Reopening after four years requires recorded failure to disclose material facts; prior scrutiny of the loan made reassessment invalid.

Reopening under sections 147 and 148 was held invalid where the assessment had already been completed under section 143(3) and the same unsecured loan transaction had been examined in the original proceedings. The reassessment reasons did not expressly record any failure by the assessee to disclose fully and truly all material facts, which is mandatory when reopening is initiated after four years from the end of the assessment year. As the issue had already been scrutinised and the statutory precondition was not met, the reassessment was quashed.

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Issues: Whether the reopening of assessment under sections 147 and 148 of the Income-tax Act, 1961 was valid when the assessment had already been completed under section 143(3) and the very loan transaction was examined in the original proceedings.

Analysis: The original assessment had scrutinised the unsecured loan of Rs. 19 lakhs, with details called for from the assessee and the lender under section 133(6) of the Income-tax Act, 1961. The reasons recorded for reopening did not state how the assessee had failed to disclose fully and truly all material facts relating to that transaction. Since the reassessment was initiated after four years from the end of the assessment year and the matter had already been examined earlier, the statutory requirement for reopening was not satisfied.

Conclusion: The reopening was invalid and was quashed, in favour of the assessee.

Ratio Decidendi: Where an assessment completed under section 143(3) of the Income-tax Act, 1961 is sought to be reopened after four years, the reasons must expressly show failure on the part of the assessee to disclose fully and truly all material facts; if the very issue was examined in the original assessment and such failure is not recorded, the reopening is bad in law.

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