Reassessment requires full disclosure of primary facts; later inferences cannot justify reopening on mere suspicion.

Reassessment under section 147(a) requires the taxing authority to have reason to believe both that income escaped assessment and that the escapement resulted from the assessee's failure to disclose fully and truly all primary and material facts. The assessee had disclosed the nature of the London management charges, the allocation basis, and the work attributed to the London office, so the original assessments were made on that material. A later auditor's certificate could not by itself establish nondisclosure of primary facts; at most it supplied a new inference or opinion. The Court reiterated that the assessee must disclose primary facts, not draw inferences for the department, and that reopening cannot rest on mere suspicion. The reassessment notices were therefore invalid.

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Issues: Whether the reassessment notices issued under section 147(a) read with section 148 of the Income-tax Act, 1961 were valid on the ground that the assessee had failed to disclose fully and truly all material facts necessary for the original assessments.

Analysis: The jurisdiction to reopen an assessment under section 147(a) required the Income-tax Officer to have reason to believe both that income had escaped assessment and that such escapement was attributable to the assessee's failure to disclose fully and truly all material facts. The assessee had disclosed the nature of the London management charges, the basis of allocation, and the work said to have been done by the London office. The original assessments were completed on that basis, and the later auditor's certificate for a subsequent year could at most provide new information or an inferential basis for opinion, not proof of nondisclosure of primary facts. The Court reiterated that the assessee's duty extended to disclosure of primary and material facts, not to drawing inferences for the taxing authority, and that belief for reopening cannot rest on mere suspicion.

Conclusion: The reassessment notices were invalid; there was no failure by the assessee to disclose fully and truly all primary facts, and the reopening under section 147(a) could not be sustained.

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