TaxTMI 
TaxTMI 
2025 (10) TMI 806
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....well as the consequential notice dated 30.06.2025 issued under Section 148 and all the consequent proceedings based thereon all of which are illegal, void ab initio, and in violation of the principles of natural justice. (II) Pass such other order or orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case." 4. It is the submission of learned counsel for petitioner that the petitioner is a company incorporated under the Companies Act, 2013, registered with the Reserve Bank of India as a Non-Banking Financial Company (NBFC) and is engaged in lawful business of inter-corporate financial arrangements advancing and receiving loans and deposits in the ordinary course of business. For the Assessment Year 2021-22, the petitioner filed its Income Tax Return, which stood accepted under Section 143(1) of the Income Tax Act, 1961 (the Act). 5. Mr. Ashish Garg states, the petitioner never had any transaction directly or indirectly with M/s. Ashutosh Traders, the entity alleged to be involved in GST invoice fraud. The limited dealings were with M/s. ITJ Retails Pvt. Ltd., which are purely in the nature of financial transactions, which are du....
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....been passed under Section 148A(3) of the Act and also notice issued under Section 148 of the Act are liable to be set aside. 11. On the other hand, Mr. Apoorv Aggarwal appearing for the respondents by drawing our attention to the order passed under Section 148A(3) of the Act states that the same is a detailed order referring to each of the contention raised by the petitioner in its replies. 12. Mr. Aggarwal submits that the challenge in this Writ Petition is primarily on the merits of the action initiated by the respondents against the petitioner and this court would not substitute itself as an Assessing Officer and look at the same and decide the issue in writ petition. In any case, all pleas available to petitioner can be urged before the Assessing Officer. 13. Having heard the counsel for the parties and also perused the order, which has been passed under Section 148A(3) of the Act, we are of the view that order is a speaking one considering all the pleas advanced by the petitioner and as such this court cannot interfere with the impugned action at this stage. The order reads as under : "The submission of the assessee has been duly considered. Upon perusal of t....
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....: i. Direct Contradiction Exposed: The bank statement evidence directly and same, it was found lacking in substantial documentation. As an NBFC, the assessee is mandatorily required under RBI guidelines and the Companies Act, 2013, to maintain proper documentation for intercorporate lending, including board resolutions under Section 179, loan registers, KYC documentation, interest rates, and tenure details. The complete absence of such documentation in assessee's submission is noted. The admission that transactions worth Rs. 6.75 crores were conducted based on "mutual understanding" without formal agreements demonstrates a complete absence of due diligence that any legitimate NBFC would undertake before advancing funds. 5. INDEPENDENT VERIFICATION UNDER SECTION 133(6) - THE DECISIVE EVIDENCE A. Decision to Conduct Independent Inquiry To eliminate any possibility of the proceedings being challenged on grounds of "borrowed satisfaction" and to independently verify the facts, a notice under Section 133(6) of the Income Tax Act was issued to M/s ITJ Retails Private Limited on 13.06.2025, specifically seeking their complete bank statements for Fin....
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....ut its genuine capacity as a creditor. 2. Creditworthiness of the Creditor: No evidence has been provided to establish ITJ Retails' financial capacity to advance Ra.4.90 crores, particularly in light of its involvement with accommodation entry providers. 3. Genuineness of the Transaction: The absence of formal agreements, interest charges, due diligence, and the proven false statement by ITJ Retails severely compromise the genuineness of these transactions. The Supreme Court in Sumati Dayal v. CIT (1995) 214 ITR 801 held that where an assessee fails to satisfactorily explain the source of credits despite opportunity, such credit are rightly treated as unexplained and added to income. "It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may ....
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....he Assessing Officer has not applied independent mind and has merely adopted Investigation Wing findings. Response: This objection has been completely neutralized by the independent actions taken by the undersigned: * Specific queries were railed seeking detailed information about the impugned transactions * Independent notice under Section 133(6) was issued to ITJ Retails * Personal examination and verification of bank statement and ledger accounts was conducted * Comparative analysis of conflicting statements was undertaken * Independent application of mind is evident from the detailed analysis and specific findings C. "No Specific Nexus" Assessee's Argument: There is no direct connection between the assessee and M/s Ashutosh Traders. Response: This arguments misconceives the nature of accommodation entry schemes. The nexus has been established through the following chain: * M/s Ashutosh Traders provided accommodation entries and received GST refunds * Rs.18.92 lakhs was transferred from Ashutosh Traders to ITJ Retails (proven through bank statements) * ITJ Retails thereafter advanc....
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.... chargeable to tax has escaped assessment. 10. It is in accordance with the judicial principles laid down by the Hon'ble Supreme Court in the case of in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC) [BCAJ]- wherein issuance of notice u/s 148 has been validated under similar circumstances; "As per our considered view, at the time of issue of notice, it is sufficient that prima-facie reasons and material should be with Assessing Officer that there is escapement of some income. At the time of issue of notice the Assessing Officer is not required to conclusively establish that there is escapement of income is sufficient for issue of notice u/s 148." 11. It is also pertinent to mention that in the case of CVT v Nova Promoters & Finlease (P) Ltd. (ITA No. 342 of 2011) dated 15.02.2012, the Hon'ble Delhi High Court, which is the jurisdictional High Court, held that as long as there is a 'live link' between the material which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held: "We are aware of the legal position that a....
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.... of opinion must be honest and bona fide. It cannot be merely pretence. Consideration of any extraneous or irrelevant material would vitiate the belief/satisfaction. 40.3. The authority must have information in its possession on the basis of which a reasonable belief can be founded that the person concerned has omitted or failed to produce books of accounts or other documents for production of which summons or notice had been issued, or such person will not produce such books of accounts or other documents even if summons or notice is issued to him. 40.4. Such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed. 40.5. Such reasons may have to be placed before the High Court in the event of a challenge to formation of the belief of the competent authority in which event the Court would be entitled to examine the reasons for the formation of the belief, though not the sufficiency or adequacy thereof. In other words, the Court will examine whether the reasons recorded are actuated by mala fides or on a mere pretence and that....