2026 (2) TMI 95 - HC - Income Tax

Reopening of assessment under section 147 over claimed bogus-invoice expenditure denied after ledger analysis and lack of opportunity to explain

Reopening of assessment under tax law was contested where alleged bogus invoices were claimed as expenditure; the ledger entries did not demonstrate ... Reopening of assessment u/s 147 - bogus invoices was claimed as expenditure - HELD THAT:- The amounts reflected in the ledger, we do not find that any income escaped assessment. On the contrary, the AO attempted to exhume the amount of Rs. 3,67,43,973/- as bogus purchase from the amount of Rs.14,07,06,100/-. The amount of Rs. 3,67,43,973/- was claimed as deduction not as part of bogus purchases, but on account of payment of Rs. 5,13,02,342/- made subsequent to the survey by DGGI. Even otherwise, the petitioner was never called upon by the AO to explain the alleged bogus claim of expenditure of Rs. 3,67,43,973/- as GST on bogus purchases. Hence, the impugned order and notice are required to be quashed and set aside. WP allowed. Issues: Whether the order passed under section 148A(3) of the Income-tax Act, 1961 and the consequent notice under section 148 of the Act for AY 2021-22 (challenging an alleged escapement of income of Rs. 3,67,43,973/- claimed as GST) are valid, having regard to the scope of the original show-cause notice under section 148A(1) and the ledger/assessment records showing write-off of amounts as bad debt and payment of GST/penalty.Analysis: The issue turns on whether the Assessing Officer (AO) correctly formed a belief that income had escaped assessment within the meaning of section 147 by treating Rs. 3,67,43,973/- as a claimed expenditure that escaped assessment, notwithstanding ledger entries, a certificate evidencing write-off of bad debts, earlier assessment under section 143(3) including scrutiny of purchases from non-filers, and payment of GST/penalty following the DGGI survey. The AO's show-cause notice under section 148A(1) alleged bogus purchases aggregating to a specified amount; the subsequent order under section 148A(3) bifurcated a larger advanced payment figure and treated a component as having been appropriated to GST and claimed as expenditure. Examination of the ledger, the computation of income showing addition of the bad-debt amount, and documentary evidence of GST payment/adjustment demonstrate that the AO travelled beyond the scope of the original show-cause material and altered the case without affording notice or opportunity to explain the specific new contention. Reopening on the same factual matrix after detailed scrutiny in the original assessment amounted to a change of opinion and lacked the requisite basis of escapement of income disclosed by the materials before the AO.Conclusion: The order under section 148A(3) and the notice under section 148 are invalid and are quashed; the writ petition is allowed in favour of the assessee and the impugned order and notice are set aside.