“first proviso to section 147”
The decision most relied on for first proviso to section 147 is Hindustan Lever Ltd. v. R.B. Wadkar (268 ITR 332), cited in 695 judgments on BharatTax.
Leading authorities on first proviso to section 147
The validity of reassessment proceedings initiated under Section 147, by issuing a notice under Section 148, must be judged solely on the reasons originally recorded by the Assessing Officer. These recorded reasons cannot be supplemented, improved upon, or modified at any later stage.
A valid reassessment under Section 147 requires concrete 'reasons to believe' that income has escaped assessment, not mere suspicion or a desire to conduct fishing and roving enquiries. If the first proviso to Section 147 applies, there must be a specific finding of the assessee's failure to disclose material facts, not just a mere charge of bogus expenses.
For assessments under Section 153C, the commencement point for calculating the six or ten assessment year block period is the date of issuing the Section 153C notice, or the date of the satisfaction note/handing over of books, as clarified by the first proviso to Section 153C(1).
A mere charge of bogus expenses, without a specific finding that the assessee failed to disclose material facts, is insufficient to justify reassessment beyond four years under the first proviso to Section 147. Courts can examine the materiality and relevance of facts forming the 'reason to believe' for initiating reassessment, ensuring it is based on reasonable grounds.
Reassessment initiated under Section 147/148 is invalid if the Assessing Officer relies on material obtained post-recording of reasons, or if it amounts to a mere change of opinion on facts fully and truly disclosed by the assessee during the original assessment. An assessee's obligation extends only to the full and true disclosure of primary facts, not to provide further assistance or inferences.
Reassessment proceedings initiated beyond four years from the end of the relevant assessment year are not justified when the assessee has made a full and true disclosure of all material facts, supported by statutory and tax audit reports, even if a different view could be taken on the valuation of closing stock. Such reopening constitutes a mere change of opinion.
An assessment cannot be reopened under Section 147 after four years if the assessee has made a full and true disclosure of all material facts, even if a claim made was later found incorrect, and the reasons recorded do not specify a failure to disclose.
Failure to fully and truly disclose material facts, for the purpose of reassessment beyond four years, extends beyond the income tax return to omissions during assessment proceedings. Mere disclosure of a transaction does not constitute true and full disclosure if underlying material facts are withheld.