Failure to supply confidential information relied upon for reopening assessment violates principles of natural justice.

The petitioner filed a regular income tax return for the Assessment Year 2012-13, which was initially accepted without demand under Section 143(1)

In March 2019, the respondent issued a notice under Section 148 to reopen the assessment based on an investigation into a third party, M/s. TDPL, which allegedly provided "accommodation entries"

The petitioner objected to the reopening, requesting the specific material and statements (such as those of Mr. Amit Dalmia) used to link them to the alleged scheme

The respondent rejected these objections, claiming the investigative documents were confidential

1. Whether the reassessment notice was valid given the respondent's refusal to provide the underlying evidence and information used against the petitioner

2. Whether the reopening was based on a "reason to believe" or merely a "reason to suspect"

3. Whether the procedural discrepancy regarding the date of recorded reasons vitiated the proceedings

The court applied Section 147 and 148 of the Income Tax Act, 1961, which govern the reopening of assessments based on escaped income

It relied on the principle that the Assessing Officer must possess a "reason to believe" that income has escaped assessment, rather than a mere "reason to suspect," as established in Income Tax Officer v. Lakhmani Mewal Das

Furthermore, the court emphasized the principles of natural justice, which require the disclosure of material evidence to the assessee, citing Technocrat Industries v. J.C. Shah

The court found that the respondent failed to establish a direct nexus between the petitioner and the alleged "shell" operations of M/s. TDPL

The Revenue's refusal to provide the statement of the entry operator or the specific investigation reports on the grounds of "confidentiality" was deemed a violation of natural justice, as the petitioner could not effectively challenge the allegations without seeing the evidence

The court observed that the notice contained only "bald allegations" without tangible material showing the petitioner actually received the alleged funds

the court noted that the respondent admitted to recording reasons on a different date than what was initially communicated to the petitioner, and failed to produce the original record during the proceedings

The High Court allowed the writ petition, quashing and setting aside the Section 148 notice dated 25.03.2019 and the order rejecting the petitioner's objections dated 13.05.2019