2023 (8) TMI 966 - HC - Income Tax

Reopening of assessment u/s 147 - genuineness of transactions of purchase of gold bars - transactions with person who is engaged in providing accommodative entries - HELD THAT - Petitioner stated that Petitioner had purchased gold bar from S.K. Jewels and made payment for the same via account payee cheque. Copies of the purchase ledger/stock register for gold bars, ledger copy of S K Jewels, ledger confirmation, purchase bills and extract of bank statements with highlighted payments were also provided. It is also mentioned in the reply that Petitioner has accounted the bill into its books of accounts for which GST tax invoice has been submitted and the bill has been uploaded on GST portal which can be verified and Petitioner has taken credit for the same. Despite this the impugned order dated 19th April 2023 u/s 148A(d) of the Act came to be passed which defies sensibility. We are unable to fathom how just because Petitioner has accepted that it had transactions with S. K. Jewels, there could be no dispute that the amount paid to S.K. Jewels would be for taking accommodation entries. There is nothing to say why Petitioner s explanation cannot be accepted. We are also surprised that to issue such an order the PCIT even gave sanction which also reflects total non-application of mind by the PCIT. It gives an impression that PCIT has simply signed even without bothering to read and understand what the matter is about. We hereby quash and set aside the order passed under Section 148A(d) - matter restored back with directions.

Summary

Issues:
The issues involved in this case include a show cause notice issued under Section 148A(b) of the Income Tax Act, 1961 based on flagged transactions, sufficiency of information provided in the notice, acceptance of transactions by the petitioner, and the validity of the order passed under Section 148A(d) of the Act.

Summary:

Show Cause Notice and Response:
The petitioner, a limited liability partnership firm, filed its return of income for AY 2019-20, disclosing a total income. Subsequently, a show cause notice was issued under Section 148A(b) based on flagged transactions involving significant amounts between two parties. The notice required the petitioner to explain the transactions indicating possible income escaping assessment.

Petitioner's Response and Order:
The petitioner responded by providing detailed documentation and explanations regarding the transactions, including purchase ledger, stock register, bank statements, and GST invoices. Despite this, an order was passed under Section 148A(d) stating an escapement of income without accepting the petitioner's explanations, leading to concerns about the validity and reasoning behind the order.

Court's Decision and Directions:
The High Court quashed the order dated 19th April 2023 and issued specific directions. The court directed that the file be assigned to an officer other than a specified individual, and all relevant information received from investigating authorities be provided to the petitioner within a specified timeframe. The petitioner was granted the opportunity to file a further response and a detailed order was to be passed after a personal hearing, ensuring fairness and transparency in the proceedings.

Conclusion:
The petition was disposed of by the High Court, without any order as to costs, emphasizing the importance of providing adequate information, considering explanations provided by the petitioner, and ensuring a fair process in dealing with tax assessment matters.