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Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Information - Position prior to 1-4-1989 - Assessment year 1965-66 - Assessing Officer on basis of information contained in circular letter, issued by IAC that 'S' group was indulging in bogus purchases and hawalas and that assessee had advanced certain loan to firm belonging to 'S' group, issued notice under section 148 to assessee - Whether when amount mentioned in circular letter were shown by assessee in its balance-sheet filed with return on basis of which assessment had followed, it could not be said that there was material for formation of belief by Assessing Officer that income had escaped assessment - Held, yes - Whether, therefore, notice issued under section 148 was invalid - Held, yes FACTS The ITO received a circular letter from the IAC in connection with 'S' group which was alleged to be indulging in bogus purchases and hawalas through different parties. In the circular the name of the assessee was mentioned as one of the parties that had advanced certain amounts firm belonging to 'S' group. The ITO formed the belief that the income of the assessee had escaped assessment under section 147(a) and, therefore, issued notice under section 148. The AAC held that the ITO had reason to believe that the assessee's income had escaped assessment and the reopening of the assessment was justified. The Tribunal, however, quashed the reassessment proceedings. On reference : HELD The only material in the hands of the ITO was the circular letter. In that letter, there was no allegation that the assessee was dealing in any bogus business. All that was mentioned there was that there were certain advances which had been discovered as having been made by the assessee to 'S' group. The amounts mentioned in the circular letter were shown by the assessee in its balance-sheet which was filed with the return on the basis of which assessment had followed and which assessment was sought to be reopened. The fact of the matter was that the ITO had not bothered to examine the return before issuing the notice under section 148. It could not be said that, on the facts found, there was material for the…

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