Allowing the petition the Court held that  the  settlement had the approval of the Court in the U.S. itself suggests that the payment made was for a lawful purpose. In any case it is perverse to even think or hold that an amount paid towards settling a civil class action suit would be either an offence or one prohibited by law so as to disallow a claim of deduction in terms of Explanation to section 37. In any case a penalty imposed for breach of a civil obligation would be outside the purview of the Explanation 1 to section 37. Admittedly, it is not the case of the revenue that the alleged penalty imposed upon the assessee was a part of a sentence in criminal proceedings which if it were, would certainly result in denying to the petitioner the benefit of the deductions claimed.  Other than the information which was received by the Assessing Officer from the DDIT (Inv) Unit-2(4), Mumbai that the assessee had paid a penalty in USA, there was no material available with the Assessing Officer, in support of such an information that the payment made was in fact ‘as a result of a penalty imposed’. A plain piece of information without any cogent material in support thereof would not justify the reopening of the assessment more so when the Assessing Officer, in the regular assessment under section 143(3) had gone into the allowability of the claim for such a deduction in the said assessment proceedings. Apart from the bare information received by the Assessing Officer, there was no material received as the same is not reflected in the reason so recorded which would justify the reopening of the assessment, the Assessing Officer in fact seeks to accord a fresh consideration to an issue which already stands concluded in the regular assessment proceedings. Therefore the Assessing Officer had no reason to believe that the payment made towards settlement of the class action suit was a payment towards a penalty imposed and on that account it is held that there was no reason for the Assessing Officer to believe that income had escaped assessment. In the light of the above to hold that what was paid by the petitioner was a penalty, in fact, would be without any basis and aimed at reviewing an order passed earlier by the Assessing Officer who had specifically gone into the allowability of the claim. A mere assertion in the absence of any material would not constitute a ‘tangible material’ for purposes of reopening an assessment. Accordingly the  notice under section 148 and the  order are set aside. (AY. 2013-14)