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AMIT BROTHERS Versus INCOME TAX OFFICER - WARD - 2 (3) (7)

2016 (7) TMI 406 - GUJARAT HIGH COURT

Reopening of assessment - application of mind - recording of satisfaction - Held that:- We may recall that the return filed by the petitioner for the assessment year in question was accepted under Section 143(1) of the Act without scrutiny. In that view of the matter, the question of change of opinion would not arise since obviously the Assessing Officer had no occasion to form an opinion regarding any of the aspects of the petitioner's return. - On receipt of the imported consignments, the .....

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reasons, we do not find that he acted without proper application of mind. First part of the reasons 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, t .....

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llenged 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 Officer for re-opening the assessment came to be rejected. 2. The petitioner is a partnership firm and is engaged in the business of diamond trading. For the assessment year 2008-09, the petitioner had filed a return of income declaring t .....

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, Mumbai in the Bhawarlal Jain Group of cases on 03.10.2013, which resulted in collection of evidences and other findings, which conclusively proved that the said Shri Bhawarlal Jain and his son, Shri Rajesh Bhawarlal Jain had through a web of 70 benami concerns, run and operated by them in the names of their employees, provided accommodation entries to various parties in respect of bogus unsecured loans and bogus purchases. Various evidences including a pen drive, found and seized from the prem .....

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statement recorded u/s. 132(4) of the Income Tas Act, 1961 recorded at 16, Mohan Building, JSS Road, Girgaum, Mumbai-04, on 11.10.2013. It was also stated by the dummy partners/Directors/proprietors of the entities of this group that they are closely known and associated with Shri Bhawarlal Jain and that they belong to the native place of Shri Bhawarlal Jain and that they were made partners/Directors/proprietors of the entities of this group at the direction of Shri Bhawarlal Jain and his famil .....

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ities 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 r .....

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ted at (I) 16, Mohan building, JSS Road, Girgaum, Mumbai-04 and (ii) Plot No. 233, Ground floor, Navkar House, Vitthal Bhai Patel Road, Girgaum, Nr. Prarthna Samaj, V.P.Road, Mumbai 04. The statements of all the persons recorded during the course of search revealed that this group was engaged in giving accommodation entries and this fact has also been admitted by the employees, the dummy partners/dummy Directors/dummy proprietors of the entities of this group as also by Shri Bhawarlal Jain. 4. T .....

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h CHA, the consignment is handed over to the actual importer and the bogus stock is entered in the books of the benami entities and the same is not recorded in the books of the actual importer. These benami entities of Shri Bhawarlal Jain group thereafter issue bogus sale bills against the bogus stock. 5. From the details and evidences made available, it is seen that the following entities of Shri Bhawarlal Jain group have given accommodation entries of bogus purchases as under, during FY2007-08 .....

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r the year to that extent. There is no other prudent use of bogus purchase bill. In view of the above fact, 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 det .....

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tended 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 rejected the objections raised by the petitioner without proper application of mind and that, therefore, notice for re-opening should be quashed. 5. On the other hand, learned counsel Mr. Sudhir Mehta fo .....

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r Section 143(1) of the Act without scrutiny. In that view of the matter, the question of change of opinion would not arise since obviously the Assessing Officer had no occasion to form an opinion regarding any of the aspects of the petitioner's return. In this context, we may refer to the decision in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. reported in [2007] 291 ITR 500 (SC), in which, it was observed as under: 16. Section 147 authorises and per .....

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uld have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. .....

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y 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 person .....

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was that the consignments would be sent in the names of the benami entities but for the purpose of actual importers. On receipt of the imported consignments, the same would be handed over to the actual importer and the bogus stock would be entered in the books of benami entities and would not be recorded in the books of actual importer. It was noticed that bogus entries worth ₹ 26.30 lacs was provided to the petitioner by one M/s. Mahalaxmi Gems Pvt. Ltd, one of the Bhawarlal group of bogu .....

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he 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. 8. Coming to the question of dissatisfactory disposal of the objections by the Assessing Officer, counsel for the petitioner had vehemently conten .....

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