Diamond purchase invoices alleged as accommodation entries based on search statements; reassessment reopening beyond four years upheld.

Reopening of assessment beyond four years was challenged on the ground that the AO lacked "reasons to believe" and acted only on investigation input. The HC held that the AO had tangible material in the form of specific information from the DGIT (Inv.) regarding search-based statements indicating the supplier was an accommodation-entry provider and that the assessee's diamond purchases were not genuine, enabling inflation of expenditure and suppression of profit. As this material was not available at the time of the original assessment and the AO independently applied his mind to it, the statutory preconditions for reassessment were satisfied. The reopening notice was upheld.

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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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