Reason to believe requires tangible material and disclosure; reassessment fails where allegations remain unsupported suspicion.

Reassessment requires disclosure of the material relied on and recorded reasons showing tangible material that creates a statutory reason to believe income escaped assessment. Withholding investigation material, transaction details and a survey statement as confidential prevented an effective response and breached natural justice, rendering the reassessment notice and rejection of objections invalid. A bare allegation of an accommodation entry, without a specific nexus between the assessee and alleged transactions, amounts only to suspicion. The absence of the actual recorded reasons further failed to establish the basis for reopening under the Income-tax Act.

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Issues: (i) Whether the reassessment notice and rejection of objections were invalid for failure to supply the material relied upon against the assessee; (ii) whether the reassessment was founded on tangible material giving rise to a reason to believe that income had escaped assessment, rather than mere suspicion.

Issue (i): Whether the reassessment notice and rejection of objections were invalid for failure to supply the material relied upon against the assessee.

Analysis: The reassessment was based on investigation material, transaction details and a statement recorded during survey proceedings. The assessee specifically requested the material, information and statement relied upon to establish its connection with the alleged accommodation entry. Refusal to provide that material merely because it was confidential prevented an effective response and violated the principles of natural justice.

Conclusion: The reassessment proceedings were invalid for non-supply of the material relied upon against the assessee.

Issue (ii): Whether the reassessment was founded on tangible material giving rise to a reason to believe that income had escaped assessment, rather than mere suspicion.

Analysis: The notice and recorded reasons contained only the assessee's name and a bald allegation concerning an accommodation entry, without disclosing tangible material or a specific nexus connecting the assessee with the alleged layered transactions. The statutory requirement under Section 147 of the Income-tax Act, 1961 is a reason to believe, which cannot be replaced by suspicion. The actual reasons recorded on 11.03.2019 were also not produced, while the document supplied was an e-letter dated 09.04.2019.

Conclusion: The reassessment was based on suspicion and not on the requisite reason to believe supported by tangible material.

Final Conclusion: The reassessment notice and the order rejecting the objections could not stand because the relied-upon material was withheld and the recorded reasons did not establish the statutory basis for reopening the assessment.

Ratio Decidendi: Reassessment cannot be sustained where the material relied upon is not supplied to the assessee and the recorded reasons disclose only suspicion without tangible material establishing a reason to believe that income has escaped assessment.

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