Reassessment and limitation under income tax law: full disclosure of primary facts bars mere change of opinion and late notices.

Reassessment under the Income-tax Act requires either failure to disclose fully and truly all primary material facts, or valid information within the statutory period. Once the assessee has disclosed the facts necessary for computation of income, there is no duty to explain the inference to be drawn or to admit that account entries are false. Where cash credits were examined in the original assessment and confirmations were filed, a later reassessment based only on a fresh view of the same material amounts to a mere change of opinion and does not attract section 147(a). Notices issued beyond the four-year limit under the reassessment provision are barred by limitation and without jurisdiction.

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Issues: (i) Whether the assessee had failed to disclose fully and truly all material facts necessary for assessment so as to attract reassessment under section 147(a) of the Income-tax Act, 1961; (ii) Whether the notices issued under section 148 were within limitation under section 147(b) of the Income-tax Act, 1961.

Issue (i): Whether the assessee had failed to disclose fully and truly all material facts necessary for assessment so as to attract reassessment under section 147(a) of the Income-tax Act, 1961.

Analysis: The material facts required for assessment are the primary facts necessary for computation of income. Once those facts are fully and truly disclosed, the assessee is under no further obligation to tell the assessing authority what inference should be drawn or to declare that entries in the accounts are false. Here, the cash credits were specifically examined in the original assessment proceedings, details and confirmations were filed, and the Income-tax Officer expressed satisfaction that the loans were satisfactorily proved. The reassessment was therefore based on subsequent information and a fresh view of the same facts, not on any failure of disclosure by the assessee.

Conclusion: The assessee did not omit or fail to disclose fully and truly all material facts, and section 147(a) was not attracted.

Issue (ii): Whether the notices issued under section 148 were within limitation under section 147(b) of the Income-tax Act, 1961.

Analysis: Since the case fell under section 147(b), reassessment could be initiated only on the basis of information in possession of the Income-tax Officer, and the notice had to satisfy the four-year limitation applicable to that provision. The impugned notices were issued more than four years after the expiry of the relevant assessment years. A reassessment based merely on a change of opinion after the original scrutiny could not be sustained beyond that period.

Conclusion: The notices were barred by limitation, void, and without jurisdiction.

Final Conclusion: The reassessment notices could not be sustained, and the writ petitions succeeded with costs.

Ratio Decidendi: Reassessment cannot be initiated on a mere change of opinion where the assessee has fully and truly disclosed all primary facts, and a notice under the reassessment provision must also be issued within the prescribed limitation period.

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