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2025 (9) TMI 310
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.... 2019-20 under Section 139(1) of the Act. Thereafter a notice under Section 140A(1) of the Act was issued, whereby, it was alleged that the assessee had entered into some bogus transactions involving accommodation entries with M/s. Karthik Alloys Pvt. Ltd. during the Financial Year (FY) 2018-19 amounting to Rs. 88,86,000/-. 3. The assessee replied to the said notice asking for an opportunity of hearing be granted before drawing any adverse inference. Despite this request, the Assessment Officer (AO) failed to consider the submissions of the assessee and disposed of the same in a mechanical and cryptic manner, by merely relying upon some information received from the investigation wing of the respondents, without pointing out any discrepancy in its reply. 4. Mr. Ruchesh Sinha, learned counsel for the assessee, at the outset, submitted that with effect from 01.04.2021, the provisions of Sections 147, 148, 149 and 151 of the Act, as they stood on 31.03.2021, were obliterated and substituted by the Finance Act, 2021. A new Section 148A was also introduced in the statute, which provided the mechanism of triggering re-assessment proceedings. 5. Further, the Central Board of Dire....
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....It is not out of place to mention here that the information made available/data uploaded by the reporting entities may not be fully accurate due to inter alia, error of human nature technical nature, etc. Therefore, due verification may be carried out and opportunity of being heard be given to the taxpayer before initiating proceedings under section 148/147 of the Act. b. The Income Tax supervisory authorities are hereby advised to keep an effective supervision so Instructions/Guidelines/ Circulars/SOPs are duly followed by the Assessing Officers in their charge." 7. According to Mr. Sinha, these instructions/guidelines were issued by the CBDT to ensure that the reassessment proceedings are not initiated in a routine manner and the principles of natural justice are followed. 8. He further submitted that with effect from 1.09.2025, the earlier reassessment regime, which existed from 1.04.2021 to 31.08.2024, was amended. However, the essence of the new reassessment mechanism was retained and no substantial changes were made and only timelines for initiating the reassessment proceedings were amended. The essence of the above guidelines shall, therefore apply mutatis mut....
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....ceedings which existed from 01.04.2021 to 31.08.2024, would be applicable to the present proceedings also, which was modified w.e.f., 01.09.2024. It is trite law that CBDT circulars/ guidelines/ instructions are binding on the Revenue any action in contravention thereto should be considered void-ab-initio. In this regard, he has relied upon on the judgments of the Supreme Court in (a) Union of India v. Azadi Bachao Andolan[2003] 132 Taxman 373 (SC), (b) Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 (SC), (c) CWT v. Vasudeo V. Dempo[1992] 196 ITR 216 (SC) and (d) ITO - Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC) etc. 12. He stated that the manner in which the notice under Section 148A(1) of the Act and also the order under Section 148A(3) were passed makes it clear that the binding guidelines issued by the CBDT have not been followed. In fact, the entire basis for initiating the reassessment proceedings is only the alleged information received which does not in any way indicate any escapement of income on part of the assessee. 13. From a perusal of paragraph 5.2 of the impugned order, it becomes clear that the AO is based on the fact that M/s. Karthik Alloys Pv....
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....sel appearing for the respondent/Revenue, would submit that information available with the respondent under the Risk Management Strategy formulated by CBDT suggested that income chargeable to tax has escaped assessment in the case of the assessee during the relevant assessment year. On the basis of such information and verification of status of return of income filed by the assessee from e-filing portal, that it was found that the assessee has filed its return for AY 2019-20, declaring income at Rs. 40,90,533/-and the same was processed u/s 143(1) of the Act on 30.11.2019 at an income of Rs. 40,90,533/-. During the period, the assessee undertook above mentioned transactions amounting to Rs. 88,86,000/- 19. He stated that an investigation/enquiry was conducted by the CGST Kolkata, in the case of M/s Karthik Alloys Pvt. Ltd. and it was found that the said entity was engaged in providing fraudulent GST invoices for claiming exaggerated Input Tax Credit to other business entities having no existence at their declared place of business as well as places where the consignment were purportedly received. It was established that M/s Karthik Alloys Pvt. Ltd. is a paper entity with no fina....
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....d. 23. He submitted that the above information, would satisfy the requirement of the AO "having information which suggests that income chargeable to tax has escaped assessment in the case of an assessee" under Section 148A of the Act, for the purpose of reopening of assessment, 24. He has sought dismissal of the petition. 25. Having heard the learned counsel for the parties, the short issue that arises for consideration is whether the respondents were justified in issuing the notice dated 28.03.2025 under Section 148A(1) of the Act; order dated 28.06.2025 passed under Section 148A(3) of the Act; and notice dated 28.06.2025 under Section 148 of the Act, relatable to the AY 2019-20 and initiating the reassessment proceedings. 26. The submissions of the learned counsel for the petitioner are the following - (1) the impugned action taken by the respondents is not in conformity with the guidelines issued by the CBDT of which reference has been made in paragraph no. 5 above; (2) it is mandatory under the new reassessment mechanism to provide a fair opportunity to the assessee before initiating the reassessment proceedings; (3) the order of the AO is....
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....anies. The reply as well as supporting documents submitted by the assessee have been perused. Without being prejudiced to the documentary evidences by the assessee, the undersigned has certain points which remained unexplained and unsubstantiated. Further, assessee has relentlessly emphasized on the documentary evidences brought on record but it should not overlook that maintaining proper records/books of accounts simply does not rule out that there is no discrepancy in sales and purchase. Assessee has quoted the comments against the M/s Kathik Alloys Pvt Ltd in the information shared by CEIB, Department of revenue, which is written as "collecting GST but not depositing the same in the government exchequer and emphasized that if a party is collecting GST and not depositing the same with the government, it does not means that the transaction itself is bogus, but similarly from the same it also cannot be inferred that transaction were not bogus. 5.2 Assessee has submitted the copy of order in different cases passed by NCLT, Mumbai, Bench, in which M/s Karthik Alloys Pvt Ltd was second party, and the same are produced before the undersigned to substantiate that the M....
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....curred by the assessee i.e. M/s R. S. Alloys in the guise of purchases from M/s Karthik Alloys Pvt. Ltd., Unit-II (GSTIN:19AAACK7734Q1ZT) are non-genuine and unsubstantiated purchases." 29. The conclusion of the AO is that mere maintenance of the documents and books of accounts provided by the assessee does not mean that there are no discrepancies in the sales and purchases made by the assessee. He has laid stress on the fact that M/s. Karthik Alloys Pvt. Ltd. was a defaulter and debtor of huge payments towards a second party on account of non-payment against purchases. He also stated that these facts further weaken the stand of the assessee that M/s. Karthik Alloys Pvt. Ltd. has made genuine transactions with the assessee amounting to Rs. 88,86,000/-. In fact he has also noted that the order passed by the NCLAT, Mumbai Bench in the case of M/s. Karthik Alloys Pvt. Ltd. would also show that it was not in a position to make huge transactions and ultimately to run business and it only suggested that M/s. Karthik Alloys Pvt. Ltd. had financial crises during the relevant year under consideration. It was also noted that M/s. Karthik Alloys Pvt. Ltd. had filed return of income only fo....
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....nnexed herewith." If that be so, initiation of the reassessment proceedings cannot be faulted. 33. Another submission of Mr. Sinha is that the information sought to be relied upon by the respondent is not sufficient enough to reopen the assessment. We are unable to accept the submission for the simple reason that sufficiency of the material available with the AO to carry out reassessment is beyond the pale of judicial review. 34. At this juncture, we may refer to the judgment of this Court in Raghav Garg v. Income Tax Officer, Ward 35 (1) Delhi, WP(C) 10070/2024, on which much reliance was placed by Mr. Agrawal, wherein it was held as under: "8. As noted above, the principal allegation is that the petitioner had availed the accommodation entries from two above-named suppliers who were found to be non-existent by the investigation wing of the tax department. Clearly, the said information leads to the suggestion that the petitioner's income for the relevant Assessment Year escaped assessment. 9. Although, the petitioner had produced documents in support of its claim that the purchases were genuine, however, it had not produced any other material to establis....