HC dismisses challenge to section 144B assessment over disallowed commission payments and bullion purchase expenses

The HC dismissed the petitioner's challenge to assessment u/s 144B involving disallowance of commission payments to foreign companies and local agents, plus expenses for bullion purchases. The petitioner, incorporated in 2019, made substantial bullion/jewelry purchases from three dealers, including from a company under liquidation through NCLT auction. The AO rejected the petitioner's explanations due to lack of clarity in documentation, failure to provide GST returns in Form GST 2A, and inadequate explanation of commission payments. The HC found disputed questions of fact unsuitable for summary proceedings under Article 226, upholding the assessment order.

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Issues Involved:
1. Disallowance of commission paid to foreign company and local agents.
2. Disallowance of expenses incurred on purchase of bullion.
3. Procedural compliance and evidence submission by the petitioner.
4. Validity of the assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961.
5. Validity of the penalty order under Section 270A of the Income Tax Act, 1961.

Summary:

Disallowance of Commission Paid to Foreign Company and Local Agents:
The petitioner challenged the disallowance of commission payments to AY Palace DMCC and local agents due to lack of documentary proof of services rendered. The assessing officer noted the absence of contra-confirmation from customers and specific details of services provided, leading to the addition of Rs.3,20,77,873/- and Rs.81,00,000/- to the income of the petitioner and initiation of penalty proceedings under Section 270A(8) of the Income Tax Act, 1961.

Disallowance of Expenses Incurred on Purchase of Bullion:
The petitioner contested the disallowance of Rs.234,15,30,188/- claimed as expenditure on purchases from Shiv Sahai & Sons (India) Pvt. Ltd., Diamond India Limited, and Surana Corporation Ltd. The assessing officer found insufficient proof of movement of goods, such as e-way bills and LR receipts, and noted discrepancies in the invoices and lack of bank statements to verify payments. The petitioner argued that e-way bills and LR receipts were not required for gold bullion under GST rules, which the assessing officer did not accept.

Procedural Compliance and Evidence Submission by the Petitioner:
The petitioner responded to various notices under Sections 143(2) and 142(1) but allegedly failed to provide complete information, including e-way bills, lorry receipts, and confirmation from sellers. The petitioner argued that it was not required to furnish such documents under GST exemptions and that the department could obtain necessary information from the sellers' jurisdictions.

Validity of the Assessment Order:
The court found that the petitioner did not furnish GST returns in Form GST 2A and other necessary documents to substantiate the transactions. The court also noted that the issues raised involved disputed questions of fact, which were not suitable for adjudication under Article 226 of the Constitution of India.

Validity of the Penalty Order:
The penalty order under Section 270A of the Income Tax Act, 1961, was challenged as it flowed from the impugned assessment order. The court upheld the assessment order, leading to the dismissal of the penalty order challenge.

Conclusion:
The court dismissed both writ petitions, upholding the assessment and penalty orders. However, the petitioner was granted liberty to file statutory appeals before the Appellate Authority within six months. No costs were awarded, and connected miscellaneous petitions were closed.

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