Reassessment requires tangible material and a bona fide reason to believe; vague information cannot sustain reopening.

Reassessment under section 147 requires a bona fide reason to believe, supported by tangible material with a live nexus to alleged income escapement. The Tribunal found the reopening was based on information said to have come from the Enforcement Directorate, but the recorded reasons showed the cash transactions were already reflected in the books and the adverse material on non-disclosure and lack of explanation was vague and uncorroborated. On that basis, the reassessment was quashed for want of valid material.

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Issues: Whether the reassessment proceedings under section 147 of the Income-tax Act, 1961 were validly initiated on the basis of the information available to the Assessing Officer.

Analysis: The reopening was founded on information said to have been received from the Enforcement Directorate. The recorded reasons themselves showed that the cash transactions were reflected in the books of account, and the adverse information regarding non-disclosure and absence of explanation was found to be vague and not corroborated by reliable material. The Tribunal applied the settled requirement that reassessment can be initiated only on the basis of a bona fide reason to believe, supported by tangible and relevant material having a live nexus with the alleged escapement of income, and not on mere suspicion or contradictory material.

Conclusion: The reassessment was held to be valid reason to believe and was quashed; the issue was decided in favour of the assessee.

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