TaxTMI 
TaxTMI 
2026 (4) TMI 772
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....adhichi Iron & Steel Pvt. Ltd., proceedings u/s 148A were initiated and notice u/s 148 was issued. In response, assessee filed it return declaring same loss as declared in original return of income. During the course of reassessment proceedings, Ld. Assessing Officer (AO) noted that purchases of Rs. 6,77,58,435/- were made from M/s.Dadhichi Iron & Steel Pvt. Ltd. and observed that input tax credit on such transactions was reversed. Ld. Ld. AO consequently treated the said purchases as bogus and made addition of Rs. 6,77,58,435/- u/s 69C, taxing it u/s 115BBE. 3. Being aggrieved, assessee carried the matter to the Ld. CIT(A), who upheld the reopening of assessment holding that the Ld. AO had valid reason to believe. On merits, Ld.CIT(A) held that M/s Dadhichi Iron & Steel Pvt. Ltd. was bogus entity issuing fake invoices and the assessee failed to prove genuineness of purchases. He relied on ITC reversal as evidence. Accordingly, addition was confirmed and appeal was dismissed. 4. Aggrieved with the order of Ld. CIT(A), assessee is in appeal by raising the following grounds: "1) Notice issued u/s 148 of I.T. Act 1961 is illegal, invalid and bad in law. Thus consequent ....
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....ice u/s 148 was issued in the case of associate company M/s Sanvijay Rolling & Engineering Ltd. in respect to purchases from M/s Dadhichi Iron & Steel Pvt. Ltd. (P- 16) [Vol.- IV]. A.O. in reassessment proceeding for Asstt. Year 2018-19 has verified and accepted purchases from same party as genuine. (P - 148 to 154) (148, 152, 153) [Vol.- IV). C) Order u/s 148A(d) is passed on 31/03/2023 (P - 229 to 335) [Vol.- IV] and notice u/s 148 is issued on 31/03/2023. Facts as found on the basis of evidence on record is noted at para 6 of order u/s 148A(d) (P - 233 & 234) [Vol.- IV]. It is clearly noted that transaction of purchase is corroborated from purchase invoice, GST return, bank statement delivery through E-way bill. Sale of such goods by assessee has fully substantiated purchase to be genuine. A.O. after noting of incident report and investigation by DGGI has concluded escapement of income. No valid belief of escapement of income can be drawn by any person properly instructed in law. Notice is issued only on borrowed satisfaction. D) A.O. did not appreciate the submissions and documentary evidences filed during 148A proceedings. AO proceeded to reopen the assessmen....
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....ncome. No live link / nexus between belief of escapement and material on record. Reliance on : i) 130 ITR 1 (SC) Ganga Saran & Sons Pvt. Ltd. vs ITO & Ors. (P- 175 - 184) (182) [Vol.- II] ii) 103 ITR 437 (SC) ITO vs Lakhmani Mewaldas (P- 124 - 134) (132, 133) [Vol.- III] iii) [2024] 164 taxmann.com 763 (Bombay) Modern Living Solutions (P.) Ltd. vs. Income-tax Officer (P- 255 - 266) (266) [Vol.- IV] iv) [2023] 149 taxmann.com 219 (Bom.) B.U. Bhandari Autolines (P.) Ltd. vs. ACIT (P- 6 - 9) (8) (Gist) H) Copy of report received from DGGI Zonal unit, Nagpur referred in order u/s 148A(d) requested by assessee has not been provided till the end of assessment. Requisite material relied upon ought to be supplied along with information in terms of Section 148A(b) to assessee. Reassessment proceedings unsustainable on ground of violation of procedure prescribed under section 148A(b). Reliance on : i) 150 taxmann.com 99 (Bom) Anurag Gupta vs. ITO (P- 135 - 139) (138) [Vol.- III] 3. Ground No.2 to 7: Addition Rs. 6,77,58,435/- u/s 69C of I.T. Act 1961 is respect of purchases recorded in books of account. ....
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....neering Ltd. F) No shred of adverse evidence brought on record by A.O to discredit legal evidence placed on record. A.O made addition observing assessee has reversed ITC credit on goods purchased hence purchases are not genuine. As seller had not paid GST on sales, assessee on advice of GST authorities agreed to reverse input credit. Mere reversal of input credit is no reason to conclude purchases as not genuine. This position is accepted by revenue in the case of associate company in respect to same party and similar fact position. Contrary view on same facts is not permissible in terms of law laid down by Hon'ble Apex Court in the case of Narendra Doshi reported at 254 ITR 606 (SC). No adverse evidence brought on record to discredit legal evidence placed on record to demonstrate genuineness of transaction. Addition made is on suspicion and is impermissible. G) To verify similar transaction of purchase of goods by group concern M/s Sanvijay Rolling & Engineering Ltd from M/s Dadhichi Iron & Steel Pvt. Ltd. notice u/s 148 was issued for Asstt Year 2018-19 and 2019-20. A.O in re-assessment proceeding of both years has verified and accepted purchases as genuine. (P-....
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....t provisions of section 69 are not mandatory, ITO is not obliged to treat such source of investment/expenditure as income in every case where the explanation offered by assessee is found to be not satisfactory. Ratio laid down by Hon'ble Apex Court squarely applies to facts in the case of assessee and addition made by A.O. is unjustified. A.O. ought not to have made addition in view of discretion available with him considering the facts and evidence on record. M) It is settled law that under no circumstances entire amount of purchase of goods to be added. Even in doubtful purchases, element of profit would meet ends of justice. Assessee has already shown 6.15% gross profit, no scope for addition. Reliance on: i) (2024) 167 taxmann.com 429 (Bom.) Ashok Kumar Rungta vs. ITO (P- 28 - 34) (33, 34) (Gist) N) CIT(A) at para 5.2 has referred to screenshot of news paper dated 05/02/2020. At para 5.3 on the basis of online search of extract of the judgement of Hon'ble Chhattisgarh High Court in the case of M/s Dadhichi Iron & Steel Pvt. Ltd. concluded that there is bogus purchase from the said concern and assessee has received accommodation entry. The afo....
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....as submitted letter wherein ground as to validity of notice issued u/s 148 of the Act on the basis of judgement of Hon'ble Jurisdictional High Court in the case of Hexaware Technologies Ltd. in W.P.No.1778/2023 vide judgment dated 03/05/2024 (62 taxmann.com 225 (Bom)) will be not pressed/addressed. The arguments on the reassessment notice validity be restricted to other submissions than as noted hereinabove. It is submitted that notice issued u/s 148 of the Act is valid on the basis of information available on Insight Portal and there is no infirmity in initiating reassessment proceedings in the case of assessee. 7. We have given thoughtful consideration to the submissions made by counsel of assessee as well as Ld.CIT-DR. We shall address the addition made by Ld. AO on merits first. Ld. AO in the assessment framed has made addition of Rs. 6,77,58,435/- by invoking the provisions of section 69C of the Act. Tax has been levied u/s 115BBE of the Act. Ld. AO has noted that there was incident report received from DGGI Zonal Unit, Nagpur wherein there was transaction made by M/s.Dadhichi Iron & Steel Pvt. Ltd. with assessee without receipt of goods. Assessee reversed ITC claimed at Rs....
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....ur. The reply is quoted as under. "I state that the goods i.e. MS Channels, MS Joist and MS Angels have been received by us from M/s Dadhichi Iron & Steel Pvt. Ltd., Raipur." 9. The facts as noted in the assessment order clearly demonstrate that entire documentary evidence has been placed on record before the Ld. AO to substantiate the genuineness of purchase made by assessee. The legal evidence as to sale made by assessee in respect to goods purchased from M/s Dadhichi Iron & Steel Pvt. Ltd. has also been placed on record. Documentary evidence being Tax Invoice, Lorry Receipts, Vehicle Number and E-way Bill fully substantiates the genuineness of transaction of purchases as well as sales of such goods by assessee from M/s Dadhichi Iron & Steel Pvt. Ltd. The aforesaid factual and legal evidence has not been adversely commented in the assessment order or any adverse evidence has been brought on record to discredit the legal evidence available on record. The documentary evidence as placed before AO was also submitted before CIT(A) and before us in paper books volume-I. The summary of documentary evidence as submitted before us is as under: During assessment proceedings fol....
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....se of M/s Sanvijay Rolling & Engineering Ltd. an associate corporate entity purchases were made from M/s Dadhichi Iron & Steel Pvt. Ltd. Notice u/s 148 of the Act was issued for A.Y. 2018-19 & 2019-20 on the basis of similar information from DGGI. Reassessment has been framed by Ld. AO of Sunvijay Rolling & Engineering Ltd. for both assessment years. Transaction of purchases made by aforesaid corporate entity in respect to same report of information was verified and purchases from M/s.Dadhichi Iron & Steel Pvt. Ltd. has been accepted as genuine on the basis of similar documents as has been placed on record by assessee. The re-assessment orders of Sunvijay Rolling & Engineering Ltd. were placed before lower authorities and are submitted before us at pages 135 to 139 and 148 to 154 at Volume-IV. Both the lower authorities have not disputed the above factual position placed on record by assessee. In the absence of any iota of adverse evidence on record to counter the legal evidence placed on record there is no justification to disbelieve the explanation of assessee as well as reject the documentary evidence on record. Revenue having accepted the purchases from same party in the case o....
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....dit claimed by M/s Dadhichi Iron & Steel Pvt. Ltd. was being disputed by GST authorities. The dispute of input credit can be made by GST authorities only when GST collection made is not disputed. The aforesaid circumstance is not an adverse circumstance to hold that sale made by M/s Dadhichi Iron & Steel Pvt. Ltd. is not genuine at the hands of assessee company. In fact conclusion of GST authorities to hold GST collection by M/s Dadhichi Iron & Steel Pvt. Ltd. required to be paid to GST Authorities itself substantiated the purchase of assessee. It is not an adverse circumstance for which addition could be made. Thus observation of lower authorities to take it as adverse circumstance to make addition at the hands of assessee is unjustified and arbitrary. 14. It is seen that condition precedent for invoking provisions of section 69C of the Act are clearly absent and addition made is prima facie arbitrary and unjustified. The learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 6,77,58,435/- made by the Assessing Officer under section 69C of the Act. The conclusion arrived at is arbitrary, unjustified, and unsustainable in the eyes of law. The CIT(A) ....
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....scharged the onus cast upon it by furnishing complete documentary evidences, including Purchase invoices, Ledger accounts of suppliers, transport delivery receipts, proof of payments made through banking channels and Books of account maintained in the ordinary course of business These evidences clearly substantiate the genuineness of the transactions. The CIT(A), however has erred in disregarding these evidences and instead relied on generalized allegations pertaining to the suppliers without establishing any direct nexus with the assessee. The CIT(A) has further erred in holding that the assessee failed to discharge its burden of proof completely ignoring the substantial evidences placed on record. In view of above facts and settled legal position the findings of the learned CIT(A) are based on surmises, conjectures and extraneous considerations and therefore deserve to be set aside. The confirmation of the addition under section 69C is thus wholly erroneous, unjustified, and liable to be deleted. 15. Considering the submissions made and totality of facts and circumstances in the case of assessee addition made by AO at Rs. 6,77,58,435/- is unjustified and unsustainable. The add....
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....Pvt. Ltd., Raipur." 17. The CIT(A), while upholding the validity of reopening, has merely relied upon information received from the DGGI and Insight Portal without appreciating that the Assessing Officer has acted solely on borrowed satisfaction ignoring the result of enquiry made. It is a settled position of law that "reason to believe" must be based on independent application of mind, which is absent in the present case. 18. In the case of assessee notice u/s 148A(a) of the Act is issued on 02/03/2023. In compliance to same detailed submission is made on 09/03/2023 along with documentary evidence. The aforesaid submission is submitted before us and is at pages 3 to 7 of Volume-IV. AO has issued notice u/s 148A(b) of the Act on 10/03/2023, along with notice no information received or details of enquiry conducted are provided to assessee. Response to notice u/s 148A(b) of the Act has been made on 21/03/2023 along with documentary evidence placed in Paper Book page 11 to 228 (Volume-IV). Apart from documentary evidence as regard to transaction of purchases assessment order passed in the case of M/s Sanvijay Rolling & Engineering Ltd. an associate company for A.Y. 2018-19 dated....
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....023. In reply to question no.5 regarding purchases made from M/s Dadhichi Iron & Steel Pvt. Ltd. the assessee specifically answered that the goods i.e. MS Channels, MS Joist and MS Angels have ben received from M/s Dadhichi Iron & Steel Pvt. Ltd., Raipur. The reply is quoted as under. "I state that the goods i.e. MS Channels, MS Joist and MS Angels have been received by us from M/s Dadhichi Iron & Steel Pvt. Ltd., Raipur." 19. It is evident from the facts and evidence on record that during the course of enquiry genuineness of purchase transaction was reasonably established by adducing legal evidence. In order passed u/s 148A(d) of the Act notice has been issued u/s 148 of the Act merely because of report received from DGGI Zonal Unit and reversal of ITC on the strength of invoices issued by M/s Dadhichi Iron & Steel Pvt. Ltd. On similar facts in the reassessment framed of associate company purchases from very same party have been accepted. On above factual position no valid satisfaction of escapement of income could have been derived by AO as to escapement of income and to conclude that it is a fit case for issue of notice u/s 148 of the Act. 20. The Hon'ble Delhi Hi....
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....mation pertained to GST Department. Facts in the case of assessee are similar. Respectfully following the same we hold that notice issued u/s 148 and order passed u/s 148A(d) of the Act in the case of assessee is not in accordance with law laid down by the Hon'ble Delhi High Court and thus same is not in accordance with law. Consequent assessment framed thereupon is liable to be cancelled. 22. The Hon'ble Co-ordinate Bench of Delhi in ITA No.4972/Del/2024 in the case of B. C. Enterprises while considering the provisions of section 148 of the Act has held as under: "10. We have heard the rival submissions and perused the material available on record. In the instant case, the assessee since inception of the proceedings asked the AO for supply of the material relied upon for initiating proceedings u/s 148A of the Act. The Hon'ble Supreme Court in the case of Ashish Agarwal reported in [2022] (5) TME-240(SC) has held that material relied upon for initiating the proceedings u/s 148A should be supplied to the assessee so as to enable him to file the necessary reply. xx xx xx 12. .............. In the instant case, from the perusal of the notice issued u/s 148A(b) ....
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....ce placed on record has been not accepted for no valid justification. Ratio laid down by the judgement of Hon'ble Delhi Bench squarely applies to the facts in the case of assessee. Respectfully following the same we hold that notice issued u/s 148 and order passed u/s 148A(d) of the Act is not in accordance with law. 24. The Hon'ble Jurisdictional High Court in the case of Gandhibagh Sahakari Bank Ltd. reported at 156 taxmann.com 221 (Bom) while considering the provisions of section 148 has held as under: "............... Except for stating that such information was available on the Insight Portal it has not been indicated in the said reasons as to how there was formation of belief by the Assessing Officer that income had escaped assessment. The reasons supplied do not indicate that any exercise of independent verification thereafter was undertaken resulting in consideration of the same with due application of mind by the Assessing Officer so as to re-open the completed assessment. Only by stating that information was available on the Insight Portal, belief has been formed by the Assessing Officer that the stated amount had escaped assessment at the hands of the petitio....