TaxTMI 
TaxTMI 
2026 (7) TMI 615
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.... in the business of trading in copper scraps and ingots under the name M/s Bhumi Enterprise. For the assessment year 2020-21, the assessee had filed his return of income on 14.12.2020 declaring a total income of Rs. 42,67,820/-, which was processed under section 143(1) of the Act. Subsequently, the case of the assessee was flagged on the Insight Portal under the high-risk category based on specific information received from the Investigation Wing. The information suggested that the assessee was a beneficiary of accommodation entries from a fake bill provider, M/s. Pooja Enterprises, involving fictitious purchases to the tune of Rs. 22,47,47,533/- during the financial year 2019-20. The Assessing Officer (in short, "the AO"), observed that the Investigation Wing had analyzed the GST data and further the 360-degree profiling of the entities involved in providing bogus invoicing and bogus GST Input Tax Credits was done. That the report of the Investigation Wing suggested that the assessee and various parties in the subsequent layers had obtained fake invoices and bills merely for booking purchases in their books of account to inflate expenses, reduce taxable profits, and to claim bogus....
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....at the AO had shared the relevant portions of the Investigation Report along with the show-cause notice and had independently applied his mind. The Ld. CIT(A) further held that the primary onus to prove the genuineness of the expenditure lay squarely on the assessee, which remained undischarged in the complete absence of transport receipts or delivery records, and thereby confirmed the disallowance. 5. Being aggrieved by the order of the Ld. CIT(A), the assessee, has come in appeal before us, raising the following Grounds of Appeal: "01. The learned CIT(A) has erred in confirming the notice issued under Section 148 on 01-05-2023 along with Order under Section 148A(d) in as much as there is no escapement of income and that no underlying information alleged in relation to bogus purchases has been supplied by the AO and therefore the notice issued under Section 148 is bad in law. 02. The learned CIT(A) has erred in confirming the addition on account of unexplained business expenditure under Section 37(1) of Rs. 22,47,47,533 on the ground that the appellant has failed to prove genuineness of the purchases in as much as: (i) the books of accounts are audite....
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.... (d)decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided ......" (emphasis supplied by us) 8. A perusal of the above reproduced provisions of Section 148A of the Act would reveal that a duty is cast upon the AO to firstly conduct an inquiry, if so required, in respect of the information received from the Investigation Wing to check the veracity of such information by co-relating and verifying such information suggesting escapement of income of the assessee. The AO is further supposed to share such information and results of any such inquiry, if any, conducted by him, with the assessee and to provide him an opportunity of hearing as to why a notice under section 148 should not be issued on the basis of such informat....
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.... Information Details: Information FY Information Source Type Source Description Information Type Description Value 2017-18 Suspicious Transaction Report STR Others OTHERS - 2018-19 Suspicious Transaction Report STR Others OTHERS - 2019-20 Suspicious Transaction Report STR Others OTHERS - 2020-21 Suspicious Transaction Report STR Others OTHERS - Verification Result: Actionable FY Result Type Result Description Result Value /Remarks 2017-18 Fictitious Transaction BOGUS PURCHASES 4,26,05,512 2018-19 Fictitious Transaction BOGUS PURCHASES 38,79,82,030 2019-20 Fictitious Transaction BOGUS PURCHASES 22,47,47,553 2020-21 Fictitious Transaction BOGUS PURCHASES 10,04,39,316 Documents Sr. No. Document Type Document Description Remarks Documents Name Size (KB) - VERPT - - D NESH CHAND compressed (1).pdf 2396393 2. On verification of information/documents available on record, it is found that Gopaldas Mathurdas Vaishnav was one of the beneficiaries of fake bill provider Pooja....
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....formation received has been perused and analyzed which needs no further enquiry". The assessee under the circumstances was not given any opportunity to rebut the correctness or veracity of such information. The assessee, under the circumstances, filed the following reply along with documents to the AO: "BHUMI ENTERPRISE PLOT NO. 496 TO 499, ROAD NO. 13, GIDC, KATHWADA, AHMEDABAD-382430 13-03-2024 To, THE COMMISSIONER OF INCOME TAX WARD 3(3)(5), AHMEDABAD RESPECTED SIR, SUBJECT: Reply to Notice under clause (b) of section 148A of the Income-tax Act, 1961. REF: ITBA/AST/F/148A(SCN)/2023-24/1062035173(1) Dated 05-03-2024 PAN: ADEPV8269P F.Y.: 2019-20 A.Y.: 2020-21 With reference to the above subject, I am in receipt of the notice captioned above wherein it is stated that I had entered into bogus transaction / fictitious transactions with Pooja Enterprises (AATFP8454E) amounting to Rs. 22,47,47,533/-. In this regard, I clarify that all the transactions made with Pooja Enterprises are genuine. To authenticate these transactions, I have submitted the following det....
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.... relevant Assessment Years or (c) declared the profit u/s 44AD of the Act on the declared gross receipts while, on the contrary, huge purchases were made by them or (d) had no economic rational while transacting such huge value and without proper business activity. 3.3 On analysing the GST Data of the assessee and the persons found in subsequent Layers of the assessor, it is seen that various persons have taken fake invoices either from the assessee directly or from the persons found in subsequent layers of the assessee in different years. Further, it is also seen from the GST Data that the HSN of these persons who obtained the fake invoices are not similar to that of the assessee. Accordingly, these persons were requested to justify the financial transactions by furnishing the (a) copy of Invoices (b) ledger account of the suppliers in their books of accounts and (c) material evidence in support of the actual delivery of the goods. However, it is seen that the summons/letters sent were either received back or, on receipt of the same, no compliance whatsoever was received or the reply furnished was without any supporting evidence for the actual delivery o....
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....48 of the Act, as mentioned in condition (ii), is "suggests" and not "proves". On receipt of the information, the same has been analyzed in the context of the details available on record, and after due consideration of the results of inquiries conducted, it is established that the assessee has failed to contend with the fact that income arising out of these transactions has been offered for taxation for the relevant assessment year. 8. Therefore, in the light of the above reasons, information and material available on record, I am of the considered view that the assessee has failed to explain the abovementioned transactions and income earned/ derived there from, during the year under consideration and the same remained unexplained and unsubstantiated as per the relevant provisions of the Act. Hence, on the basis of material available on record which establish that the income chargeable to tax in respect of above-mentioned unexplained transactions of Rs 22,47,47,533/-, which has escaped assessment for FY 2019-20 and therefore, this is a fit case for issuance of notice under Section 148 of the Act for Assessment Year Year 2020-21. 9. This order is being passed under....
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....d not be substantiated for want of evidence. Therefore, the information provided by the Investigation Wing, though, may be a triggering factor to initiate the proceedings u/s 148A of the Act by making the requisite inquiries and giving opportunity of hearing to the assessee as prescribed under clauses (a) & (b) of Section 148A of the Act, however, the AO was supposed to pass a reasoned order based on the result of such inquiries and after duly considering the reply and submissions of the assessee in respect of such information and result of enquiries thereof, as prescribed under clauses (c) and (d) of section 148A of the Act. Hence, the order passed by the AO solely on the basis of vague and general information, further based on mere suspicion of the Investigation Wing, without following the requisite procedure as prescribed under clauses (a) to (d) of Section 148A of the Act, is not a legally valid order and hence, is liable to be quashed. Therefore, the subsequent notice issued u/s 148 of the Act is also not sustainable in the eyes of law. 15. At this stage, it will also be relevant to compare the earlier provisions of section 147 of the Act with the substituted provisions as ....
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....ossession, and should proceed to reopen the assessment by just borrowing his satisfaction from the Investigation Wing. Nonetheless, the operating words triggering the reopening of the assessment are, "reasons to believe" and hence, there need not be of any conclusive observation or finding of the AO regarding the escapement of income of the assessee. If the material coming into the knowledge or possession of the AO is such that any officer, in the ordinary course of his duties, would believe that the income of the assessee has escaped assessment, though, such material may not be enough to give any conclusive finding of such escapement of income, the reopening of the assessment would be justified. However, there is a sea-change in the relevant provisions w.e.f. 01.04.2021 as the aforesaid key words- "reason to believe" do not find mention in the substituted provisions. In the substituted provisions, the operating words are, "if any income chargeable to tax, .. .., has escaped assessment". The aforesaid substituted provisions of section 147, when read with the simultaneously inserted provisions of section 148A of the Act, would show that the AO now is supposed to conduct inquiries, i....
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....ent order and appellate order of the CIT(A), it is revealed that the reopening of the assessment in this case was made on the basis of certain investigation initiated by the Sales Tax Department/GST Department, wherein they had show-caused the assessee by serving notice dated 07.10.2022, 'intimating, discrepancies in the return after scrutiny u/s 61 of GGST/CGST Act, 2017 regarding the suspicious input tax credit availed by the assessee from Pooja Enterprise. The copy of the said notice dated 07.10.2022 has been placed at Page 44 of the Paper Book. However, the Ld. Counsel for the assessee has invited our attention to the copy of the 'order of acceptance of reply against the notice issued u/s 61' whereby, the GST Department after considering the reply of the assessee given in response to the show-cause notice dated 07.10.2022, has accepted the said reply finding the same as satisfactory and holding that no further action is required to be taken in the matter. The copy of the said order dated 27.06.2023 has been placed at Paper Book Page 43. Therefore, the very basis upon which the reopening of the assessment was triggered in this case has ceased to exist and hence, in the absence o....