2025 (1) TMI 507 - HC - Income Tax

Validity of reassessment proceedings - Shorter time to respond to the notice issued un/s 148A(b) - petitioner was provided seven days to respond to the same, however, three days out of seven days were holidays - HELD THAT - In the present case, the petitioner was required to clearly show the movement of goods to establish that the goods had in fact moved from Shri Ajay Gupta to the petitioner. It does not appear that any such information was provided by the petitioner to the AO. AO, after taking note of the response submitted by the petitioner, issued an order holding that it was a fit case for issuance of notice u/s 148. AO had also noted that the Goods and Service Tax Identification Numbers (GSTIN) of the said dealer (Ajay Gupta) had been cancelled as the concerned authorities had found that the said entities were not involved in actual business activities but were mere shell entities. After issuance of notice u/s 148 AO had also issued notices u/s 142 (1) of the Act and the reassessment proceedings are being conducted. The petitioner has also filed his response to the said notices. The contention that the petitioner was not afforded sufficient time to file a reply to the notice issued u/s 148A (b) of the Act is unpersuasive. The said ground clearly appears to be an afterthought as the petitioner had not made any request for further time to file a response to the said notice. On the contrary, the petitioner had filed his response to the said notice within the stipulated period. Clause (b) of Section 148A of the Act does not stipulate that the Assessee is required to be provided minimum of seven working days. The Assessee is required to be provided notice not being less than seven days but not exceeding thirty days for furnishing his reply. Even if it is accepted that the public holidays are required to be excluded for the purpose of calculation of seven days, the petitioner would be required to file his reply on the next date following the public holiday. However, petitioner did in fact file his reply within the specified period and, therefore, he cannot make any grievance at this stage of not being provided sufficient time to do so. Petition dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the petitioner was granted sufficient time to respond to the notice issued under Section 148A(b) of the Income Tax Act, 1961.
Whether the issuance of notice under Section 148 of the Income Tax Act was justified based on the information available to the Assessing Officer (AO).
Whether the transactions reported by the petitioner were genuine or constituted accommodation entries.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sufficient Time to Respond

Relevant Legal Framework and Precedents: Section 148A(b) of the Income Tax Act requires the AO to provide an opportunity to the assessee to be heard, with a notice period of not less than seven days and not exceeding thirty days.
Court's Interpretation and Reasoning: The court noted that Section 148A(b) does not specify "working days" but simply "days." Therefore, the inclusion of public holidays within the notice period does not violate the statutory requirement.
Key Evidence and Findings: The petitioner was issued a notice on 21.03.2024 and responded on 29.03.2024, within the stipulated period.
Application of Law to Facts: Even if public holidays were to be excluded, the petitioner filed the response within the allowable period, negating the claim of insufficient time.
Treatment of Competing Arguments: The petitioner's argument of insufficient time was deemed an afterthought, as no request for an extension was made.
Conclusions: The court found the petitioner's claim unpersuasive and upheld the sufficiency of the notice period.

Issue 2: Justification for Issuance of Notice under Section 148

Relevant Legal Framework and Precedents: Section 148 of the Income Tax Act allows for reassessment if income has escaped assessment, following procedures in Section 148A.
Court's Interpretation and Reasoning: The AO had credible information suggesting that income had escaped assessment due to transactions with a non-genuine entity.
Key Evidence and Findings: The AO relied on information that the petitioner made purchases from a non-filer, whose GSTIN was canceled due to non-genuine business activities.
Application of Law to Facts: The AO's decision to issue a notice under Section 148 was based on valid grounds, considering the information about accommodation entries.
Treatment of Competing Arguments: The petitioner's evidence of banking transactions did not sufficiently counter the AO's findings of accommodation entries.
Conclusions: The court upheld the AO's decision to issue the notice under Section 148 as justified.

Issue 3: Nature of Transactions

Relevant Legal Framework and Precedents: The genuineness of transactions is assessed based on the movement of goods and the nature of financial transactions.
Court's Interpretation and Reasoning: The petitioner failed to demonstrate the movement of goods, which is crucial to establish the genuineness of the transactions.
Key Evidence and Findings: The AO noted that the petitioner's documentation did not address the core issue of accommodation entries.
Application of Law to Facts: The lack of evidence regarding the movement of goods supported the AO's inference of accommodation entries.
Treatment of Competing Arguments: The petitioner's documentation of banking transactions was insufficient to rebut the AO's findings.
Conclusions: The court agreed with the AO's assessment that the transactions were not genuine.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Clause (b) of Section 148A of the Act does not stipulate that the Assessee is required to be provided minimum of seven working days."
Core Principles Established: The statutory period for response under Section 148A(b) includes all days, not just working days, unless explicitly stated otherwise.
Final Determinations on Each Issue: The petition was dismissed, affirming the adequacy of the notice period, the justification for the reassessment notice, and the AO's findings regarding the nature of the transactions.

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