Reassessment beyond four years requires full disclosure of material facts; disclosed gratuity claim could not justify reopening.

Reopening beyond four years from the end of the assessment year requires a failure by the assessee to disclose fully and truly all material facts necessary for assessment. Here, the gratuity deduction claim, supporting accounts and related documents were disclosed in the original scrutiny assessment under section 143(3), and the reopening was based only on the view that the gratuity fund lacked the required approval for deduction. The court noted that, on these facts, the absence of an additional supporting document did not amount to nondisclosure of material facts. The reassessment notice was therefore not sustainable under the proviso to section 147 and was quashed.

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Issues: Whether the reassessment notice issued beyond four years from the end of the relevant assessment year could survive when the assessee had disclosed the gratuity claim and related material in the original scrutiny assessment, and whether there was any failure to disclose fully and truly all material facts necessary for assessment.

Analysis: The assessment had originally been completed under section 143(3) of the Income-tax Act, 1961 after scrutiny. The assessee had claimed deduction for contribution towards gratuity and had placed the relevant accounts and documents on record, including the arrangement under which the fund was being administered. The reopening was founded on the view that the gratuity fund was not approved as required for deduction under section 36(1)(v) of the Income-tax Act, 1961. In a case where reopening is sought beyond four years, the proviso to section 147 of the Income-tax Act, 1961 requires a failure by the assessee to disclose fully and truly all material facts. On the facts, the assessee had disclosed the claim and the supporting particulars; the absence of a further declaration or an immediately available approval order, in the circumstances of long-standing acceptance of the claim, did not amount to suppression of material facts. The notice was therefore unsustainable on the statutory precondition for reopening beyond four years.

Conclusion: The reassessment notice was invalid and was quashed in favour of the assessee.

Ratio Decidendi: Reassessment beyond four years cannot be sustained unless the assessee failed to disclose fully and truly all material facts necessary for assessment; mere non-production of an additional supporting document, when the primary claim and connected material were already disclosed in scrutiny assessment, does not by itself satisfy that statutory requirement.

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