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 escaped income, and the assessing officer attempted to segregate a claimed deduction from total purchases. The challenged sum was claimed as a post-survey payment and the taxpayer was not given an opportunity to explain the alleged bogus GST-related expenditure. For these reasons the impugned reopening notice and consequential order were quashed and the writ petition allowed.

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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.

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