Reason to believe under reassessment law must rest on relevant material; vague suspicions cannot support valid notice.

Section 34(1A) of the Income-tax Act, 1922 required the Income-tax Officer to have reason to believe, on reasonable grounds and supported by relevant material, that income had escaped assessment before issuing notice. Mere suspicion was insufficient. The recorded reasons referred only to vague assertions of secret profits and a large payment from the Oberois, but disclosed no factual basis capable of supporting the statutory belief. Because the jurisdictional condition precedent was not met, the notices were held illegal and invalid, and the assessee's challenge succeeded.

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Issues: Whether the notices issued under section 34(1A) of the Income-tax Act, 1922 were valid when the Income-tax Officer lacked material showing a reason to believe that income had escaped assessment.

Analysis: The statutory power under section 34(1A) could be exercised only if the Income-tax Officer had reason to believe, on reasonable grounds and not on mere suspicion, that income chargeable to tax had escaped assessment and that the belief was founded on relevant material. The recorded reasons disclosed only vague assertions of secret profits and receipt of a large sum from the Oberois, without any factual basis capable of supporting the statutory belief. Such self-contradictory and unsupported reasons did not satisfy the jurisdictional condition precedent for issuance of notice.

Conclusion: The notices were illegal and invalid, and the challenge to them succeeded in favour of the assessee.

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