The assessee filed return of income, but no scrutiny assessment was carried out. There was information obtained from the Principal Directorate of Income–Tax (Investigation Wing). The information provided that the modification of client code in the stock exchange by brokers was misused for manipulative activities, including tax evasion. On investigation by SEBI and Investigation Directorate Ahmedabad, the assessee name appeared in the list of beneficiaries. A.O. based on information held it has reasons to believe that income of the escaped assessment.

According to the Tribunal, the reassessment is invalid, as it was based on the information from the investigation wing without making independent verification and application of mind by the AO. (AY. 2009-10)