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Issues: Whether the reassessment notice issued beyond four years under section 147 read with section 148 of the Income-tax Act, 1961 is valid where reopening was founded on audit objections and materials already on record, and whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
Analysis: The proviso to section 147 of the Income-tax Act, 1961 bars action after four years from the end of the relevant assessment year unless income has escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. The Tribunal examined the factual matrix, the sequence of scrutiny assessment, appellate and revisionary proceedings (including orders under section 263 and giving effect thereof), and the reasons recorded for reopening which relied on audit objections and materials already on record. The Tribunal contrasted the reliance on internal/external audit notes with the requirement that the Assessing Officer must possess fresh tangible material or form his own subjective satisfaction that income has escaped assessment. Prior decisions cited by the parties (including authorities distinguishing mere audit opinion from fresh information and those where audit revealed previously unknown facts) were considered. Applying the statutory proviso and precedent, the Tribunal found no specification in the reasons or assessment order of any failure by the assessee to disclose material facts attributable to it; the reopening was based on the same materials already available and amounted to change of opinion rather than fresh tangible material establishing escapement of income due to the assessee's failure.
Conclusion: The reassessment proceedings under section 147/148 are invalid; the notice of reopening and the impugned assessment order are quashed and the appeals and cross-objections are dismissed in favour of the assessee.
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