Reasons to believe vs reasons to suspect — scope of reopening

Circular No. 549/1990 — Reasons to believe vs reasons to suspect — scope of reopening

Date: 1990-10-31 Status: ACTIVE Category: Reassessment / Reopening Binding on Department: Yes (Section 119 / Section 400 IT Act 2025)

Summary

Landmark circular: AO must have ‘reason to believe’ (not merely ‘reason to suspect’) that income has escaped assessment. Heavily cited in reassessment litigation.

Key Directions

1. ‘Reason to believe’ requires a rational nexus between material and belief of income escapement.
2. Mere suspicion or change of opinion does not constitute ‘reason to believe’.
3. Reasons must be recorded in writing before issuance of notice.
4. Borrowed satisfaction must still be independently evaluated by AO.

Applicability Under IT Act 2025

Saving Clause: Section 536 of IT Act 2025 saves circulars issued under the 1961 Act “so far as not inconsistent” with the new Act.

Old Section (1961 Act)	New Section (2025 Act)	Consistent?
147	282	Yes
148	283	Yes

Cross-References

Act Sections

• Section 147
• Section 148
• Section 282
• Section 283

Related Circulars

• None identified

Key Case Law (Circular Supremacy)

• To be populated — cases where this circular was cited/applied

Full Text

Full text to be added — see raw/circulars/ for PDF when available

Source

• Official: incometaxindia.gov.in/circulars