Reassessment beyond four years requires a specific failure-to-disclose allegation; higher windmill depreciation was allowed despite no separate option.

Reassessment initiated after four years was invalid because the notice under section 148 did not expressly allege that escapement of income resulted from the assessee's failure to disclose fully and truly all material facts, as required by the proviso to section 147. Higher depreciation on windmills was allowed because the option under rule 5(1A) was facilitative, and the claim was otherwise made in the return and supported by the books and audit report; failure to separately exercise the option before the due date did not defeat the deduction. The Revenue's challenge was rejected and the relief to the assessee was sustained.

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Issues: (i) Whether reassessment proceedings initiated beyond four years under section 147 could be sustained when the notice under section 148 did not allege failure by the assessee to disclose fully and truly all material facts. (ii) Whether the assessee was entitled to higher depreciation on windmills under rule 5(1A) despite not having exercised the option before the due date under section 139(1).

Issue (i): Whether reassessment proceedings initiated beyond four years under section 147 could be sustained when the notice under section 148 did not allege failure by the assessee to disclose fully and truly all material facts.

Analysis: The notice was issued after the expiry of four years from the relevant assessment year. In such a case, the proviso to section 147 requires the recording of a specific allegation that escapement of income arose by reason of the assessee's failure to make a return or to disclose fully and truly all material facts necessary for assessment. The recorded reasons did not contain that essential averment, and no contrary material was shown.

Conclusion: The reassessment proceedings were invalid and the challenge to reopening failed against the Revenue.

Issue (ii): Whether the assessee was entitled to higher depreciation on windmills under rule 5(1A) despite not having exercised the option before the due date under section 139(1).

Analysis: Depreciation on assets used for generation of power is governed by section 32(1) and the prescribed rates under the Income-tax Rules, 1962. The option under rule 5(1A) was held to be facilitative and not so mandatory that failure to separately exercise it before the due date would defeat the claim where the higher rate was claimed in the return and supported by the books and audit report. The earlier tribunal view relied upon by the first appellate authority was followed.

Conclusion: The assessee was entitled to the higher rate of depreciation on windmills.

Final Conclusion: The Revenue's appeal was rejected in full, and the relief granted to the assessee was sustained.

Ratio Decidendi: For reassessment beyond four years, the notice must expressly allege failure to disclose fully and truly all material facts, and a claim for higher depreciation under the prescribed rules is not defeated merely because a separate option was not exercised before the due date when the claim is otherwise made in the return.

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