Reassessment: Sections 147 and 148 of Income-tax Act, 1961: A.Y. 1997-98: Notice u/s.148 issued without recording in the reasons that there was failure on the part of the assessee to disclose fully and truly all material facts: Notice not valid.

For the A.Y. 1997-98, the assessment was completed u/s.143(3) of the Income-tax Act, 1961 on 29-12-1999. Thereafter, on 18-3-2004 (beyond the period of 4 years), the Assessing Officer issued notice u/s.148 for reopening the assessment.

The assessee challenged the notice by filing a writ petition. The Bombay High Court allowed the petition and held as under: “

(i) Having regard to the purpose of section 147, the power conferred by section 147 does not provide a fresh opportunity to the Assessing Officer to correct an incorrect assessment made earlier unless the mistake in the assessment so made is the result of the failure of the assessee to fully and truly disclose all material facts, it is not open for the Assessing Officer to reopen the assessment on the ground that there is a mistake in assessment.

(ii) Moreover, it is necessary for the Assessing Officer to first observe whether there is a failure to disclose fully and truly all material facts necessary for assessment and having observed that there is such a failure to proceed u/s.147. It must follow that where the Assessing Officer does not record such a failure he would not be entitled to proceed u/s.147.

(iii) The Assessing Officer has not recorded the failure on the part of the petitioner to fully and truly to disclose all material facts necessary for the A.Y. 1997-98. What is recorded is that the petitioner has wrongly claimed certain deductions which he was not entitled to. There is a well-known difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts. It is only in the latter case that the Assessing Officer would be entitled to proceed u/s.147.

(iv) In the circumstances, the impugned notice is not sustainable and is liable to be quashed and set aside.”