Reassessment u/s 148 quashed; bogus purchase addition u/s 69C r/w 115BBE deleted for lack of evidence

ITAT Ahmedabad (AT) allowed the assessee's appeal, quashing the reassessment initiated u/s 148 and deleting the addition made u/s 69C r/w s.115BBE. The Tribunal held that the AO acted solely on general information alleging that a third party was an accommodation-entry provider, without any specific, cogent material linking the assessee's transactions to bogus entries. As the assessee had produced invoices, stock registers, delivery challans and bank statements evidencing genuine sales, and the Revenue conducted no independent enquiry to rebut these, the reopening was based on mere suspicion and constituted a change of opinion on an already examined issue, rendering it invalid in law.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reassessment proceedings initiated under Sections 147 and 148A, based on general information that the counter-party was an alleged accommodation entry provider, were valid in law in the absence of specific tangible material indicating escapement of income in the assessee's case.

1.2 Whether reopening on an issue already examined in the original assessment, without any fresh material, amounted to a mere change of opinion and was therefore impermissible.

1.3 Whether the addition under Section 69C read with Section 115BBE, treating the impugned transaction as bogus, was sustainable in view of the evidentiary material produced by the assessee and the absence of independent enquiry by the Assessing Officer.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of reassessment under Sections 147/148A; existence of "information suggesting escapement of income"; change of opinion

Legal framework (as discussed)

2.1 The Tribunal referred to the statutory requirement that reassessment under Section 147 must be founded on "information suggesting that income chargeable to tax has escaped assessment", as contemplated in Section 148 and Explanation (1)(i) thereto, and to the necessity of tangible material forming the basis of such belief. It noted that reopening post 01.04.2021 was also stated by the Assessing Officer to be based on information flagged on the Insight Portal in accordance with the risk management strategy of the Board.

Interpretation and reasoning

2.2 The Tribunal examined the contents of the notice issued under Section 148A(b), which recorded that: (i) information from a "reliable source" indicated a high value transaction with one Shri Kirit Dayalal/Dahyabhai Patel; (ii) the bank account of said person was flagged in a Suspicion Transaction Report and found "adverse" and used for "providing bogus entries"; and (iii) on that basis, the assessee's transaction of Rs. 25,00,059/- through him was treated as non-genuine and as having escaped assessment.

2.3 The Tribunal held that the Assessing Officer had proceeded only on the general allegation that Shri Kirit Dahyabhai Patel was an accommodation entry provider, without bringing any specific, cogent material to demonstrate that the particular transaction recorded in the assessee's books was actually bogus or represented escapement of income in the assessee's hands.

2.4 It was noted that the assessee had duly recorded the transaction in its books, disclosed it in the audited financial statements, and the same had already been the subject matter of examination in the original assessment under Section 143(3). The reassessment thus targeted an issue previously scrutinized.

2.5 The Tribunal accepted the contention that, in the absence of any fresh tangible material linking the alleged bogus nature of the counterparties' activities to the assessee's specific transaction, the reopening constituted a mere change of opinion on a matter already considered in the original assessment, which is impermissible in law.

Conclusions

2.6 The Tribunal concluded that the reopening under Section 147/148A was based merely on suspicion and generalized third-party information, without any specific tangible material demonstrating escapement of income in the assessee's case.

2.7 Once the relevant transaction had been examined in the original assessment proceedings, the absence of new material rendered the reassessment a mere change of opinion, which is not legally sustainable.

2.8 Accordingly, the reassessment initiated under Section 148 and the consequent proceedings were held to be invalid and could not be upheld.

Issue 3: Sustainability of addition under Section 69C read with Section 115BBE on alleged bogus transaction

Interpretation and reasoning

3.1 The Tribunal noted that the addition of Rs. 25,00,059/- was made under Section 69C read with Section 115BBE on the premise that the transaction with Bhavani Enterprise (proprietary concern of Shri Kirit D. Patel) was non-genuine, on the sole basis of the general allegation against the said individual as an accommodation entry provider.

3.2 The assessee had produced documentary evidences including invoices, delivery challans, stock records, sales register entries, and bank statements evidencing that the transaction was for sale of goods and that the consideration was received through proper banking channels.

3.3 The Tribunal recorded that the Revenue did not rebut these documents with any contrary material, nor did the Assessing Officer conduct any independent enquiry to demonstrate that the goods were not actually traded or that the transaction was sham.

3.4 On these facts, the Tribunal held that the mere inclusion of the counterparties' accounts in a Suspicion Transaction Report or their general characterization as accommodation entry providers, without specific adverse material against the assessee's own transaction, was insufficient to justify treating the transaction as bogus or to invoke Section 69C.

Conclusions

3.5 In the absence of independent enquiry and in view of the uncontroverted documentary evidence produced by the assessee, the Tribunal held that the onus placed on the assessee stood discharged and the Revenue had failed to establish that the transaction was non-genuine.

3.6 Consequently, the addition of Rs. 25,00,059/- made under Section 69C read with Section 115BBE was held to be unsustainable and was directed to be deleted.

3.7 As a result, the appeal was allowed and the impugned addition stood cancelled.

---