Reopening beyond four years needs recorded failure to disclose all material facts; unregistered partnership deed did not defeat remuneration claim.

Reopening of assessment beyond four years was held invalid because the recorded reasons did not expressly allege that the assessee failed to disclose fully and truly all material facts, a jurisdictional requirement under the first proviso to Section 147; the notice under Section 148 was therefore quashed. Disallowance of partner remuneration was also found unsustainable because the partnership deed was in writing and specified the partners' shares, satisfying Section 184, and registration of the deed with any external authority was not a statutory condition for recognition of the firm. The assessment and consequential proceedings were annulled.

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Issues: Whether the reopening of assessment beyond four years was valid in the absence of any recorded failure by the assessee to disclose fully and truly all material facts; and whether disallowance of partner remuneration on the ground that the partnership deed was not registered with any authority could be sustained.

Issue (i): Whether the reopening of assessment beyond four years was valid in the absence of any recorded failure by the assessee to disclose fully and truly all material facts.

Analysis: The reasons recorded for reopening did not state that the assessee had failed to disclose fully and truly all material facts necessary for assessment. For a reopening made after the expiry of four years from the end of the relevant assessment year, the first proviso to Section 147 of the Income-tax Act, 1961 requires such failure to be specifically alleged and supported in the recorded reasons. In the absence of any such allegation or whisper in the reasons, the jurisdictional condition for reassessment was not satisfied.

Conclusion: The reopening under Section 147 and the notice under Section 148 of the Income-tax Act, 1961 were invalid and were quashed.

Issue (ii): Whether disallowance of partner remuneration on the ground that the partnership deed was not registered with any authority could be sustained.

Analysis: The partnership deed was in writing and specified the individual shares of the partners, thereby meeting the requirements of Section 184 of the Income-tax Act, 1961. Registration of the partnership deed with any authority was not a condition imposed by the Income-tax Act for recognition of the firm. The proposed disallowance founded on absence of such registration could not therefore be upheld.

Conclusion: The disallowance of partner remuneration was unsustainable.

Final Conclusion: The assessment and all consequential proceedings were annulled, and the appeal was allowed on both grounds.

Ratio Decidendi: For reassessment beyond four years, the recorded reasons must expressly show failure by the assessee to disclose fully and truly all material facts; absent such recording, reassessment is barred, and non-registration of a partnership deed with an external authority does not defeat compliance with Section 184 of the Income-tax Act, 1961.

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