Reason to believe for reassessment fails where disclosed gifts rest on retracted statements and no independent evidence exists.

Reassessment under sections 147/148 was treated as invalid where the assessee had disclosed the gift transaction in the return, the reopening relied mainly on a retracted third-party statement and general foreign-exchange immunity scheme material, and no independent evidence linked the receipt to an unexplained source. The Assessing Officer's information showed only a broad allegation about gifts routed through NRE accounts on payment of premium, which did not specifically establish that this assessee's remittance fell outside the immunity scheme. As the basic remittance particulars were already furnished and the CBDT circular barred enquiry into covered remittances, mere suspicion did not amount to reason to believe.

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Issues: Whether reassessment under section 147/148 was valid when the assessee had disclosed the gift transaction in the return and the reopening was based substantially on a retracted third-party statement and information gathered under the foreign exchange immunity scheme.

Analysis: The material before the Assessing Officer showed only a general allegation that gifts were arranged through NRE accounts on payment of premium; it did not specifically establish that the assessee's receipt was outside the immunity scheme. The third-party statement had been retracted well before reopening, and there was no independent material linking the assessee's gift to any unexplained source. The assessee had furnished the basic particulars of the remittance at the time of the original return. The CBDT circular assured that no enquiry would be made regarding remittances covered by the immunity scheme, and the Court treated that circular as binding on the Department. On these facts, the expression "reason to believe" was not satisfied by mere suspicion.

Conclusion: Reopening of the assessment was invalid and without jurisdiction, and the assessee succeeded on this issue.

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