2023 (2) TMI 1360 - HC - Income Tax

Reopening of assessment - bogus sale and purchase transactions, to claim fraudulent Input Tax Credit (ITC) - HELD THAT - A perusal of the order passed u/s 148A(d) of the Act would show, that while the AO has noticed the fact that the petitioner has filed the reply, he has not dealt with the objections raised by the petitioner. AO appears to have been persuaded to trigger the reassessment proceedings because of the information made available to him, which had its source in the insight portal. According to us, this was not a satisfactory way of approaching the matter. AO should have applied his mind to the reply filed by the petitioner and formed an opinion based on the material placed, as to whether income chargeable to tax had indeed escaped assessment. Therefore, for the moment, according to us, the best way forward would be to set aside the impugned order and the notice, both of which are dated 31.03.2022, with a direction to the AO to carry out a de novo exercise. It is ordered accordingly. As before commencing this exercise, the AO will furnish necessary information/material, which links, according to him, the petitioner to the entities referred to in the notice issued u/s 148A(b) of the Act. If such information/material is furnished to the petitioner, the petitioner will be granted liberty to file a supplementary reply. For this purpose, two weeks will be granted to the petitioner.

Summary

Issues:
Challenging order under Section 148A(d) of the Income Tax Act, 1961; Allegations of fraudulent Input Tax Credit (ITC) based on bogus transactions; Assessment Year 2018-19 transactions worth Rs. 8,48,86,110; Lack of information linking petitioner to entities in notice under Section 148A(b); Inadequate consideration of petitioner's reply by Assessing Officer; Direction for de novo assessment exercise and provision for supplementary reply; Extension of time for fresh order by Assessing Officer.

Analysis:
The High Court considered a writ petition challenging an order under Section 148A(d) of the Income Tax Act, 1961, alleging fraudulent Input Tax Credit (ITC) through bogus transactions. The respondent/revenue accused the petitioner of engaging in transactions totaling Rs. 8,48,86,110 with various entities during Assessment Year 2018-19. However, the petitioner denied these transactions, highlighting a lack of information linking them to the mentioned entities in the notice under Section 148A(b).

The Court noted that the Assessing Officer had not adequately considered the petitioner's objections before initiating reassessment proceedings based on information from the insight portal. Consequently, the Court directed a de novo assessment exercise, setting aside the impugned order and notice dated 31.03.2022. The Assessing Officer was instructed to provide necessary information linking the petitioner to the entities, allowing for a supplementary reply within two weeks.

Furthermore, the Court granted an extension until 31.05.2023 for the Assessing Officer to pass a fresh order, considering the de novo assessment. It was clarified that these directions would not impact the merits of the case. The writ petition was disposed of accordingly, with parties instructed to act based on the digitally signed copy of the order.