Reassessment after four years is impermissible absent failure to fully and truly disclose all material facts.

The petitioner, a company engaged in yarn processing, filed its return for A.Y. 2012-13 on 28.09.2012.

The case underwent scrutiny assessment under Section 143(3) of the Income Tax Act, 1961, during which the petitioner provided audited financial statements and notes explaining a change in depreciation methodology from the Straight Line Method (SLM) to the Written Down Value (WDV) method.

An assessment order was passed on 20.03.2015.

On 27.03.2019—after the expiry of four years from the end of the relevant assessment year—the Revenue issued a notice under Section 148 to reopen the assessment, alleging escapement of income due to the depreciation claim.

The petitioner’s objections were rejected on 16.10.2019, leading to this writ petition.

1. Whether the respondent was justified in reopening the assessment under Section 147 after a period of four years when the assessee had disclosed the change in depreciation method during original scrutiny proceedings.

2. Whether the "failure to disclose fully and truly all material facts" condition under the proviso to Section 147 was satisfied by the Revenue.

The court applied the First Proviso to Section 147 of the Income Tax Act, 1961, which stipulates that where an assessment has been completed under Section 143(3), no action shall be taken for reopening after four years unless the income chargeable to tax has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts necessary for assessment.

The court also considered Explanation 1 to Section 147, noting that mere production of account books does not necessarily constitute disclosure if the material facts are hidden; however, this is balanced against the principle that once material is disclosed, the Assessing Officer must draw the correct legal inference.

Precedential support was drawn from Mihir Textiles Limited v. Joint Commissioner of Income Tax.

The court found that during the original scrutiny assessment, the petitioner had explicitly disclosed the change in depreciation policy in its "Notes on financial statements" and accounting policies.

Specifically, the petitioner noted the transition from SLM to WDV and the resulting arrear of depreciation amounting to Rs. 1,70,46,944/-.

The court reasoned that since this information was available to the Assessing Officer (AO) during the 143(3) proceedings, the AO had the opportunity to verify and deliberate upon it before passing the original order.

The Revenue failed to demonstrate any "tangible material" or new information that was suppressed by the petitioner; rather, the Revenue attempted to re-examine the same facts already on record.

Consequently, the mandatory condition precedent for reopening after four years—a failure to disclose material facts—was not met.

The court found no failure on the part of the petitioner to disclose material facts.

Accordingly, the Court quashed the Section 148 notice dated 27.03.2019 and the order disposing of objections dated 16.10.2019, allowing the writ petition.