Reassessment notices can stand where recorded reasons show escapement of income from failure to disclose material facts, despite earlier settlement.

Reassessment under the Income-tax Act is sustainable where the recorded reasons, made before notice, show a bona fide belief that income escaped assessment because the assessee failed to make a full and true disclosure of material facts. The scheme requires compliance with the recording requirement in section 148 and the sanction framework in section 151, depending on the time elapsed. Later-discovered material, including books and documents not earlier known to the Revenue, may justify reopening even after an earlier settlement, if it supports escapement of income not previously disclosed.

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Issues: Whether the notices for reassessment under the Income-tax Act, 1961 were validly issued on the basis of recorded reasons showing escapement of income due to failure to disclose fully and truly all material facts, and whether the earlier settlement barred reopening.

Analysis: The reassessment scheme under section 147(a) permits action where the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment because of the assessee's omission or failure to make full and true disclosure. Section 148 requires the reasons to be recorded before notice, and section 151 imposes further sanction requirements depending on the lapse of time. On the facts, the recorded investigation report referred to material discovered after the settlement, including undisclosed books and documents, and the Court treated the belief required by the statute as sufficiently reflected in those recorded reasons. The existence of an earlier settlement did not prevent reassessment where later material showed escapement of income not known to the revenue at the time of settlement.

Conclusion: The reassessment notices were held valid and the challenge to them failed, in favour of the Revenue.

Ratio Decidendi: A reassessment notice is sustainable if the recorded reasons disclose a statutory basis for a bona fide belief that income has escaped assessment due to the assessee's failure to make full and true disclosure, and later discovered material may justify reopening notwithstanding an earlier settlement.

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