TaxTMI 
TaxTMI 
2025 (12) TMI 300
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....t Year (AY) 2017-18. FACTS: 4. The petitioner is a Company incorporated under the Companies Act, 1956, the majority shareholders of which are citizens of India. The petitioner, during the year under consideration, was engaged in the business of trading in textile fabrics and made certain purchases from Ruchita Chemicals LLP in the normal course of business and made various payments against such purchases to the said party. The closing credit balance of Ruchita Chemicals LLP was Rs. 96,79,38,144/-, which is a part of the total trade payable of Rs. 1,12,43,13,194/- reflected in the audited financial statements. The petitioner filed its return of income for AY 2017-18 on 30.10.2017 declaring total income at Rs. 11,09,730/-. The year under consideration was selected for scrutiny assessment by issuing statutory notice dated 10.08.2018 under Section 143(2) of the Act. The then Assessing Officer (AO), vide notice dated 19.08.2019 issued under Section 142(1) of the Act, called upon the petitioner to furnish various details including details pertaining to (i) trade payables and (ii) purchases. The petitioner, vide letter dated 28.08.2019, furnished a detailed reply to the aforesaid no....
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....s made from Ruchita Chemicals LLP in the normal course of business and is duly recorded in the audited books of account and, accordingly, the petitioner has also furnished the ledger of Ruchita Chemicals LLP, contra ledger and sample bills. It is submitted that the purchases from Ruchita Chemicals LLP have not at all been doubted by the respondent, and all the transactions are duly reflected in the books of account maintained by the petitioner and hence, the respondent was not justified in doubting the portion of payment made against such purchases. Thus, it is urged that the impugned notice deserves to be quashed. 9. It is submitted that there is no escapement of income chargeable to tax and that the provisions of Section 147 of the Act can be invoked only if income chargeable to tax has escaped assessment. It is further submitted that the reopening is premised on a change of opinion and that the respondent has acted illegally and without jurisdiction in issuing notice under Section 148 of the Act, which can be resorted to only if there is escapement of income chargeable to tax and there must be a live link or close nexus between the material before the AO and the opinion with ....
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....n a search conducted on Invent Assets, it came to light that the petitioner is involved in a dubious purchase and hence, the provisions of Section 148 of the Act were invoked. Thus, it is urged that at this stage, the impugned notice issued under Section 148 of the Act may not be quashed as the final amount of escapement can be determined after the assessment is completed. ANALYSIS AND CONCLUSION 13. We have heard the learned advocates appearing for the respective parties at length and also perused the documents as pointed out by them. 14. The facts established from the record are that scrutiny assessment was undertaken by issuing statutory notice under Section 143(2) of the Act on 10.08.2018 for AY 2017-18. Various letters were issued to the petitioner pursuant to the aforesaid notice and there were inter se communications. The petitioner filed detailed representations to all the letters and ultimately the assessment was framed under Section 143(3) of the Act on 30.10.2019, whereby the return of income of the petitioner was accepted. It is not disputed that the documentary evidence on record, which includes the ledger of Ruchita Chemicals LLP, contra ledger and sample bil....
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....ent proceedings." 19. A bare perusal of the findings recorded by the AO in the above communication clarifies that the AO is not sure about the exact quantum of escapement and that his opinion is still in a state of flux, as he has specifically stated that the quantum of escapement "if any" will be finalized only upon completion of assessment proceedings. Thus, the observations recorded by the AO disclose that he himself is unsure about the actual escapement and has made it subject to the final outcome of the assessment proceedings. 20. At this stage, we may refer to the observations of this Court in the case of Lambda Therapeutic Research Limited vs. Assistant Commissioner of Income Tax, 2018 402 ITR 177, which are as under : "(12) After examining all the details, the Assessing Officer, by the assessment order dated 24.04.2014 consciously chose to make disallowance of Rs. 9,82,226/- under section 80-IB(8A) of the Act holding that the income to the extent of Rs. 9,82,226/- was not earned from the eligible business activities. It is pertinent note that the Assessing Officer while reworking the deduction has observed that "The detailed scrutiny of the claim of the asses....