Reassessment beyond four years fails when original scrutiny had full disclosure and reopening relies on already examined material.

Reassessment initiated after four years from the end of the assessment year is valid only where income escaped assessment because the assessee failed to disclose fully and truly all material facts in the original scrutiny assessment under section 143(3). Here, the assessee had already furnished the return, audited accounts, computation, bank details and loan details during the original proceedings, and the reopening relied on the same material already examined. A reference to a search in another group did not supply fresh material showing nondisclosure. The statutory conditions for reopening beyond four years were not met, so the reassessment was held invalid in law.

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Issues: Whether reassessment initiated beyond four years from the end of the relevant assessment year was valid when the original assessment had been completed under section 143(3) and the assessee had disclosed all primary facts.

Analysis: The original assessment was completed under section 143(3) of the Income-tax Act, 1961, and the notice under section 148 was issued after the expiry of four years. In such a case, reassessment can survive only if escapement of income is attributable to the assessee's failure to make a return or to disclose fully and truly all material facts necessary for assessment. The record showed that the assessee had furnished the return, audited financial statements, computation, bank details, unsecured loan details, and details of loans and advances during the original scrutiny proceedings under sections 142(1) and 143(3). The reopening was founded on the same profit and loss account and balance sheet material already examined in the original assessment, and the reference to the search in another group did not identify any new material demonstrating failure of disclosure. The statutory conditions for reopening beyond four years were therefore not satisfied.

Conclusion: The reassessment proceedings were invalid and bad in law; the challenge to the reassessment succeeded.

Ratio Decidendi: Where an assessment under section 143(3) is reopened after four years, the reopening is permissible only on proof of failure by the assessee to disclose fully and truly all material facts, and a reopening based on material already examined in the original assessment is not sustainable.

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