2026 (4) TMI 47 - AT - Income Tax

Reassessment beyond four years fails without a recorded allegation of full and true disclosure failure by the assessee.

Reassessment initiated beyond four years from the end of the relevant assessment year required a recorded allegation that the assessee failed to fully and ... Reopening of assessment beyond four years - Jurisdictional condition under first proviso to section 147 - reason to believe - recorded reasons alleging any failure by the assessee to fully and truly disclose all material facts necessary for assessment - information received from the Investigation Wing, Mumbai, that the assessee company had allegedly received accommodation entries HELD THAT: - The Tribunal held that where an original assessment had been completed u/s 143(3) and reopening was undertaken beyond four years, the statutory requirement was not merely the existence of tangible material but also a recorded finding in the reasons that escapement of income was attributable to the assessee's failure to make a full and true disclosure of material facts. The recorded reasons in the present case only referred to information received from the Investigation Wing regarding an alleged accommodation entry and did not contain any allegation of such failure. That omission went to the root of jurisdiction and could not be cured by general observations regarding tangible material or sufficiency of information. On that basis, the assumption of jurisdiction under section 147 was held to be bad, and the reassessment was quashed. [Paras 14, 15, 16] Final Conclusion: The Tribunal allowed the appeal and quashed the reassessment for want of valid jurisdiction, holding that the recorded reasons did not satisfy the mandatory condition for reopening beyond four years. The grounds on merits were not adjudicated and were left open. Issues: Whether reassessment initiated beyond four years from the end of the relevant assessment year was valid when the recorded reasons did not allege any failure by the assessee to fully and truly disclose all material facts necessary for assessment.Analysis: The reassessment was initiated after the expiry of four years from the end of the assessment year. In such a case, the first proviso to Section 147 of the Income-tax Act, 1961 requires not only tangible material for reopening but also a recorded allegation that the assessee failed to fully and truly disclose all material facts necessary for assessment. The reasons recorded for reopening referred only to information from the Investigation Wing and did not state any such failure on the part of the assessee. The absence of this jurisdictional requirement in the recorded reasons went to the root of the validity of the reopening.Conclusion: The reopening was invalid and the reassessment order was quashed for want of valid assumption of jurisdiction.Ratio Decidendi: Where reassessment is initiated beyond four years from the end of the relevant assessment year, the recorded reasons must expressly disclose failure by the assessee to fully and truly disclose all material facts necessary for assessment; in the absence of such a jurisdictional allegation, the reopening is void.