Reassessment reopening on locker search revealing cash and jewellery: s.148 notice upheld despite "roving enquiry" challenge dismissed

The dominant issue was whether reassessment reopening under s.147/s.148 was vitiated for lack of "reason to believe" and amounted to a roving enquiry. The HC held that, in writ jurisdiction, it cannot examine the sufficiency of material and only tests whether the material is relevant and has a rational connection or live link to the belief of escapement. Information arising from a search of a locker jointly held with the spouse, revealing cash and jewellery, and the investigation communication and appraisal report constituted relevant material; it could not be said the AO lacked the requisite belief. The challenge to the s.148 notice failed and the writ petition was dismissed.

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Issues Involved:
1. Validity of the notice u/s 148 of the Income-tax Act, 1961.
2. Existence of material for forming a reasonable belief of income escaping assessment.
3. Allegation of roving and fishing enquiries by the Assessing Officer.

Summary:

1. Validity of the notice u/s 148 of the Income-tax Act, 1961:
The petitioner challenged the notice dated May 3, 1993, issued u/s 148 for the assessment year 1990-91, claiming it was without jurisdiction as the pre-conditions for exercising power did not exist. The respondents contended that there was sufficient material for the Assessing Officer to form a reasonable belief that the income had escaped assessment.

2. Existence of material for forming a reasonable belief of income escaping assessment:
The reasons for reopening the assessment included a letter dated February 17, 1993, from the ACIT, Investigation Circle 19(1), New Delhi, indicating that the petitioner was earning income in benami names and had received money totaling Rs. 15 crores through bank drafts from four Sikkim companies. The Assessing Officer had perused the appraisal report and relevant annexures before issuing the notice. The court found that the material, including the letter and appraisal report, constituted relevant material for forming the requisite belief.

3. Allegation of roving and fishing enquiries by the Assessing Officer:
The petitioner argued that the Assessing Officer was making roving and fishing enquiries, which is not permissible. However, the court held that the material relied upon was not irrelevant or vague and had a rational connection for forming the opinion. The court referenced the Supreme Court decisions in ITO v. Purushottam Das Bangur and ITO v. Selected Dalurband Coal Co. Pvt. Ltd., which supported the view that the information from the letter and appraisal report could be relied upon for forming a reasonable belief.

Conclusion:
The court dismissed the writ petition, holding that there was no illegality in the issue of the impugned notice and that the material available was sufficient for forming a reasonable belief of income escaping assessment. The parties were left to bear their own costs.

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