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21. In Assistant Collector of Customs v. Charan Das Malhotra, (1971) 1 SCC
697 = 1983 (13) E.L.T. 1477 (S.C.), Shelat J., has held reasonable believe to be rele-
vant and not extraneous.
22. In Kewal Krishan v. State of Punjab, AIR 1967 SC 737 = 1993 (67)
E.L.T. 17 (S.C.), Kapur J., while dealing with identical provisions has clarified
that confiscatory power based on ‘reason to believe’ has to be exercised only on
the satisfaction based on certain objective material.
23. Earlier in Hukma v. The State of Rajasthan, AIR 1965 SC 476 = 2008
(228) E.L.T. 8 (S.C.), Das Gupta J., clearly opined that burden of proof postulated
upon the private party is based on the existence of the satisfaction of ‘reason to
believe’.
24. While dealing with the expression ‘reason to believe’ in relation to
another confiscatory statute, i.e. Narcotic Drugs and Psychotropic Substances
Act, 1985, S.B. Sinha J., in Aslam Mohammad Merchant v. Competent Authority and
Others, (2008) 14 SCC 186, opined that proper application of mind on the part of
the competent authority is imperative prior to issuance of a show cause notice,
intending to confiscate the goods. Also there has to be some material leading to
formation of some opinion or reason to believe for such action cannot be taken
on mere ipse dixit and roving enquiry is not contemplated in law. Further “It is
now a trite law that whenever a statute provides for “reason to believe”, either
the reasons should appear on the face of the notice or they must be available on
the materials which had been placed before him.”
25. In the Bar Council of Maharashtra v. M.V. Dabholkar and Others, (1976)
2 SCC 291, Krishna Iyer J., has observed that ‘reason to believe’ cannot be con-
verted into a formalised procedural roadblock, it being essentially a barrier
against frivolous enquiries.
26. In dealing with the provision of the Income-tax Act, where one in-
variably finds the expression ‘reason to believe’, the Apex Court in S. Narayanap-
pa and Others v. The Commissioner of Income-tax, Bangalore, AIR 1967 SC 523 has
held such expression not to mean a purely subjective satisfaction but to be one
held in good faith and not merely a pretence. “To put it differently it is open to
the Court to examine the question whether the reasons for the belief have a ra-
tional connection or a relevant bearing to the formation of the belief and are not
extraneous or irrelevant to the purpose of the section.”
27. In Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District
I, Calcutta and Another, AIR 1961 SC 372, the Court has observed that :
“The expression ”reason to believe” postulates belief and the existence
of reasons for that belief. The belief must be held in good faith : it cannot be mere-
ly a pretence. The expression does not mean a purely subjective satisfaction of the
Income Tax Officer : the forum of decision as to the existence of reasons and the be-
lief is not in the mind of the Income Tax Officer. If it be asserted that the Income
Tax Officer had reason to believe that income had been under assessed by
reason of failure to disclose fully and truly the facts material for assessment,
the existence of the belief and the reasons for the belief, but not the suffi-
ciency of the reasons, will be justiciable. The expression therefore predicates
that the Income Tax Officer holds the belief induced by the existence of rea-
sons for holding such belief. It contemplates existence of reasons on which the
belief is founded, and not merely a belief in the existence of reasons inducing the be-
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