ITAT Ahmedabad Quashes ₹116 Cr Bogus Sales Addition – Reopening Time-Barred

ITO Vs Pel Industries Limited (ITAT Ahmedabad)

ITAT Ahmedabad Quashes ₹116 Cr Bogus Sales Addition – Reopening Time-Barred; ITAT Ahmedabad Quashes Reopening – Revenue’s Appeal Dismissed in ₹116 Cr Bogus Sales Case

AO had reopened assessment u/s 147 based on information from Investigation Wing alleging that Assessee had shown bogus sales of ₹116.01 crore to M/s Pankaj Metals.

AO treated the entire sales as accommodation entries & added ₹116.01 crore u/s 68. On appeal, CIT(A) deleted the addition. Revenue carried the matter to ITAT

Revenue’s Arguments

• Information from Investigation Wing & contradictory statements of directors of Pankaj Metals proved that sales were only paper entries.
• Notices u/s 133(6) to purchase parties were not replied to, hence genuineness of transactions not proved.
• VAT returns & transaction registers filed by assessee were not reliable

Assessee’s Arguments

• Entire sales cannot be treated as bogus without also treating corresponding purchases as bogus.
• Relied on Rule 27 of ITAT Rules, raising a legal ground that reopening u/s 147 was invalid.
• Notice u/s 148 dated 25.06.2021 was beyond 3 years from end of AY 2015-16, hence barred.
• Second notice dated 24.08.2022 was beyond 6 years, hence also barred.
• Relied on SC in Deepak Steel & Power Ltd. (174 taxmann.com 144) & Gujarat HC in Mayurkumar Babubhai Patel (176 taxmann.com 25) which held that all notices for AY 2015-16 issued on/after 01.04.2021 are invalid

Tribunal’s Findings

• First notice (25.06.2021) was beyond 3 years – invalid.
• Second notice (24.08.2022) was beyond 6 years – time barred.
• Following SC in Deepak Steel & Guj HC in Mayurkumar Patel, reopening itself was time-barred & invalid.
• Since reopening failed, there was no need to examine merits of bogus sales addition

Outcome

• Reopening quashed as time-barred.
• Revenue’s appeal dismissed in full.
• Addition of ₹116.01 crore deleted

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD