Reassessment under section 147(a) requires true non-disclosure by the assessee, not an assessing officer's own error.

Reopening under section 147(a) requires escaped income to arise from the assessee's failure to disclose fully and truly all material facts. Where excess depreciation resulted partly from the assessing officer's own failure to apply the correct method, the jurisdictional condition for reassessment was not met, so reopening on that basis was invalid. The same principle applied to the balancing charge under section 41(2): the relevant facts were already on record, and any short assessment stemmed from the department's earlier method of taxation rather than non-disclosure by the assessee. The reassessment notices were therefore quashed.

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Issues: (i) Whether reassessment notices under section 147(a) were valid on the ground that the assessee had failed to disclose fully and truly all material facts regarding initial depreciation, resulting in excess depreciation allowance; (ii) Whether reassessment could be sustained on the ground that income had escaped assessment in relation to balancing charge under section 41(2) because only one-half of the sale proceeds of machinery had earlier been taxed.

Issue (i): Whether reassessment notices under section 147(a) were valid on the ground that the assessee had failed to disclose fully and truly all material facts regarding initial depreciation, resulting in excess depreciation allowance.

Analysis: For action under section 147(a), the officer must have reason to believe both that income escaped assessment and that such escapement occurred by reason of the assessee's omission or failure to disclose fully and truly all material facts. Although the assessee had not disclosed the earlier grant of initial depreciation, the excess depreciation arose also because the Income-tax Officer did not take into account the past allowances and the original cost as required while computing written down value. Since the escapement was attributable to the combined effect of the assessee's omission and the officer's own failure to apply the correct method, the statutory condition was not satisfied.

Conclusion: The reassessment could not be sustained on this ground and the notices were invalid.

Issue (ii): Whether reassessment could be sustained on the ground that income had escaped assessment in relation to balancing charge under section 41(2) because only one-half of the sale proceeds of machinery had earlier been taxed.

Analysis: The material facts relating to sale proceeds and written down values were already on record. The earlier practice of taxing only one-half of the sale proceeds was followed by the department itself, and a later change in the manner of applying section 41(2) could not be treated as escapement caused by any omission or failure by the assessee. The alleged short taxation was therefore not referable to non-disclosure by the assessee.

Conclusion: The reassessment could not be sustained on this ground and the notices were invalid.

Final Conclusion: The jurisdictional requirements for reopening under section 147(a) were not met, and the impugned reassessment notices were quashed.

Ratio Decidendi: Reassessment under section 147(a) is permissible only when escaped income is attributable to the assessee's failure to make a full and true disclosure of all material facts, and not where the escapement also results from the assessing officer's own failure to correctly apply the law or to verify the record.

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