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2025 (4) TMI 405 - AT - Income TaxReopening of assessment - Estimation of income on bogus purchases - addition by applying G.P rate of 0.88% on such alleged purchased alleged as bogus - HELD THAT - From the perusal of the order passed u/s 148A(d) we observed that the AO observed that the information was self-sufficient and it was considered that further enquiries u/s 148A(a) of the Act are not required. However when we see the information as provided to assessee along with notice u/s 148A(a) as Annexure and reproduced herein above we find that such information did not speak about the real transactions. Assessee has made bogus purchases in the form of accommodation entries provided by Ahok Kumar Gupta and other entities operated and controlled by him. It is also stated that such information was received through insight portal. Nowhere it is stated as to how department was having such information who is Ashok Kumar Gupta what is the nexus between assessee and Ashok Kumar Gupta which are the entities managed and controlled by him and which of such entities had sold good to assessee alleged as accommodation entry. Details of purchases made date of transactions item value of each individual transaction of purchases etc. were never brought on record as provided in sub-section (a) to section 148A - AO has never provided the statements of such Ashok Kumar Gupta and the other relied upon material based on which of transactions were alleged as accommodation entry of purchases alongwith the notice u/s 148A(b) of the Act. It appears that the AO simply proceeded to reopen the case of the assessee based on the information available on the insight portal which is uploaded under Risk Management Strategy formulated by CBDT and no independent application of mind by AO before using such information against the assessee nor any enquiry was made as provided in section 148A(a) of the Act. This action of AO is highly arbitrary - AO not only proceeded to issue notice u/s 148A(a) without making verification of the vague and insufficient information available with him to satisfy himself that income chargeable to tax has escaped assessment but at the same time also failed to provide the material relied upon to the assessee along with notice u/s 148A(b) of the Act. The Hon ble Supreme Court in the case of Ashish Agarwal (supra) has held that AO should supply the relied upon material to the assessee so as to enable him to respond the show cause notice issued by AO. Not providing the opportunity to cross examine the witness whose statements are relied upon by the Revenue - As from the perusal of the assessment order it is seen that the Assessing officer has relied upon the statements of Sh. Ashok Gupta and also referred the results of the enquiry conducted u/s 133(6) of the Act from the respective parties however despite of request made by the assessee for cross examination of all such parties no such opportunity was provided to assessee. It is settled proposition of law that if the Revenue is using the statement of third parties the assessee should have been allowed an opportunity to cross examine those witnesses as has been held by the Hon ble Supreme Court in the case of Andaman Timber Products 2015 (10) TMI 442 - SUPREME COURT The Co-ordinate Bench of Tribunal in the case of Best City Infrastructure Ltd. 2017 (8) TMI 250 - DELHI HIGH COURT has held that not providing opportunity of cross examination makes the addition invalid. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Validity of Reopening under Section 148 - Legal Framework and Precedents: The reopening of assessments under Section 148 requires compliance with procedural steps outlined in Section 148A, including providing the assessee with relevant information and an opportunity to respond. The Supreme Court's decision in Ashish Agarwal emphasized the necessity of supplying relied-upon material to the assessee. - Court's Interpretation and Reasoning: The Tribunal found that the AO did not supply the necessary material or specific information to the assessee, rendering the notice under Section 148A(b) vague and non-compliant with legal requirements. - Key Evidence and Findings: The Tribunal noted the absence of specific transaction details, such as the identity of entities involved and the nature of transactions, in the notice issued to the assessee. - Application of Law to Facts: The lack of detailed information and failure to provide relied-upon material led the Tribunal to conclude that the reopening was procedurally flawed. - Treatment of Competing Arguments: The Revenue argued that sufficient opportunity was provided, but the Tribunal disagreed, citing the absence of material evidence and procedural lapses. - Conclusions: The Tribunal held the notice under Section 148 invalid, leading to the quashing of the reassessment proceedings. Opportunity for Cross-Examination - Legal Framework and Precedents: The right to cross-examine witnesses is a fundamental aspect of natural justice, as upheld by the Supreme Court in Adman Timber Products. - Court's Interpretation and Reasoning: The Tribunal observed that the AO relied on statements from third parties without providing the assessee the opportunity to cross-examine these witnesses. - Key Evidence and Findings: The AO's reliance on statements from Sh. Ashok Kumar Gupta and others without cross-examination was deemed a violation of natural justice. - Application of Law to Facts: The Tribunal emphasized that the lack of cross-examination opportunity invalidated the reliance on such statements. - Treatment of Competing Arguments: The Revenue's defense of procedural adequacy was rejected due to the absence of cross-examination. - Conclusions: The Tribunal found the denial of cross-examination to be a serious procedural flaw. Compliance with Principles of Natural Justice - Legal Framework and Precedents: Natural justice principles require fair hearing and consideration of all relevant information and responses. - Court's Interpretation and Reasoning: The Tribunal noted procedural lapses, including the failure to consider the assessee's responses and provide necessary information. - Key Evidence and Findings: The Tribunal highlighted the AO's failure to consider the assessee's detailed reply and the lack of a speaking order. - Application of Law to Facts: The procedural deficiencies led the Tribunal to conclude that the reassessment was conducted unfairly. - Treatment of Competing Arguments: The Tribunal dismissed the Revenue's claims of procedural compliance due to evident lapses. - Conclusions: The Tribunal held the reassessment proceedings invalid due to violations of natural justice. 3. SIGNIFICANT HOLDINGS - Preserve verbatim quotes of crucial legal reasoning: "The Hon'ble Supreme Court in the case of Ashish Agarwal (supra) has held that AO should supply the relied upon material to the assessee so as to enable him to respond to the show cause notice issued by AO." - Core Principles Established: The necessity of providing complete and specific information to the assessee when reopening assessments, and the requirement for cross-examination to uphold natural justice. - Final Determinations on Each Issue: The Tribunal quashed the reassessment proceedings due to procedural violations, including the lack of specific information, denial of cross-examination, and failure to consider the assessee's responses.
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