Reassessment beyond four years needs a proven disclosure failure; share capital cannot be added under section 68 on premium alone.

Reassessment beyond four years is barred where the recorded reasons do not show any failure by the assessee to fully and truly disclose all material facts necessary for assessment; reopening on the basis of the same material already on record is invalid. Share capital and share premium received from a non-resident company and a SEBI-registered venture capital fund cannot be added under section 68 when the assessee produces evidence establishing identity, creditworthiness and genuineness, and no further source-of-source inquiry is required for such investors in the relevant year. High premium alone does not justify an addition where the surrounding evidence supports the credit.

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Issues: (i) Whether reassessment initiated after four years from the end of the relevant assessment year was valid when there was no failure by the assessee to disclose fully and truly all material facts. (ii) Whether the share capital and share premium received from a non-resident company and a SEBI-registered venture capital fund could be added under section 68.

Issue (i): Whether reassessment initiated after four years from the end of the relevant assessment year was valid when there was no failure by the assessee to disclose fully and truly all material facts.

Analysis: The original assessment had been completed under section 143(3), and the reasons for reopening were founded on the same material already available in the assessment records, including the audited financial statements and disclosed share premium entries. No fresh external material or specific omission by the assessee was identified in the recorded reasons. In the absence of any disclosed failure to fully and truly disclose material facts necessary for assessment, the first proviso to section 147 barred reopening beyond four years.

Conclusion: The reassessment was invalid and the assessee succeeded on this issue.

Issue (ii): Whether the share capital and share premium received from a non-resident company and a SEBI-registered venture capital fund could be added under section 68.

Analysis: The assessee furnished incorporation details, tax residency and income-tax records, confirmations, bank statements, audited financials, share certificates, board resolutions and foreign remittance documents for the non-resident investor, and registration, financial statements, confirmations and banking records for the venture capital fund. The Tribunal held that the assessee discharged the primary burden of proving identity, creditworthiness and genuineness. It further held that, for the year under consideration, there was no requirement to explain the source of source for these categories of investors, and that the high premium by itself did not justify an addition under section 68. The contemporaneous acceptance of the same premium in other years also supported the assessee's case.

Conclusion: The addition under section 68 was deleted and the Revenue's challenge failed.

Final Conclusion: The reassessment was quashed and the addition for share capital and share premium was deleted, leaving the assessee with substantial relief and no sustained addition on merits.

Ratio Decidendi: Reassessment beyond four years requires a recorded and demonstrable failure by the assessee to disclose fully and truly all material facts, and a share-capital credit is not taxable under section 68 where the assessee proves identity, creditworthiness and genuineness through cogent evidence, without any further source-of-source burden for the relevant year and class of investors.

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