Reassessment beyond four years invalid absent failure to disclose material facts; section 80IA loss carry-forward objection also rejected.

Reassessment beyond four years was held unsustainable because the recorded reasons did not show any failure by the assessee to fully and truly disclose all material facts; the original assessment had already considered the deduction claim and audit report, so the notice under section 148 was invalid. On the deduction issue, section 80IA was applied by linking computation to the assessee's chosen initial assessment year, and earlier years' losses already absorbed could not be notionally carried forward again to reduce the claim. The Revenue's objection therefore failed, and the deduction could not be disallowed on that basis.

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Issues: (i) Whether the reassessment initiated beyond four years was valid in the absence of any recorded failure by the assessee to disclose fully and truly all material facts; (ii) Whether, on merits, deduction under section 80IA had to be recomputed by notionally carrying forward earlier years' losses before allowing the claim for the relevant assessment year.

Issue (i): Whether the reassessment initiated beyond four years was valid in the absence of any recorded failure by the assessee to disclose fully and truly all material facts.

Analysis: The original assessment had been completed under section 143(3), and the reopening was made after expiry of four years from the end of the relevant assessment year. The reasons recorded did not show any application of the proviso to section 147 or any finding that the assessee had failed to disclose fully and truly all material facts necessary for assessment. The assessee had already placed the deduction claim and related audit report before the Assessing Officer in the original proceedings, and the issue had been examined earlier.

Conclusion: The reassessment was invalid and the notice under section 148 was bad in law.

Issue (ii): Whether, on merits, deduction under section 80IA had to be recomputed by notionally carrying forward earlier years' losses before allowing the claim for the relevant assessment year.

Analysis: The Tribunal followed the principle that under section 80IA(5), the relevant computation is linked to the initial assessment year chosen by the assessee, and losses of years earlier than that initial year, if already absorbed, cannot be notionally brought forward again. The earlier losses were not required to be reworked for denying the deduction claimed in the relevant year.

Conclusion: The Revenue's objection on merits failed and the deduction could not be disallowed on the basis of notional carry forward of earlier losses.

Final Conclusion: The reassessment was quashed and the Revenue's appeal failed both on jurisdiction and on the substantive deduction issue.

Ratio Decidendi: In a reopening beyond four years, reassessment is unsustainable unless the recorded reasons disclose the assessee's failure to fully and truly disclose material facts, and for section 80IA computations, earlier years' losses already absorbed cannot be notionally brought forward beyond the chosen initial assessment year.

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