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2020 (2) TMI 941 - AT - Income TaxReopening of assessment u/s 147 - “reasons to believe” and not “reasons to suspect” - HELD THAT:- Provisions imposing condition precedent for initiating reassessment proceedings is to ensure finality of proceedings. The Act also provides that such reason must be recorded in writing before issue of notice of reassessment so as to judge the existence of such belief before initiating reassessment proceedings by issue of notice u/s.148. The above requirements are meant to ensure that powers to initiate reassessment proceedings are not exercised in an arbitrary manner. The Courts have analyzed and explained in several cases as to what could be the valid reason to believe escapement of income, which would enable the AO to successfully reopen the assessment. It has been held that the words ‘reason to believe’ are stronger than the words ‘reason to suspect’ or ‘reason to doubt’. It requires more than merely ‘satisfaction’ of the Assessing Officer. The belief entertained by the AO must not be arbitrary or irrational. The expression ‘reason to believe’ does not mean purely subjective satisfaction of the Assessing Officer. The belief must be held in good faith. It cannot be merely pretence. Again, the belief must be of an honest and reasonable person based upon reasonable grounds. AO may act upon direct or circumstantial evidence, but his belief must not be based on mere suspicion, gossip or rumors. AO would be acting without jurisdiction, if the reasons for his belief are not material or relevant. There should be nexus between the information coming into possession of the AO and his belief on the basis of such information that income of the Assessee chargeable to tax has escaped assessment. Therefore, we note that it is a case of ‘change of opinion’ and hence we quash the reassessment proceedings. - Decided in favour of assessee.
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