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TMI Blog2025 (4) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... received accommodation entries in the shape of bogus purchases from one Sh. Ashok Gupta and other entities controlled and managed by him amounting to Rs. 5,58,30,830/-, initiated the proceedings by way of issue of notice u/s 148A(b) of the Act. Thereafter, order u/s 148A(d) was passed on 23rd March, 2022 holding that income to this extent has escaped assessment, and, subsequently, notice u/s 148 was issued on 29.03.2022 after prior approval of PCIT. In response, the assessee has filed the return of income on 06.12.2022 decaling the same income as was declared in the return filed u/s 139(1) of the Act. The reassessment order was passed vide order dated 27.03.2023 wherein the AO has made total addition of Rs. 5,43,82,576/- being the gross value of purchases made from three entities alleged as bogus being made from the entities control and managed by Sh. Ashok Kumar Gupta. Against such order, the assessee preferred appeal before ld. CIT(A), who vide impugned order dated 30.08.2024 though has dismissed the legal ground taken by the assessee regarding re- opening u/s 148, however, has reduced the addition from Rs. 5,43,82,576 to Rs. 4,78,566/- by applying G.P rate of 0.88% on such alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid order u/s 148A(d) dated 24.03.2022 and consequential invalid jurisdictional notice u/s 148 dated 29.03.2022 and there is total non-application of mind at all stages of proceeding. 3. That based on admitted and undisputed facts impugned assessment order passed u/s 147/1448 dated 27.03.2023 and impugned first appeal order dated 30.08.2024 are both invalid being made without requisite/valid sanction u/s 151 of 1961 Act. 4. That based on admitted and undisputed facts impugned assessment order passed u/s 147/1448 dated 27.03.2023 and impugned first appeal order dated 30.08.2024 are both invalid being based on vague and nonspecific SCN U/s 148A(b) dated 11.03.2022 and without considering the reply filed 24.03.2022 which vitiates the Impugned reopening filed U/s 1481(c) dated action u/s 148/1484 of the Act. 5. That based on admitted and undisputed facts impugned assessment order passed u/s 147/1440 dated 27.03.2023 and impugned first appeal order dated 30.08.2024 are both invalid being contrary to mandate of article 265 of constitution of India. And is totally arbitrary, perverse, irrational and is violation of mandate the of section 144B of 1961 Act. 6. That based on admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the details contained in Annexure A, a notice section 148 of the Income tax Act, 1961 should not be issued. 3. You may, to the extent technologically feasible, submit your response with supporting documents (if any) on the above mentioned issues electronically in 'e-proceeding' facility through your account in e-filing portal at your convenience on or before 18/03/2022. 4. This notice is being issued after obtaining the prior approval of the PCIT, Delhi-20 accorded on date 11/03/2022 vide Reference No. 100000028952243. ANNEXURE Information received though Insight Portal (High risk Transaction on verification module of Insight Portal) in the case of M/s B. C. Enterprises Pan AAAFB7728A for the AY 2018-19 that the assessee has made bogus purchases in form of accommodation entries provided by Ashok Kumar Gupta & entities operated and controlled by him amounting to Rs. 5,58,30,830 /- during the FY 2017-18." 6. The Ld. AR argued that from the perusal of the said notice, it is clear that the AO in Annexure 'A' has referred certain information received through insight portal of the Department, according to which the assessee has made bogus purchase provided by Sh. Ash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the attendant consequences. 154 The effect of a legal fiction is that "a position which otherwise would not obtain is deemed to obtain under the circumstances. "155 In K Prabhakaran v. P Jayarajan, 156 Chief Justice R C Lahoti, speaking for the majority, observed that: "39. [...] While pressing into service a legal fiction it should not be forgotten that legal fictions are created only for some definite purpose and the fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field. A legal fiction presupposes the existence of the state of facts which may not exist and then works out the consequences which flow from that state of facts. Such consequences have got to be worked out only to their logical extent having due regard to the purpose for which the legal fiction has been created. Stretching the consequences beyond what logically flows amounts to an illegitimate extension of the purpose of the legal fiction." 98. A legal fiction is created for a definite purpose and it should be limited to the purpose for which it is enacted or applied. It is a well-established principle of interpretation that the courts must giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) issuance of a show cause notice; and (ii) supply of all the relevant information which forms the basis of the show cause notice. The supply of the relevant material and information allows the assessee to respond to the show cause notice. The deemed notices were effectively incomplete because the other requirement of supplying the relevant material or information to the assesses was not fulfilled. The second requirement could only have been fulfilled by the Revenue by an actual supply of the relevant material or information that formed the basis of the deemed notice. 102. While creating the legal fiction in Ashish Agarwal (supra), this Court was cognizant of the fact that the assessing officers were effectively inhibited from performing their responsibility under Section 148A until the requirement of supply of relevant material and information to the assesses was fulfilled. This Court lifted the inhibition by directing the assessing officers to supply the assesses with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. Thus, during the period between the issuance of the deemed notices and the date of judgment in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rves to be held bad in law and all the proceedings including the reassessment orders deserves to be quashed. 9. On the other hand, Ld. Sr. DR vehemently supported the orders of the lower authorities and submitted that in the present case, opportunity was provided to the assessee vide notice issued u/s 148A(b) but the assessee has not made any compliance within the time provided, therefore, the AO was of the opinion the assessee is involved in high value financial transactions of bogus purchases with the sole intention to evade tax. He further submitted that the AO during the course of assessment proceedings has issued show cause notice, wherein all the material available was confronted with the assessee, thus, it is wrong to say that the Assessing Officer has not provided the information to the assessee. Rather, the assessee has failed to justify the purchases made from three entities managed and controlled by Shri Ashok Kumar Gupta. Therefore, he requested that the reassessment proceedings were rightly initiated in the case of the assessee and the same deserves to be uphold. 10. We have heard the rival submissions and perused the material available on record. In the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 2 [relate to, the assessee; or (d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.] Explanation.-For the purposes of this section, specified authority means the specified authority referred to in section 151.]" 12. From the perusal of the provisions of section 148A, it is clearly provided in sub-section (a) that before issue of noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 as he failed to appreciate the intent of the legislation behind introduction of provisions of section148A before issue of notice u/s 148 of the Act. The 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. We also observed that ld. CIT(A) while dismissing this plea of the assessee in para 5.4.3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extraction the appellant wanted from them." [Emphasis supplied]" 15. The Co-ordinate Bench of Tribunal in the case of Best City Infrastructure Ltd. vide order dated 31.05.2016 has held that not providing opportunity of cross examination makes the addition invalid. This order is upheld by Hon'ble Delhi High Court as reported in 397 ITR 82. Similar view is expressed by Hon'ble High Courts in following cases: -PCIT vs. Pavitra Realcom Pvt. Ltd. in ITA No.579/2018 (Delhi) -PCIT vs. Esspal International Pvt. Ltd. in ITA No.25/2024 (Rajsthan) -Dr. M. Malliya vs. ACIT in TCA No.284/11 (Madras). Therefore, not providing the opportunity to cross examine the witness whose statements are relied upon by the Revenue is gross violation of principal of natural justice. Moreover, the AO has failed to consider the reply filed by the assessee in response to notice issued u/s 148A(b) of the Act. Hon'ble Rajsthan High Court in the case of R.K. Buildcreations (Pvt.) Ltd. vs. ITO reported in [2024] 462 ITR 478 (Raj) has held as under: "It is mandatory for the AO to pass speaking order, taking into consideration not only the material on record but also the reply filed. The additional reply dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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