2024 (5) TMI 600 - HC - Income Tax

Penalty proceedings u/s 271AAC(1) - Unexplained expenditure u/s 69C - cumulative amounts as mentioned by CBIC relied upon - HELD THAT - AO had relied solely on the assumption that the information provided by CBIC was correct notwithstanding that it had not disclosed the details of any import bills and that no reconciliation in this regard was carried out. AO had faulted the assessee for not reconciling the information regarding the quantum of purchases made as received from CBIC with that as disclosed by the assessee. AO also had no knowledge as to which import or purchase made by the assessee was not disclosed by the assessee as the AO also had no such information. We accept the contention that apart from stating that it had not imported goods of the value as disclosed it was impossible for the assessee to dispute the alleged additional purchases. The assessee could not be faulted for not reconciling the data as the information available with the AO is wholly insufficient for carrying out any reconciliation exercise. If any addition was proposed to be made on the basis that the purchases as reflected in the assessee s books is not correct and it has made certain imports that had not been recorded in the books of accounts the least that the Assessing Officer was required to do was to identify the entries that ought to have been made in the Books of Accounts of the assessee and which it had failed to do. Merely proceeding on the basis that CBIC is an apex body and therefore information provided by it cannot be doubted without even identifying or meaningfully analysing such information is wholly insufficient to proceed to make an addition. We find merit in the contention that the impugned order is unsustainable and has been passed in violations of principles of natural justice. It is obvious that the AO must have some material to indicate that an expenditure has been made to make such an addition. The only material in this case are the cumulative amounts as mentioned by CBIC without details of any such expenditure. Thus the impugned order is set aside. The matter is remanded to the Assessing Officer for decision afresh in accordance with law.

Summary

Issues Involved:
The petition challenges an assessment order u/s 143(3) read with 144B of the Income Tax Act, 1961 for Assessment Year 2022-23, alleging violation of natural justice principles.

Assessment of Unexplained Expenditure:
The Assessing Officer added Rs. 70,10,37,475 to the total income as unexplained expenditure u/s 69C of the Act and initiated penalty proceedings u/s 271AAC(1) for concealment of income. The controversy revolves around the declaration of purchases made by the assessee during the relevant year. The assessee claimed its purchases were imports, duly reflected in books, amounting to Rs. 1,51,41,55,705. However, the Assessing Officer alleged purchases worth Rs. 2,21,51,93,180 based solely on CBIC data.

Violation of Natural Justice:
The petitioner contended that the Assessing Officer failed to provide details of allegedly concealed imports, depriving the assessee of a fair opportunity to contest the addition made. The impugned order lacked reference to specific import details and faulted the assessee for not reconciling CBIC data with its declaration.

Judgment Details:
The High Court found the impugned order unsustainable and passed in violation of natural justice principles. The Assessing Officer lacked sufficient material to identify alleged undisclosed expenditure, solely relying on cumulative CBIC data without specific import details. The Court set aside the order, remanding the matter for a fresh decision ensuring necessary details are provided to the assessee for a fair opportunity to explain any additions on account of unexplained expenditure.

Conclusion:
The petition was allowed, and the application disposed of, emphasizing the importance of providing adequate information to the assessee for a fair assessment process in accordance with legal principles.