Reassessment beyond four years fails where examined software expenditure is revisited without fresh material or disclosure failure.

Reassessment initiated after four years requires recorded reasons based on tangible material and disclosure of the assessee's failure to fully and truly disclose material facts. Where software expenditure and supporting ledger details were specifically sought and furnished during the original scrutiny assessment, revisiting the profit and loss account to propose capitalisation, without fresh material or an alleged disclosure failure, amounts to an impermissible change of opinion. The notes state that the Section 148 notice and consequential reassessment were without jurisdiction, void from inception, and quashed.

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Issues: Whether reassessment initiated after four years from the end of the relevant assessment year was valid where the original scrutiny assessment had examined the software expenditure.

Analysis: Reopening of a completed scrutiny assessment requires reasons showing a belief, founded on tangible material, that income escaped assessment. Where notice is issued after four years, the first proviso to Section 147 additionally requires that the recorded reasons disclose the assessee's failure to make a full and true disclosure of material facts. The recorded reasons merely revisited the profit and loss account and proposed capitalisation of software expenditure, without identifying fresh tangible material or alleging such failure of disclosure. The software-expense details and ledger had also been specifically called for and furnished during the original assessment. Reassessment therefore rested on a change of opinion, which cannot be used as a review of the completed assessment.

Conclusion: The notice under Section 148 and the consequential reassessment proceedings were without jurisdiction, ab initio void, and quashed; this is in favour of the assessee.

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