Reopening of assessment upheld where later discovery of omitted expenses supplied reason to believe and disclosure was not fully and truly made.

Reopening under section 148 was sustained because later assessment proceedings revealed that personal and household expenses of directors and their relatives had been debited in the company's accounts, giving the tax authority a rational basis to believe income had escaped assessment for the earlier year. Mere production of account books did not establish full and true disclosure of all primary facts, especially where the assessee failed to show that the relevant material had been fully placed before the assessing authority. On that footing, the High Court held the notice valid and within jurisdiction, and the challenge to reassessment failed.

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Issues: Whether the notice issued for reopening the assessment under section 148 of the Income-tax Act, 1961 was without jurisdiction for absence of reason to believe that income had escaped assessment, and whether the assessee had made full and true disclosure of material particulars.

Analysis: The reopening was upheld on the basis that, during assessment proceedings for a subsequent year, the income-tax authorities discovered that personal and household expenses of directors and their relations had been debited in the company's accounts. That discovery supported the belief that income had escaped assessment in the earlier year. The record also showed that the earlier allowance of expenses had proceeded on a different footing, and the assessee had not shown that all material facts had been truly and fully disclosed merely by producing account books.

Conclusion: The notice under section 148 was valid and within jurisdiction; the challenge failed.

Final Conclusion: The petition was rejected, and the reassessment notice was sustained.

Ratio Decidendi: For reopening under section 148, subsequent discovery of omitted material facts can constitute a sufficient basis for reason to believe, and mere production of account books does not amount to full and true disclosure of all primary facts.

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