The Delhi High Court has held that the show cause notice as well as the reassessment order under Section 148A(d) of the Income Tax Act were based on distinct and separate grounds. The department failed to provide the details of the transaction and the vendors from whom the bogus purchases were made.
The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that "the show cause notice primarily states that "it is seen that the petitioner has made purchases from certain non-filers." However, no details or any information about these entities were provided to the petitioner. It is not understood as to how the petitioner was to know which of the entities it dealt with were filers or non-filers!"
The petitioner/assessee had filed its return of income for the Assessment Year 2018-19, declaring an income of Rs. 6,32,45,180 and a loss of Rs. 74,36,185. The case was picked up for scrutiny and, after examination of all the submissions of the petitioner, an assessment order under Section 143(3) read with Section 144B of the Act was passed. One of the points for selecting the petitioner's case for scrutiny was 'Business Purchases', and after analysing the documents submitted by the petitioner, no additions were made by the Assessing Officer on account of business purchases.
The petitioner stated that the show cause notice issued under Section 148A(b) of the Income Tax Act did not provide any information or details regarding the income that has been alleged to have escaped assessment. The petitioner filed a response to the show cause notice specifically requesting the respondent to provide the details of the transaction and also to provide the details of the vendors from whom the petitioner had made purchases and raised invoices, which the respondent considered bogus. The respondent failed to consider the fact that the petitioner had made purchases from vendors who were registered under GST and had claimed an input tax credit of GST on the purchases made from them as per statement 2A reflected on the GST portal based on the invoices raised by the vendors. The credit claimed by the petitioner was not rejected.
The court observed that a report was prepared against the petitioner which concluded that the assessee had made bogus purchases from bogus entities to suppress the profit of the company and reduce the tax liability during the years 2015-16 to 2020-21. However, no report which forms the basis for the 'information' on which the assessment was proposed to be reopened had been provided to the petitioner. In fact, there are no specific allegations in the show cause notice to which the petitioner could file a reply.
The court quashed the reassessment order and the respondents were given liberty to furnish additional materials in support of the allegations made in the show cause notice dated March 16, 2022, within three weeks, including reports.
Case Title: M/s Best Buildwell Private Limited Versus ITO
Citation: 2022 LiveLaw (Del) 755
Citation: W.P.(C) 11338/2022
Counsel For Petitioner: Advocates Salil Kapoor with Ananya Kapoor, Tarun Chanana and Sumit Lal Chandani
Counsel For Respondent: Sr. Standing Counsel Kunal Sharma