Reassessment beyond four years requires failure of full and true disclosure; notices lacking that jurisdictional basis were quashed

Reassessment after four years from the relevant assessment year requires, under the first proviso to Section 147 of the Income-tax Act, 1961, a failure by the assessee to disclose fully and truly all material facts necessary for assessment. The article notes that original assessments had been completed under Section 143(3), while the recorded reasons incorrectly stated that no scrutiny assessments had occurred and alleged undisclosed penny-stock accommodation entries that were neither claimed nor omitted from the details furnished. As no failure of disclosure was recorded, the jurisdictional condition for reopening was not satisfied. The reassessment notices under Section 148 and consequential assessments under Section 147 were therefore described as without jurisdiction and quashed.

---

---

Issues: Whether reassessment proceedings initiated after four years under Section 147 of the Income-tax Act, 1961 were valid in the absence of failure by the assessee to disclose fully and truly all material facts.

Analysis: The reassessment notices were issued beyond four years from the relevant assessment years, while original assessments had already been completed under Section 143(3) of the Income-tax Act, 1961. The recorded reasons incorrectly stated that no scrutiny assessments had been made and wrongly alleged undisclosed accommodation entries relating to penny stocks, although the assessee had not claimed such long-term capital gains or losses and had furnished relevant details during the original assessment proceedings. Under the first proviso to Section 147 of the Income-tax Act, 1961, reopening after four years requires failure by the assessee to disclose fully and truly all material facts necessary for assessment. The recorded reasons contained no such failure, and the jurisdictional condition for reopening was therefore not satisfied.

Conclusion: The reassessment notices issued under Section 148 of the Income-tax Act, 1961 and the resultant assessments under Section 147 were without jurisdiction and were quashed.

---