Reassessment beyond four years fails where reasons do not show full and true disclosure of material facts

Reassessment beyond four years under the first proviso to section 147 is valid only where the recorded reasons expressly show the assessee's failure to disclose fully and truly all material facts necessary for assessment. Where the original assessment under section 143(3) was completed on the basis of return, financial statements and inventory details already before the AO, and the reopening relied on the same material without identifying any withheld facts, the attempt amounts to a mere change of opinion and is without jurisdiction. On that reasoning, the reassessment notice under section 148 and the consequential assessment are invalid and liable to be quashed.

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Issues: Whether the reassessment notice and the assessment framed beyond four years from the end of the relevant assessment year were valid when the recorded reasons did not identify any failure by the assessee to disclose fully and truly all material facts necessary for assessment.

Analysis: The original assessment had been completed under section 143(3) of the Income-tax Act, 1961, after the return, financial statements and inventory details were already before the Assessing Officer. The reasons for reopening relied on the same material available in the original proceedings and did not specify what material facts had been withheld by the assessee. In a case governed by the first proviso to section 147, reassessment after four years is permissible only if income has escaped assessment by reason of the assessee's failure to make a return or to disclose fully and truly all material facts necessary for assessment. Since the recorded reasons did not satisfy that statutory condition, the reopening was treated as a mere change of opinion and lacked jurisdiction.

Conclusion: The reassessment notice under section 148 and the consequential assessment were held invalid and liable to be quashed; the assessee succeeded.

Ratio Decidendi: Where reassessment is initiated beyond four years, the recorded reasons must expressly demonstrate the assessee's failure to disclose fully and truly all material facts necessary for assessment, and reopening on the basis of material already available in the original assessment is impermissible as a mere change of opinion.

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