2023 (1) TMI 419 - HC - Income Tax

Reopening of assessment u/s 147 - allegation against Assessee involved in the issuance of fake/bogus invoices - bogus purchase transaction with FFPL - HELD THAT - Interestingly, entities and companies which FFPL appears to have provided accommodation entries not only includes the petitioner but certain public limited companies/PSUs such as Bharat Heavy Electricals Ltd., Indian Oil Corporation Ltd., HMT Machine Tools Ltd., Hindustan Shipyard Ltd., Hindustan Aeronautics Ltd., Hindustan Petroleum Corporation Ltd., Godrej and Boyce Manufacturing Company Ltd. and Larsen and Toubro Ltd. There is no material to suggest, that accommodation entries were provided by FFPL to these companies. We may also note, that in this particular case, notice u/s 148A(b) was issued even without conducting an enquiry, as required u/s 148A(a) of the Act.The said provision requires approval of the specified authority for conducting an enquiry. In our view, had such an enquiry been conducted before issuance of the notice, then the kind of flaws that have emerged, to which we have made a reference above, would not have, possibly, occurred. Instead of conducting an independent enquiry, the respondents/revenue relied upon the information supplied by the CGST authorities. Thus we are inclined to quash the impugned order dated 26.03.2022 passed under Section 148A(d) of the Act, as also the consequential notice dated 26.03.2022 issued under Section 148 of the Act. Decided in favour of assessee.

Summary

Issues:
Challenge to order under Section 148A(d) of the Income Tax Act, 1961 and consequential notice under Section 148 of the Act.

Analysis:
1. The petitioner challenged an order dated 26.03.2022 issued under Section 148A(d) of the Income Tax Act, 1961, along with a notice of the same date under Section 148 of the Act. The core allegation was the involvement in the issuance of "fake/bogus invoices" by Flash Forge Pvt. Ltd. (FFPL), as per the notice dated 10.03.2022.

2. The respondents alleged that Advance Computers and Mobiles India Pvt. Ltd. was engaged in issuing fake invoices for fraudulent input tax credit without supplying goods. Information was received regarding twelve entities, including FFPL, for FY 2017-2018 (AY 2018-2019), implicating the petitioner in a transaction with FFPL worth Rs. 37,33,626.

3. The petitioner denied the transaction with FFPL, asserting it provided security services and disclosed earnings for tax. The assessing officer, however, deemed all transactions with FFPL as "sham transactions," leading to the conclusion that Rs. 37,33,626 had escaped assessment for AY 2018-2019.

4. The respondents claimed FFPL did not exist, and the invoices were fabricated. The petitioner argued that the respondents' document mentioned both the petitioner and Advance Computers and Mobiles India Pvt. Ltd., forming the basis for the notice.

5. Notably, FFPL allegedly provided accommodation entries to various entities, including public limited companies, without evidence of such transactions. The notice under Section 148A(b) was issued without the required enquiry, leading to flaws in the process.

6. The court quashed the order under Section 148A(d) and the consequential notice under Section 148 of the Act, citing the lack of an independent enquiry before issuance. The respondents were granted the liberty to proceed lawfully, and the writ petition was disposed of accordingly.