2 Bogus Purchase: AO cannot reject reply without recording satisfaction

Case Law Details

Case Name : Abhinav Mittal Vs Union of India (Gauhati High Court)
Appeal Number : Case No. : WP(C)/3067/2022
Date of Judgement/Order : 11/05/2022
Related Assessment Year :

Abhinav Mittal Vs Union of India (Gauhati High Court)

ITAT held that A transaction of purchase and a transaction of sale are two different transactions in two opposite directions. If the allegation is that bogus purchases were made and the reply given thereof is that no such purchases were made, but in fact it was a sale by the assessee, it was for the Income Tax officials to apply their own mind on the reply given by the petitioner.

Conveniently, the Assistant Commissioner converts the allegation made in the show cause notice from a bogus purchase to that of a sale after the reply of the petitioner and also instead of arriving at any satisfaction, the Assistant Commissioner merely expressed that it is rather strange that the assessee had acted in the manner indicated therein.

In view of the above, we interfere with the order dated 31.03.2022 and remand the matter back to the Assistant Commissioner for an appropriate order to be passed as required under the law by arriving at a satisfaction regarding acceptability/non-acceptability of the reply given by the petitioner vis-à-vis the allegation in the show cause notice under Section 148A of the Income Tax Act.

FULL TEXT OF THE JUDGMENT/ORDER OF GAUHATI HIGH COURT

Heard Mr. A Jain, learned counsel for the petitioner. Also heard Mr. H Gupta, learned counsel for the respondents in the Income Tax Department.

2. A notice under Section 148A of the Income Tax Act, 1961 dated 21.03.2022 was issued to the petitioner assessee wherein in paragraph 1 of the Annexure thereto it was provided as extracted:

1.Information has been received through Insight Portal under High RiskCase Related Information that Sri Abhinav Mittal had made bogus purchases from M/s. Swastik traders, Prop. Shri Rahul Bhuraria for Rs.40,86,573/- and M/s Kalki Trading Company, Prop. Shri Deepesh Goel for Rs.25,94,075/- during the financial year 2017­18.”

3. A reading of the said paragraph 1 prima facie indicates that the allegation against the petitioner is that he had made bogus purchase from M/s. Swastik Traders whose proprietor is Rahul Bhuraria for an amount of Rs.40,86,573/- and M/s Kalki Trading Company whose proprietor is Shri Deepesh Goel for an amount of Rs.25,94,075/- during the financial year 2017-18.

4. The petitioner in response thereof had given a reply before the Assessment Officer that he had not made any purchase as alleged in the notice under Section 148(A), but on the other hand for an equivalent amount for the period 2017-18, he has sold Kabuli Channa and Rajma to M/s. Swastik Traders and Kalki Trading Company of the said amount.

5. A transaction of purchase and a transaction of sale are two different transactions in two opposite directions. If the allegation is that bogus purchases were made and the reply given thereof is that no such purchases were made, but in fact it was a sale by the assessee, it was for the Income Tax officials to apply their own mind on the reply given by the petitioner.

6. By the order dated 31.03.2022 of the Assistant Commissioner the only satisfaction that was arrived at is as extracted:

“….It is rather strange that the assessee had made the exact sale amount towards sale of kabuli chana, as against the alleged bogus sale reported in the information received through Risk Management Strategy of the Board…”

7. Conveniently, the Assistant Commissioner converts the allegation made in the show cause notice from a bogus purchase to that of a sale after the reply of the petitioner and also instead of arriving at any satisfaction, the Assistant Commissioner merely expressed that it is rather strange that the assessee had acted in the manner indicated therein.

8. In view of the above, we interfere with the order dated 31.03.2022 and remand the matter back to the Assistant Commissioner for an appropriate order to be passed as required under the law by arriving at a satisfaction regarding acceptability/non-acceptability of the reply given by the petitioner vis-à-vis the allegation in the show cause notice under Section 148A of the Income Tax Act.

9. We make it clear that we are not interfering with the order for any other reason other than what is indicated above and the Assistant Commissioner would proceed de-novo from the stage of show cause reply being submitted by the petitioner.

10. Writ petition stands disposed of in the above terms.

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