Full disclosure in reassessment includes primary facts on accumulated profits; nondisclosure can justify reopening.

In reassessment proceedings, the court held that the Revenue was not required as a general rule to produce the recorded reasons for sanction where the reassessment order itself disclosed the basis of reopening. It further held that the assessee's duty of full and true disclosure extends to primary facts material to assessment, including the company's balance-sheet and accumulated profits when loan receipts may attract deemed-dividend treatment. Because those facts were not furnished, the assessing officer lacked the primary material needed to decide applicability of the provision, and reopening was validly initiated. The reassessment was upheld as within jurisdiction, with the merits remitted to the Tribunal.

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Issues: (i) Whether the Revenue was bound to produce the reasons recorded for obtaining sanction before challenging the validity of the reassessment notice. (ii) Whether the assessee had failed to make a full and true disclosure of material facts by not furnishing the company's balance-sheet and details of accumulated profits, so as to invalidate the reassessment.

Issue (i): Whether the Revenue was bound to produce the reasons recorded for obtaining sanction before challenging the validity of the reassessment notice.

Analysis: The challenge based on non-production of recorded reasons was distinguished on the ground that the earlier decision relied upon involved a situation where the jurisdictional objection had been taken at the earliest stages and the relevant memorandum of reasons had not been produced even after remand. In the present matter, the reassessment order itself recorded the basis for reopening, and the assessee's only substantive objection was that all primary facts had already been disclosed. The court held that the earlier decision could not be applied as a general rule to require production of the recorded reasons in every case in the manner suggested.

Conclusion: The objection was rejected.

Issue (ii): Whether the assessee had failed to make a full and true disclosure of material facts by not furnishing the company's balance-sheet and details of accumulated profits, so as to invalidate the reassessment.

Analysis: The court applied the principle that an assessee must disclose fully and truly all primary facts necessary for assessment, and that the assessing authority's duty to draw inferences does not relieve the assessee of that obligation. Since the loan from the company could be taxed as a deemed dividend only to the extent of the company's accumulated profits, the existence and extent of such accumulated profits were material facts relevant to the assessment. Because the balance-sheet was not furnished, the Income-tax Officer lacked the primary fact needed to determine the applicability of the deemed-dividend provision. The question was treated as one of law on admitted facts, and the reliance placed on cases concerning income of another person or mere oversight by the officer was held inapplicable.

Conclusion: The assessee had not made a full and true disclosure of material facts, and the reassessment was validly initiated.

Final Conclusion: The reference was answered against the assessee, and the reassessment proceedings were upheld as within jurisdiction; the matter on merits was remitted to the Tribunal for decision.

Ratio Decidendi: For reassessment under the reopening provision, the assessee must disclose every primary fact material to assessment, including facts necessary to determine whether a received loan is taxable as a deemed dividend; failure to disclose such facts gives the Income-tax Officer jurisdiction to reopen.

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