Reassessment notice validity turns on bona fide belief and relevant material; adequacy of evidence is not re-tested at reopening.

Judicial review of reassessment notices is limited to checking whether the assessing officer formed a bona fide belief on relevant material that income had escaped assessment because of failure to fully and truly disclose material facts. The court does not re-examine the sufficiency or adequacy of the material at the reopening stage. Stock-in-trade is a material fact for assessment, and merely producing books of account does not satisfy the disclosure duty if the actual stock position is not truly revealed. On the survey material and bank stock statements, the notices were supported by relevant material and were valid at initiation, so no interference under article 226 was warranted.

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Issues: Whether notices issued under sections 147 and 148 of the Income-tax Act, 1961 could be interfered with under article 226 of the Constitution of India on the ground that the Income-tax Officer lacked material to believe that income had escaped assessment due to failure to disclose fully and truly all material facts.

Analysis: The scope of judicial review at the stage of reopening assessment is confined to examining whether the Income-tax Officer formed a bona fide belief on relevant and germane material and whether such belief had a rational connection with the inference that income had escaped assessment because of nondisclosure of material facts. The sufficiency or adequacy of the material is not for the court to reassess. Stock-in-trade of a trading concern is a material fact for assessment, and the disclosure duty is not satisfied merely by production of books of account where the actual stock position is not truly disclosed. On the materials arising from the survey and the bank stock statements, the court found that there was relevant material to support the belief that the petitioner had not fully and truly disclosed material facts.

Conclusion: The notices under sections 147 and 148 were valid at the stage of initiation and no interference was warranted under article 226.

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