fresh adjudication after granting reasonable opportunity to the assessee. The issue is decided in favour of the assessee for fresh consideration.
Issue (iii): Whether the addition relating to long-term capital gain from sale of gold and denial of exemption was sustainable.
Analysis: The supporting purchase and sale documents, balance sheet and wealth-tax return did not establish the claimed valuation, and no valuation report was furnished in support of the claim.
Conclusion: The addition was sustained. The issue is decided against the assessee.
Final Conclusion: The validity of reopening and the capital-gain addition remain undisturbed, while the disputed cash-credit additions require de novo determination upon an adequate opportunity being afforded.
Ratio Decidendi: A return accepted under section 143(1) may be reopened where tangible material gives rise to a reason to believe that income has escaped assessment, since no prior opinion arises from such processing.