Reassessment for nondisclosure fails where primary facts were fully disclosed and later estimates cannot by themselves justify reopening.

Reassessment under section 147(a) requires escaped income to result from the assessee's failure to fully and truly disclose primary facts necessary for assessment. Where the assessee had already disclosed the books of account and balance-sheet showing construction expenditure, the assessing authority was obliged to draw the proper inference from those primary facts. A later inspection report or higher cost estimate could not, by itself, establish nondisclosure or create a further duty to disclose additional facts. On that reasoning, the reassessment was held invalid and improper, with the issue decided in favour of the assessee.

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Issues: Whether reassessment under section 147(a) of the Income-tax Act, 1961 was valid on the basis of the assessee's alleged failure to disclose fully and truly all material facts.

Analysis: The assessee had disclosed its books of account and balance-sheet in the original assessment, showing the expenditure incurred on construction of the house. The reassessment was initiated only after a later inspection report estimated the construction cost at a higher figure. The governing principle is that reassessment under section 147(a) requires not merely escaped income, but escaped income caused by the assessee's omission or failure to make a full and true disclosure of primary facts necessary for assessment. Once primary facts are disclosed, the assessing authority must draw the proper inferences; a later estimate or fresh information cannot by itself convert the case into one of nondisclosure. The provisions relied upon by the Revenue did not create any further duty on the assessee, and the facts did not show concealment of any primary fact or any material entry hidden in the disclosed records.

Conclusion: The reassessment under section 147(a) was invalid and not proper; the answer was against the Revenue and in favour of the assessee.

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