2024 (2) TMI 931 - HC - Income Tax

Assessment u/s 144B - Disallowance of commission paid to the Foreign Company and Local Agents/Parties and expenses incurred by the petitioner on account of purchase of bullion - HELD THAT - The petitioner appears to be the company which was incorporated only in the year 2019. The petitioner had filed return of Income u/s 139 on 15.03.2022. After the return was filed, the petitioner was called upon to furnish the details of the purchases made by the petitioner from various dealers particularly three dealers mentioned above. There is a huge purchase quantum of bullion/ jewellery from there sellers. The petitioner was called upon to furnish the details of purchase from these sellers. M/s.Surana Corporation Limited was under liquidation and has apparently sold jewellery to the petitioner on 20.07.2020 pursuant to an auction notice dated 12.07.2020 conducted by the Company Secretary appointed as Insolvency Resolution Professional who was later appointed as the liquidator of the said Company by the National Company Law Tribunal (in short, NCLT), Chennai, by its order dated 25.10.2019. As noticed that the petitioner has attached sample invoice issued by the Company Secretary in Practice and Insolvency Professional who was appointed as the liquidator of the said company. However, before this Court the petitioner has filed copies of invoice for a sum of Rs.127,35,78,406/-. There is no clarity on the same. The explanation of the petitioner has not been accepted by the AO. Although, during the period dispute, the movement of jewellery items including bullion are not required to accompany e-way bill in terms of Rule 138 (4)(a) of the GST Rule 2017, as amended by Notification No.12/2018 Central Tax with effect from 01.04.2018, GST Returns of the supplier and GST Returns of the petitioner would have registered the transaction of gold, the petitioner ought to have filed the GST Returns in Form GST 2A before the respondent. These documents have not been furnished by the petitioner. Also the other issues regarding payment of commission to both Indian and Foreign agents have not been properly explained by the petitioner. There are several dispute question of facts who do not call for adjudication in a summary proceedings under Article 226 of the Constitution of India. Therefore, there are no valid grounds to interfere with the impugned assessment order passed under Section 143(3) r/w 144B. Decided against assessee.

Summary

Issues Involved:
1. Disallowance of commission paid to foreign company and local agents.
2. Disallowance of expenses incurred on purchase of bullion.
3. Procedural compliance and evidence submission by the petitioner.
4. Validity of the assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961.
5. Validity of the penalty order under Section 270A of the Income Tax Act, 1961.

Summary:

Disallowance of Commission Paid to Foreign Company and Local Agents:
The petitioner challenged the disallowance of commission payments to AY Palace DMCC and local agents due to lack of documentary proof of services rendered. The assessing officer noted the absence of contra-confirmation from customers and specific details of services provided, leading to the addition of Rs.3,20,77,873/- and Rs.81,00,000/- to the income of the petitioner and initiation of penalty proceedings under Section 270A(8) of the Income Tax Act, 1961.

Disallowance of Expenses Incurred on Purchase of Bullion:
The petitioner contested the disallowance of Rs.234,15,30,188/- claimed as expenditure on purchases from Shiv Sahai & Sons (India) Pvt. Ltd., Diamond India Limited, and Surana Corporation Ltd. The assessing officer found insufficient proof of movement of goods, such as e-way bills and LR receipts, and noted discrepancies in the invoices and lack of bank statements to verify payments. The petitioner argued that e-way bills and LR receipts were not required for gold bullion under GST rules, which the assessing officer did not accept.

Procedural Compliance and Evidence Submission by the Petitioner:
The petitioner responded to various notices under Sections 143(2) and 142(1) but allegedly failed to provide complete information, including e-way bills, lorry receipts, and confirmation from sellers. The petitioner argued that it was not required to furnish such documents under GST exemptions and that the department could obtain necessary information from the sellers' jurisdictions.

Validity of the Assessment Order:
The court found that the petitioner did not furnish GST returns in Form GST 2A and other necessary documents to substantiate the transactions. The court also noted that the issues raised involved disputed questions of fact, which were not suitable for adjudication under Article 226 of the Constitution of India.

Validity of the Penalty Order:
The penalty order under Section 270A of the Income Tax Act, 1961, was challenged as it flowed from the impugned assessment order. The court upheld the assessment order, leading to the dismissal of the penalty order challenge.

Conclusion:
The court dismissed both writ petitions, upholding the assessment and penalty orders. However, the petitioner was granted liberty to file statutory appeals before the Appellate Authority within six months. No costs were awarded, and connected miscellaneous petitions were closed.