The AO initiated reassessment proceedings based on information received from the investigation wing. The AO initiated the proceedings on the ground that the genuineness of purchases was doubtful. However, while doing so, the AO accepted the corresponding sales transactions entered into with the same parties as well as with other parties, thereby acknowledging that the assessee was carrying on genuine business activities.

The Court held that the reopening was sought on the basis of a mere suspicion. The Court held that reassessment can be initiated only on the basis of “reason to believe” and not “reason to suspect”, and that mere suspicion of possible escapement of income does not justify reopening of a completed assessment. The High Court further noted that there was no failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. The transactions relating to purchases and sales had already been scrutinised in the original assessment under section 143(3) and were not disputed by the Revenue.

The High Court also observed that the Tribunal failed to appreciate that the Assessing Officer had concluded escapement of income without properly considering the material already available on record. Additionally, the statements recorded during the search were retracted within one month, and neither the Assessing Officer nor the CIT (A) dealt with the issue of such retraction. Accordingly, the reopening of the assessment was held to be invalid, and the reassessment proceedings were quashed. (AY.2011-12,2012-13,  2013-14)