Bona fide belief for reassessment cannot rest on suspicion; section 148 notice was invalid for lack of statutory material.

Reassessment under section 147(a) requires the Income-tax Officer to have material giving rise to a bona fide belief that income has escaped assessment because of the assessee's failure to disclose fully and truly all material facts; mere suspicion is insufficient. On the facts, doubt about the availability of books of account did not by itself establish escapement of income, and the officer's statement that more income might have been found if the books were produced did not satisfy the statutory belief requirement. The section 148 notice was therefore invalid, and the reassessment based on it was quashed.

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Issues: Whether the notice issued under section 148 of the Income-tax Act, 1961 for reassessment under section 147(a) was valid and supported by the requisite material and belief of escapement of income.

Analysis: Reassessment under section 147(a) requires the Income-tax Officer to possess material from which a bona fide belief can be formed that income has escaped assessment, and that such escapement resulted from the assessee's omission or failure to disclose fully and truly all material facts. A belief based only on suspicion is insufficient. On the facts, there was some material for doubting the assessee's statement regarding the availability of books of account, but that by itself did not establish escapement of income. The officer's own statement that larger income would have been found if the books had been disclosed did not amount to the statutory belief that income had escaped assessment.

Conclusion: The notice under section 148 was invalid and was quashed; the assessment made pursuant to it was also set aside. The decision is in favour of the assessee.

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