TMI Blog2016 (7) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... asons recorded in paras 1 to 3 give background of various activities carried on by Bhawarlal group of persons as revealed during search and seizure operation carried out by the investigation wing of the department. Contents of paras 4 to 6 of the reasons refer specifically to the petitioner and are in the nature of the Assessing Officer's observation on the basis of materials supplied to him. This is, therefore, neither a case of issuance of notice without application of mind nor a case of recording of reasons through borrowed satisfaction of another authority or wing of the department. - Decided against assessee. - SPECIAL CIVIL APPLICATION NO. 1937 of 2016 - - - Dated:- 4-7-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR MANISH J SHAH, ADVOCATE FOR THE RESPNDENT : MR SUDHIR M MEHTA, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged a notice dated 13.03.2015 seeking to re-open the assessment of the petitioner for the assessment year 2008-09. The petitioner has also challenged an order dated 08.12.20015, by which, the petitioner's objections to the notice issued by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his group that they were merely employees of Shri Bhawarlal Jain and his family and that they were looking after miscellaneous office work like depositing cheques in banks, handing over parcels to clients, making data entry etc. On being asked about various aspects of the business of this group, the dummy partners/Directors/proprietors of the entities of this group,they expressed their ignorance and stated that they are not involved in any such activities and that they are paid lump sum salary in cash. During the course of search, blank cheque books signed by the dummy partners/Directors/proprietors of the entities of this group were also found, which were sized. Similarly, books of account in the name of the dummy partners/Directors/proprietors of the entities of this group were also found, which were also seized. 3. According to the regular books of accounts and returns of income filed by different entities of the group, the business of these entities are disclosed to be trading of rough and finished diamonds and manufacturing of diamond jewellery. However, no stock of diamond was found from any of the premises searched or surveyed. It was also seen that no books of account we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have a reason to believe that there is escapement of income to the tune of ₹ 26,03,997/- in hands of the Assessee for the year under consideration, within the meaning of section 147 of the Act I am satisfied that the case of the assessee is a fit case for action u/s 147 of the Act and issue of notice u/s. 148 of the I.T.Act. 3. Upon receipt of the reasons, the petitioner raised detailed objections under communication dated 17.09.2015. Alongwith such objections, the petitioner produced several documents primarily contending that the purchases of diamond were genuine and the allegation of bogus entries cannot be accepted. The Assessing Officer disposed of such objections by impugned order dated 08.12.2015. At this stage, the petitioner approached the High Court in the present petition. 4. Learned counsel Mr. J.P.Shah for the petitioner raised two contentions. He firstly contended that, the Assessing Officer has mechanically recorded the reasons borrowing the opinion of the investigation wing and without independently arriving at a belief that the income of the petitioner chargeable to tax has escaped assessment. His second contention was that the Assessing Officer rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)] ; Raymond Woollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 7. With this background, we may peruse the reasons recorded by the Assessing Officer. In such reasons, he referred to the materials collected by the investigation wing of the Income Tax Department in case of Bhawarlal Jain and his associates which prima facie suggested that the said persons were operating through several benami concerns, through which, accommodation entries of bogus loans and bogus purchases were being provided. Extensive search led to revelation of number of such instances involving several entities. With respect to the petitioner, it was found that with the aid of Bhawarlal and other family members, the assessee had indulged in imports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voluminous evidence to establish that the purchases of the diamonds, referred to in the reasons recorded by the Assessing Officer, were genuine. (ii) Copies of documents of imports by the importer and other such documents were supplied by the importer to the Assessing Officer without examining these documents. According to the counsel for the petitioner, he simply brushed aside the objections of the petitioner. (iii) Whether these documents establish genuine imports by the parties who claimed to have so imported or whether there were mere accommodation entries supplied by the Bhawarlal Jain group of persons are the issues which need to be gone into at the time of the assessment. In an intricate web of complex creation of benami front bogus entries and fictitious importers, it would neither be possible nor necessary for the Assessing Officer to go into the genuineness of such transaction at the stage of considering the assessee's objections that too on a mere statement filed by the assessee. Particularly, in a case, where the original assessment was accepted without scrutiny the Assessing Officer must have a full innings and power to scrutinize these purchases during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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