2016 (8) TMI 272 - HC - Income Tax

Reopening of assessment - reasons to believe - information provided by DGIT (Investigation) Mumbai - Held that - Perusal of the reasons recorded show that the information was provided to the Assessing Officer by DGIT (Investigation) Mumbai, concerning dubious transactions of Rajendra Jain and Surendra Jain who were managing Sparsh Export Pvt. Ltd. These persons were subjected to search during which they had also made certain confessional statements. The assessee had made purchases of cut and polished diamonds worth ₹ 11.99 lacs from Sparsh Export Pvt. Ltd. On the basis of the information available at the command of the Assessing Officer, he noted that Rajendra Jain and Surendra Jain merely provided accommodation entries without actual sale of diamonds. The assessee had thereby claimed higher expenditure and reduced the profit. It cannot be stated that the Assessing Officer did not have tangible materials to form a belief that the income chargeable to tax had escaped assessment. Such information was not available during the original assessment. Obviously the assessee would not make such disclosures. The requirement for reopening of the assessment even beyond a period of four years are therefore, satisfied. Merely because such information was supplied to the Assessing Officer by the investigation wing of the department would not mean that the Assessing Officer cannot rely upon it after of course, perusing the same and form his own opinion on the basis of the same.

Issues:
1. Validity of notice for reopening assessment beyond the statutory period.
2. Disclosure of material facts by the assessee during original assessment.
3. Reopening assessment based on information regarding fake transactions and accommodation entries.
4. Reopening assessment based on loan of gold received by the assessee.

Analysis:

Issue 1: Validity of notice for reopening assessment beyond the statutory period
The petitioner challenged a notice seeking to reopen the assessment for the assessment year 2008-2009 beyond the four-year period. The Assessing Officer issued the notice based on information received post-original assessment. The petitioner argued that there was no failure to disclose material facts during the original assessment, making the notice unauthorized. However, the court held that the Assessing Officer had valid reasons to believe that income had escaped assessment due to the new information, justifying the reopening beyond the statutory period.

Issue 2: Disclosure of material facts by the assessee during original assessment
The Assessing Officer sought to reopen the assessment based on the assessee's alleged failure to fully disclose material facts during the original assessment. The petitioner contended that all relevant details were disclosed during scrutiny. The court noted that the assessee had provided detailed information regarding gold loans during the original assessment, which was part of the returns filed. As such, the court held that there was no failure to disclose material facts, rendering the reopening of assessment impermissible.

Issue 3: Reopening assessment based on information regarding fake transactions and accommodation entries
The Assessing Officer's decision to reopen the assessment was also based on information regarding fake transactions involving cut and polished diamonds. The information suggested that the assessee had engaged in fake transactions with entities providing accommodation entries without actual sales. The court found that the new information provided by the investigation wing post-original assessment justified the reopening, as the Assessing Officer had tangible materials to believe that income had escaped assessment.

Issue 4: Reopening assessment based on loan of gold received by the assessee
The second reason for reopening the assessment was the loan of gold received by the assessee from individuals lacking creditworthiness. The court observed that the Assessing Officer did not provide a credible source for this information and noted that the transaction was part of the original assessment. As the assessee had already disclosed details regarding the gold loans during scrutiny, the court deemed the reopening on this basis impermissible.

In conclusion, the court dismissed the petition, upholding the validity of the notice for reopening the assessment based on the new information regarding fake transactions and accommodation entries, while rejecting the reopening based on the gold loan transactions due to lack of new material facts.

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