Case Law Details
Hassan Laxman Rao Vidya Vs ITO (ITAT Bangalore)
The assessee appealed against the order dated 07.02.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi under Section 250 of the Income-tax Act, 1961 for Assessment Year 2018-19. The appeal challenged, among other grounds, the addition of Rs. 1,30,05,200 on account of alleged bogus purchases, the ex parte appellate order, and alleged violations of Sections 250(4) and 250(6) and the principles of natural justice.
The assessee had filed the return of income on 31.10.2018 declaring total income of Rs. 15,69,810. During scrutiny assessment, the Assessing Officer received information from the Investigation Wing alleging that the assessee had generated fictitious bills/invoices along with e-way bills without actual movement of goods or services. Notices under Sections 143(2) and 142(1) were issued seeking information. The assessee furnished part of the information and sought time to submit the remaining documents. Despite a further opportunity and a show cause notice regarding purchases of Rs. 1,30,05,200 from ARS Enterprises and Suman Fin Stock, the assessee did not furnish documentary evidence such as bills, receipts and vouchers. Consequently, by order dated 24.09.2021 under Section 143(3) read with Section 144B, the Assessing Officer treated the purchases as bogus and added the amount to the assessee’s income.
The CIT(A) dismissed the appeal ex parte due to non-compliance with hearing notices.
Before the Tribunal, the assessee submitted that all information sought by the Assessing Officer was available but could not be furnished during the COVID pandemic, and requested one more opportunity to produce the documents for verification. The Departmental Representative supported the orders of the lower authorities, stating that sufficient opportunities had already been granted.
After considering the submissions and material on record, the Tribunal considered it appropriate to grant the assessee another opportunity to substantiate the claim. It restored the matter to the jurisdictional Assessing Officer for de novo adjudication after verification of the information and documents to be furnished by the assessee. The Tribunal also directed that the Assessing Officer would be at liberty to call for any further information necessary for complete adjudication, the assessee should fully cooperate in the assessment proceedings, and no order should be passed without affording the assessee a reasonable opportunity of hearing. The impugned order was set aside, and the appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. The assessee has filed the present appeal against the impugned order dated 07.02.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”] for the assessment year 2018-19.
2. In this appeal, the assessee has raised the following grounds: –
1. The impugned order passed by the Learned CIT(A) and AO, to the extent prejudicial to the Appellant, is not justified in law and on the facts and circumstances of the case.
2. The learned CIT(A) has erred in law and on facts in upholding the order of the Learned AO.
3. The learned CIT(A) and AO have erred in law and on facts in passing the order against the principles of natural justice.
4. The Order of CIT(A),that is against the provisions of section 250(4) and (6) of the Act, is bad in law and therefore liable to be quashed;
5. The Ld.CIT(A) and AO have erred in sustaining the addition of Rs. 130,05,000 by considering the purchases to be bogus in nature;
6. That the A.O. has erred in doubting the purchases are made only in the last fag of the end of the year without appreciating that the Appellant is supplying the goods when there is an order from the keonics (a Karnataka State Government Enterprise).
7. The A.O. has erred in considering the assessment on a fair and accurate basis and taking the figures for additions to the income is totally baseless.
8. The mere reliance by the A.O. on information obtained from the sales tax department would not be sufficient to trust that the purchases are bogus and thereafter to make an addition to the income already declared. If the A.O. had doubted the genuineness of the purchase, it was incumbent upon the A.O. to have caused further enquiries in the matter to ascertain the genuineness of the transaction.
9. The Ld.CIT(A)/AO have not brought on record any material evidence to conclusively prove that the said purchases are bogus. Mere reliance by the A.O. on information obtained from the sales tax department without affording the Assessee any sufficient opportunity examine those bogus purchases.
10. Without causing any further enquiries with respect to the said purchases. The Ld.A.O. cannot make the additions and consider the total income u/s 143(3). The A.O. has failed to cause any enquiry to be made to establish his suspicion that the said purchases are bogus.
11. If the purchases were held to the bogus, then as a logical consequence, the sale also had to be held as bogus. When the Ld.A.O. believed all the sales and held the same as genuine sales, there was no reason to come to the conclusion that the purchases are bogus. Further, it is to be noted that one limb of the transaction cannot be accepted while rejecting the other limb of the same transaction.
12. When one to one reconsideration of purchase and sales is made by the Appellant, no disallowances can be made. And no additions can be made to the net profit when the net profit declared in sales purchases was fair and reasonable.
13. The Ld.AO has erred in law and on the facts in levying interest under section 234A/B and 234C of the Act;
14. The Ld.AO, based on the above, has erred in law and on facts in levying penalty based on the above addition.
3. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is an individual and for the year under consideration filed his return of income on 31.10.2018, declaring a total income of Rs. 15,69,810/-. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, information was received from the Investigation Wing that the assessee has resorted to bogus purchases by generating fictitious bills/invoices along with E-way bills without the actual moment of goods or services. To verify the information, notices were issued to the assessee requiring certain information. In response, the assessee furnished part of the information and assured to submit the remaining information in due course. Accordingly, another opportunity was granted to the assessee to furnish the necessary documents for verifying the genuineness of the purchases made by the assessee. However, no compliance was made by the assessee even after issuance of a show cause notice asking the assessee to explain as to why the purchases amounting to Rs. 1,30,05,200/- made by ARS Enterprises and Suman Fin Stock should not be treated as bogus and brought to tax in the hands of the assessee. As the assessee could not furnish the necessary documentary evidence like bills, receipts, vouchers, etc., the Assessing Officer (“AO”) vide order dated 24.09.2021 passed under section 143(3) r.w.s. 144B of the Act treated the purchases amounting to Rs. 1,30,05,200/- made from the aforesaid two entities as bogus and added the said amount to the total income of the assessee.
4. The learned CIT(A) dismissed the appeal filed by the assessee vide ex parte order in the absence of any compliance by the assessee with the notices issued for hearing. Being aggrieved, the assessee is in appeal before us.
5. During the hearing, the learned Authorised Representative (“learned AR”) submitted that all the information as sought by the AO is available with the assessee and due to the COVID pandemic, all these details could not be filed before the AO to substantiate the genuineness of purchase transactions, which are alleged to be bogus. The learned AR submitted that, given an opportunity, the assessee shall furnish all these details before the AO for necessary examination.
6. On the other hand, the learned Departmental Representative, by vehemently relying upon the order passed by the lower authorities, submitted that sufficient opportunities were granted to the assessee to furnish all the information/documents in support of its claim.
7. Having considered the submissions of both sides and perused the material available on record, we deem it appropriate to grant one more opportunity to the assessee to substantiate its claim before the AO and furnish all the information/documents in support of its claim for necessary verification by the AO. Accordingly, in the interest of justice and fair play, we restore this matter to the file of the Jurisdictional AO for de novo adjudication after verification/examination of the details and information as may be filed by the assessee. As the matter has been restored to the file of the AO for consideration afresh, the AO shall be at liberty to call for any other information as may be required for complete adjudication of the issue. We further direct the assessee to fully cooperate in the assessment proceedings. Needless to mention, no order shall be passed without affording reasonable opportunity of hearing to the assessee. With the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.
8. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 29th June, 2026
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