C. C. Dangi & Associates Vs ACIT (Bombay High Court)
Penalty was leviable on PCIT and JAO for mechanically passing the orders in the reassessment proceedings without application of mind
Conclusion: AO merely on the basis of the information as found from the CGST authorities that certain entities were engaged in issuing/generating/providing fake/bogus invoices to pass on a fraudulent “Input tax credit” (“ITC”) without supply could not have proceeded to take steps to reopen assessee’s assessment, when none of the materials from the CGST portal were relevant qua assessee was concerned. Such non-application of mind had caused serious prejudice and harassment to assessee
Held: The primary contention urged by assessee was that the entire basis to issue the same was on a report generated by the Central Goods and Service Tax (“CGST”) Authorities that certain entities were engaged in issuing/generating/providing fake/bogus invoices to pass on a fraudulent “Input Tax Credit” (“ITC”) without supply. In so far as assessee was concerned, this was in relation to an entity M/s Flash Forge Private Limited which according to AO had issued fake invoices in favour of assessee amounting to Rs.10,97,500/- for the assessment year in question. It was on such count the case of the department was that income in the sum of Rs. 10,97,500/- chargeable to tax had escaped assessment, as assessee had not set out as to what kind of professional services were rendered by it to M/s Flash Forge. AO hence had found it appropriate to reopen assessee’s assessment. A prior approval was sought to pass the order u/s 148A(d) from the Specified Authority, Principal Commissioner of Income Tax and after receiving the prior approval from the specified authority, an order u/s 148A(d) was passed. It was held that AO merely on the basis of the information as found from the CGST authorities could not have proceeded to take steps to reopen assessee’s assessment, when none of the materials from the CGST portal were relevant qua assessee was concerned. In Samp Furniture Private Limited vs. Income Tax Officer, Ward 3(3)-Thane & Ors1 this Court observed that the Chief Commissioner of Income Tax had acted with total non-application of mind in granting approval in question in the said case. It was observed that such non-application of mind had caused serious prejudice and harassment to assessee therein. The Court also observed that the provisions of the Act would in no manner justify such action permitting the Chief Commissioner to exercise powers under Section 151 in such arbitrary manner. The Court also observed that in fact in exercising authority in such manner, the whole purpose of sanction under Section 151 stood defeated, in resorting to an action being taken against the object and spirit of the provisions of law resulting in serious consequences. The Court reprimanded such actions and considering such conduct, it imposed cost of Rs.25,000/- on the Jurisdictional Assessing Officer (“JAO ” for short) and Chief Commissioner of Income Tax to be deposited personally. Following the same, appeal of assessee succeeds.
