Reason to believe in reassessment notices allows court scrutiny, but recorded reasons need not be disclosed to the assessee initially.

In reassessment proceedings under the Indian Income-tax Act, 1922, the phrase "reason to believe" makes the notice justiciable, so the Court may examine whether the Income-tax Officer's belief rested on relevant material. However, at the initial stage the assessee cannot insist on disclosure of the recorded reasons or sanction if disclosure would frustrate the proceedings. It is sufficient for the Court itself to inspect the materials and satisfy itself that the belief was formed on reasonable grounds. On that basis, the notice was treated as valid and the challenge failed.

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Issues: Whether, in proceedings under section 34(1A) of the Indian Income-tax Act, 1922, the assessee was entitled to compel disclosure of the Income-tax Officer's recorded reasons and the Board's sanction at the stage of issuance of notice, and whether the notice was invalid for want of lawful formation of belief.

Analysis: The expression "reason to believe" made the issuance of notice justiciable, so the Income-tax Officer had to satisfy the Court that relevant facts existed and that the belief was founded on material capable of supporting it. At the same time, premature disclosure of the recorded reasons to the assessee would defeat the very object of reassessment proceedings, particularly where the department apprehended that evidence might be removed or altered. The Court held that the reasons and sanction could be examined by the Judge, but need not be disclosed to the assessee at that stage. It was sufficient if the Court itself inspected the materials and was satisfied that the belief was formed on reasonable grounds.

Conclusion: The assessee was not entitled to further disclosure at that stage, and the notice under section 34(1A) was valid.

Final Conclusion: The challenge to the reassessment notice failed, and the proceeding was dismissed with the Court affirming the limited judicial scrutiny of the recorded reasons without requiring disclosure to the assessee before production of the relevant books and documents.

Ratio Decidendi: Where a reassessment notice is issued on the basis of "reason to believe", the Court may inspect the recorded reasons to test whether the belief was founded on relevant material, but the assessee cannot insist on disclosure of those reasons at the initial stage if such disclosure would frustrate the statutory proceedings.

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