2023 (3) TMI 862 - HC - Income Tax

Reopening of assessment u/s 147 - accommodation entry receipts - VAT returns filled by assessee to substantiate payments - HELD THAT - As during the investigation it has been found that M/s Seema Enterprises is not involved in any real business and hence the contention of petitioner that it made payments in the course of business was not accepted. AO has specifically recorded that the proprietor Smt. Seema Gupta has accepted that her firm was not engaged in real business activities. This Court is of the view that merely filing of VAT returns cannot be held to establish genuineness of transaction especially when it was not shown that the VAT Department had made any physical or spot enquiry. Moreover, neither M/s Seema Enterprises nor the Petitioner had produced before the AO the transport details, purchase contract or bills with regard to the alleged purchases. Prima facie this Court is also of the view that income has escaped assessment. Decided against assessee.

Summary

Issues involved:
Challenge to notice under Section 148A(b) of the Income Tax Act, 1961 and order under Section 148A(d) for Assessment Year 2014-15.

Analysis:

1. Challenge to Notice and Order:
The petitioner challenged the notice dated 18th May, 2022, issued under Section 148A(b) of the Income Tax Act, 1961, and the order dated 26th July, 2022, passed under Section 148A(d) for the Assessment Year 2014-15. The petitioner argued that the impugned order was arbitrary and cryptic as it alleged that a significant sum had escaped assessment without considering that no accommodation entry was taken. The petitioner contended that their business involved trading in chemical and allied goods, with transactions conducted through proper banking channels with M/s Seema Enterprises. Both parties had filed their DVAT returns, which were acknowledged by the Department. The petitioner claimed that the impugned order lacked proper application of mind and failed to appreciate the nature of their business.

2. Investigation Findings:
Upon reviewing the investigation findings, it was revealed that M/s Seema Enterprises was not engaged in genuine business activities, contradicting the petitioner's assertion of legitimate transactions. The Assessing Officer noted that the proprietor of M/s Seema Enterprises had admitted the absence of real business activities. The court emphasized that merely filing VAT returns did not conclusively establish the genuineness of transactions, especially in the absence of physical verification by the VAT Department. Neither M/s Seema Enterprises nor the petitioner provided transport details, purchase contracts, or bills related to the alleged purchases. Consequently, the court opined that there was a prima facie case of income escaping assessment, supporting the Assessing Officer's decision.

3. Court Decision:
The court found no error in the impugned order and disposed of the writ petition. The petitioner was granted liberty to submit all relevant documents and evidence, as well as present their contentions and submissions before the Assessing Officer for further consideration. The judgment upheld the validity of the notice and order issued under the Income Tax Act, 1961, for the specified Assessment Year 2014-15.