Reassessment requires full disclosure beyond four years and tangible new material within four years, not mere change of opinion.

Reassessment beyond four years is valid only if the assessee failed to disclose fully and truly all material facts; where the relevant figures, computations and basis of loss were already disclosed, reopening is not permitted and the notices fail. Even within four years, reassessment must rest on tangible new material and a reason to believe, not a mere change of opinion on matters already examined in the original assessment. On that basis, the reopening notices were held unsustainable across all years.

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Issues: (i) Whether the reassessment notices issued beyond four years for the relevant assessment years were valid in the absence of any failure by the assessee to disclose fully and truly all material facts. (ii) Whether the reassessment notice issued within four years was sustainable when it was founded only on a change of opinion and not on tangible material.

Issue (i): Whether the reassessment notices issued beyond four years for the relevant assessment years were valid in the absence of any failure by the assessee to disclose fully and truly all material facts.

Analysis: The reopening beyond four years required compliance with the proviso to section 147 of the Income-tax Act, 1961, namely, a failure by the assessee to make a full and true disclosure of all material facts necessary for assessment. The record showed that the assessee had disclosed the policyholders' deficit, the transfer from shareholders' funds, the computation under section 44 read with Rule 2 of the First Schedule, and the basis on which the return reflected a loss. The explanations furnished during the assessment proceedings made clear that the nil figure in Form I was after the internal transfer and that the assessee's computation proceeded on the disclosed figures. No material suppression or misleading disclosure was established.

Conclusion: The reassessment notices for the years reopened beyond four years were invalid and liable to be quashed.

Issue (ii): Whether the reassessment notice issued within four years was sustainable when it was founded only on a change of opinion and not on tangible material.

Analysis: For the year reopened within four years, the Assessing Officer had already examined the same figures and queries during the original assessment under section 143(3) of the Income-tax Act, 1961. The reasons for reopening relied on the very same nil surplus or deficit in Form I that had been considered earlier. In the absence of new tangible material, the reopening amounted only to a review of the earlier decision, which is impermissible under section 147. The statutory requirement of a reason to believe was therefore not satisfied.

Conclusion: The reassessment notice for the year reopened within four years was also unsustainable.

Final Conclusion: The reassessment notices for all the years in question were quashed, as the preconditions for invoking the reopening power were not met.

Ratio Decidendi: Reassessment cannot be sustained beyond four years unless there is a failure to disclose fully and truly all material facts, and even within four years it requires tangible material and cannot rest on a mere change of opinion.

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