Reassessment beyond four years fails where reopening is based on change of opinion and no failure to disclose material facts.

Reassessment initiated beyond four years was invalid because the original scrutiny assessment under section 143(3) had already examined the loan write-back and treated it as business income. The reopening reasons wrongly assumed escapement and alleged failure to disclose material facts, even though rectification proceedings on the same issue had earlier been initiated and then dropped. On these facts, the attempt to reopen amounted to a change of opinion, and the statutory condition of failure to disclose fully and truly all material facts was not met. The reassessment notice and the consequent assessment were therefore quashed.

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Issues: Whether the reassessment proceedings initiated after the expiry of four years were valid in the absence of any failure by the assessee to disclose fully and truly all material facts necessary for assessment.

Analysis: The original assessment was completed under section 143(3) after scrutiny, and the same loan write-back amount had already been examined and treated as business income. The reasons recorded for reopening proceeded on the footing that the amount had escaped assessment and that there was failure on the part of the assessee to disclose material facts. The record also showed that rectification proceedings under section 154 had earlier been initiated on the same issue and later dropped. On these facts, the reopening was found to rest on an erroneous understanding of the record and amounted to a change of opinion. Since the notice was issued beyond four years, the statutory condition of failure to disclose fully and truly all material facts was not satisfied.

Conclusion: The reassessment notice and the consequent assessment were held invalid and were quashed. The legal ground challenging reopening was allowed, and the other grounds on merits became infructuous.

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