Reassessment beyond four years and uncorroborated third-party loose papers cannot support reopening or an on-money addition.

Reassessment beyond four years is invalid where the assessee has already disclosed primary facts in the original assessment and the recorded reasons do not show any genuine failure of disclosure; on those facts, the reopening was quashed. An addition for alleged on-money payment for property purchase cannot be sustained on the basis of seized third-party loose papers alone, without corroboration, supporting material, or effective cross-examination; the Revenue failed to discharge the burden of proving undisclosed investment, so the addition was deleted.

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Issues: (i) Whether reassessment initiated after four years from the end of the assessment year was valid when the assessee had disclosed the primary facts in the original assessment. (ii) Whether the addition made on account of alleged on-money payment for purchase of property could be sustained on the basis of seized third-party loose papers without corroboration or cross-examination.

Issue (i): Whether reassessment initiated after four years from the end of the assessment year was valid when the assessee had disclosed the primary facts in the original assessment.

Analysis: The original assessment had been completed under section 143(3) of the Income-tax Act, 1961, and the transaction of purchase of the property was reflected in the books and balance sheet. In such a situation, reopening beyond four years could survive only if income had escaped assessment because of the assessee's failure to disclose fully and truly all material facts. The recorded reasons proceeded on the incorrect premise that the transaction was kept of the books, which was inconsistent with the record and showed lack of proper application of mind.

Conclusion: The reassessment was held to be bad in law and was quashed.

Issue (ii): Whether the addition made on account of alleged on-money payment for purchase of property could be sustained on the basis of seized third-party loose papers without corroboration or cross-examination.

Analysis: The addition rested on rough papers seized from a third party, with no supporting agreement, receipt, independent enquiry, or corroborative material showing payment over and above the stated consideration. The assessee was not afforded effective cross-examination of the person from whose premises the material was recovered, and the papers were treated as unreliable loose sheets lacking evidentiary sanctity. In tax proceedings, the burden to prove understatement or unaccounted investment remains on the Revenue, and that burden was not discharged.

Conclusion: The addition under section 69 of the Income-tax Act, 1961 was unsustainable and was deleted.

Final Conclusion: The reopening failed on jurisdictional grounds and the substantive addition also failed on merits, resulting in complete relief to the assessee.

Ratio Decidendi: A reassessment beyond four years is invalid where the assessee has disclosed primary facts and the recorded reasons do not show a genuine failure of disclosure, and an addition for undisclosed investment cannot rest solely on uncorroborated third-party loose papers.

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