Reassessment beyond time limit requires assessee's nondisclosure of primary facts; departmental depreciation error cannot justify reopening.

Reassessment beyond the statutory time limit is valid only where escaped income is linked to the assessee's omission or failure to disclose fully and truly all primary facts necessary for assessment. The assessee's duty is limited to disclosure of primary facts; the assessing authority must draw the correct legal and factual inferences from those facts. Where depreciation particulars were already before the department, an error in applying the depreciation ceiling or a later change of opinion on the same material does not amount to nondisclosure by the assessee. On those facts, the reassessment notices were invalid because the escapement arose from departmental error, not from any failure of disclosure.

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Issues: Whether reassessment notices issued under section 147(a) of the Income-tax Act, 1961 were valid where the alleged escapement arose from an incorrect depreciation computation and not from any omission or failure by the assessee to disclose fully and truly all material facts necessary for assessment.

Analysis: For reopening after the prescribed period, the Income-tax Officer must have reason to believe both that income has escaped assessment and that such escapement was caused by the assessee's omission or failure to disclose fully and truly all material facts. The assessee's duty extends only to disclosure of primary facts; it is for the assessing authority to draw the correct legal and factual inferences from those facts. The record showed that the relevant depreciation particulars were already before the department and the mistake lay in the Income-tax Officer's failure to take account of initial depreciation while applying the depreciation ceiling. A mistake in calculation, or a change of opinion on the same primary facts, does not constitute failure by the assessee to disclose material facts.

Conclusion: The reassessment notices were invalid, because the escapement of income was not attributable to any omission or failure by the assessee to make a full and true disclosure.

Ratio Decidendi: Reassessment beyond the statutory time limit cannot be founded merely on a departmental mistake in applying the law or computing depreciation; it requires a demonstrable omission or failure by the assessee to disclose fully and truly all primary facts.

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