GST Data Sufficient for Reopening Bogus-Purchase Case: Delhi ITAT Remands Merits

Harsh Jindal Pranshu Goel Vs ITO (ITAT Delhi)

GST Information Was Sufficient to Reopen Alleged Bogus-Purchase Case; Delhi ITAT Remands Merits to CIT(A)

The assessee filed his return for AY 2018-19, declaring taxable income of ₹12,69,970. Based on information received through the Insight Portal, the Department alleged that he had obtained bogus purchase entries of ₹77,71,894 from concerns connected with Deepak Sharma.

A search conducted in the case of Deepak Sharma revealed that two GST registrations—Shri Salasar Balaji Industries and GS Industries-were linked to his PAN. The GST registration of GS Industries had been cancelled suo motu from 10 October 2017. No books of account or stock relating to the stated metal-trading business were found at the declared premises, giving rise to the allegation that the concerns were engaged in providing accommodation entries.

The assessee argued that the reassessment was invalid because the satisfaction for reopening had been recorded before Deepak Sharma’s statement dated 14 July 2022 was recorded.

The ITAT rejected this jurisdictional contention. It held that the reopening was not dependent solely upon the later statement. The information already available from the official GST portal, including the GST registrations, cancellation and suspected non-genuine business activity, was sufficient to form a prima facie view that income had escaped assessment.

However, the Tribunal noted that the assessee had not effectively participated in the reassessment proceedings and had not filed proper written submissions before the CIT(A), though a paper book had been uploaded. Therefore, the matter was restored to the CIT(A) for fresh adjudication on merits.

The CIT(A) was directed to consider the existing evidence and any further evidence produced by the assessee, grant a proper opportunity of hearing and pass a reasoned order. The appeal was allowed for statistical purposes.

List of Cases Discussed / Relied Upon

• Harsh Jindal Pranshu Goel Vs ITO (ITAT Delhi)

FULL TEXT OF THE ORDER OF ITAT DELHI

The instant appeal filed by the assessee is directed against the order dated 12.03.2025 passed by the Commissioner of Income Tax (Appeals)-Delhi under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 19.03.2023passed by the Assessment Unit, Inco me Tax Department under Section 147 r.w.s. 144 r.w.s. 144B of the Act for Assessment Year 2018-19.

2. The assessee, an individual, filed his return of income declaring income of Rs. 9,67,501/- including capital gains of Rs. 3,92,880/- and income from other sources of Rs. 74,823/-. On the gross total of income of Rs. 14,35,204/-, the assessee claimed deduction under Chapter VI-A of Rs. 1,65,235/- and declared ultimate taxable income of Rs. 12,69,970/- which was processed under Section 143(1) of the Act on 05.12.2018.

3. Subsequently, on the basis of information received through Insight Portal under the High Rish CRIU/VRU that the assessee was a beneficiary of bogus purchases amounting to Rs. 77,71,894/- from Shri Deepak Sharma, proceeding under Section 148A of the Act was initiated by serving notice upon the assessee. However, no response was made by the assessee and, therefore, finally proceeding was completed upon making addition the hands of the assessee which was is turn confirmed by the Ld. CIT(A). Hence the instant appeal before us.

4. The brief facts leading to this case is this that a search under Section 132 of the Act was conducted in the case of Shri Deepak Sharma Group of Mandi, Gobindgarh. Further, information was available on the official GST Portal, that two GST Nos. being 03BGPPS4292E2Z4 (Shri Salasar Balaji Industry) & 03BGPPS4292E1Z5 (GS Industries) were registered against PAN of Shri Deepak Sharma.

4.1. The said GST number in favour of GS Industries was cancelled by GST Authorities suo-moto w.e.f. 10.10.2017. There was also allegation that the Assessee was beneficiary of bogus accommodation entries with respect to purchases made from Shri Deepak Sharma. Relevant to mention that the Assessee declared purchase of Rs. 77,71,894/-from Shri Deepak Sharma. Furthermore during the search Shri Deepak Sharma stated that he maintained books of accounts at 431, Sector-10A, Mandi Gobindgarh though no books of accounts was fo und. It had also been mentioned in the Form-3CD that Deepak Sharma does wholesale trading of metal and metal ores. Relevant to mention that during search, no goods related to the said business was ever found. While recording statement under Section 131(1A) of the Act, Shri Deepak Sharma on 14.07.2022 was specifically confronted about the entities registered with GST department under his PAN wherein he had admitte d of not having any genuine business and so it was used to provide accommodation entries. The statement already been reproduced in the AO’s order placed before us. On the basis of such finding of fact, proceedings under Section 148 of the Act was initiated and in the absence of any explanation rendered by the assessee, finally, show-cause was issued and upon rejecting books of accounts, the AO made the addition of Rs. 9,67,501/-.

4.2. The Assessee filed appeal with Ld. CIT(A), who dismissed the appeal of the Assessee by holding as under:

6. DECISION:

6.1 I have carefully considered the grounds of appeal, statement of facts, submissions made from time to time and the details mentioned in the assessment order. The appellant has filed 9 grounds of appeal. Grounds no. 1, 2 and 9 are general in nature and do not require separate adjudication. Ground no. 6 relates to initiation of penalty proceedings and is dismissed for being premature. Ground no. 4 states that the AO has not followed the SOPs issued by the CBDT. This ground is not substantiated and no details have been given regarding which SOPs the AO has not followed. Hence this ground is dismissed for being unsubstantiated.

6.2 Grounds no. 3 and 5 relate to the rejection of books of accounts and addition made on account of alleged bogus purchases. It is seen that no separate addition on account of bogus purchases has been made. The AO rejected the books of accounts u/s 145(3) and estimated business income at Rs. 1,06,08,286/- after determining turnover of Rs. 13,25,78,569/-. Since business income of Rs. 9,67,501/- already stood declared, the AO made an addition of Rs. 96,38,785/-. During the appeal proceedings, the appellant has not filed any written explanation but has uploaded a paper book containing documents as per index reproduced at Para 5 above. It is seen that in the reply filed before the AO on 2/2/2023, the appellant had given only basic details like computation of income, Balance Sheet, P&L account, Tax Audit report and details of offices, godowns etc. These same details have been uploaded as a paper book in the appeal proceedings. It is seen that apart from stating that its books are audited, the appellant has furnished no explanation to the specific points raised by the AO in the show cause issued on 30.01.2023, which is reproduced at Para 5 above. No explanation or details on these specific points have been filed in the present appeal proceedings either.

6.3 It is seen that the AO has pointed out the following discrepancies, which led the AO to conclude that the books of accounts were not accurate:

(i) As per information received and details gathered from the GST portal by the AO, the appellant had shown bogus purchases of Rs. 77,77,984/- from the concern of one Mr. Deepak Sharma. Search u/s 132 was conducted on Mr. Deepak Sharma and it was found that Mr. Deepak Sharma was not involved in any genuine business activity. From the GST portal, it was found that the GST number of GS Industries (one of the bogus concerns of Shri Deepak Sharma) was cancelled w.e.f. 10.10.2017. The appellant has not furnished any documents which establish that he had physically received goods from Mr. Deepak Sharma.

(ii) Notice u/s 133(6) was issued by the AO to various suppliers and it was found that though the appellant had shown purchases of Rs. 3,89,840/- from Satpal Singh, the supplier informed that purchases actually stood at Rs. 13,79,305/-. After making allowance for GST, the AO held that purchases to the extent of Rs. 5,53,300/- were unaccounted. The appellant has not furnished any reply to explain the above anomaly.

(iii) Total deposits in the current account with the Bank of Karnataka stood at Rs. 12,08,77,585/-, whereas the total turnover declared was only Rs. 3,49,05,895/-. There is no explanation submitted for this major discrepancy.

(iv) Total deposits in the saving bank account with the Bank of Karnataka stood at Rs. 59,55,516/-. Out of this, the AO identified deposits to the extent of Rs. 49,50,000/- as representing business receipts.

The Assessee filed appeal with Ld. CIT(A), who dismissed the appeal the Assessee by holding as under:-

No explanation has been given regarding the aforesaid receipts, and as to whether the same were accounted for in the declared turnover.

6.4 In view of the specific discrepancies pointed out by the AO, as enumerated at Para 6.3 above, the action of the AO in rejecting the books of accounts u/s 145(3) is hereby upheld. The AO adopted the deposits in the current bank account as the business turnover, to which he added the deposits of Rs. 49,50,000/- in the savings bank account which were clearly in the nature of business receipts. Thus the AO has correctly calculated the business turnover as Rs. 13,25,78,569/- (12728569 plus 4950000) and estimated business income by adopting the rate of 8%. The estimation of business income at Rs. 1,06,06,286/- (being 8% of the turnover of Rs. 132578569) is hereby upheld. Grounds no. 3 and 5 are dismissed.

6.5 Ground no. 6 relates to income of Rs. 3,92,880/- being shown as short term capital gain, taxable @ 15%. The appellant had not given any documentary evidence to establish that STCG of Rs. 3,92,880/- had been earned during the year. Hence this income was held to be income from other sources, to be taxed at normal rates. No evidence in support of STCG has been filed during the appeal proceedings, which would justify charging of tax at the concessional rate of 15%. Thus the action of the AO in taxing income of Rs. 3,92,880/- at the normal rates of taxation is hereby upheld and ground no. 6 is dismissed. It may be mentioned here that the AO has not directed the income to be taxed u/s 115BBE, as claimed in the ground of appeal.

6.7 Ground no. 7 relates to deduction u/s 80C and 80D not being allowed on amounts paid for LIC premium (Rs. 1,50,053/-) and medical insurance premium (Rs. 6,206/-). The AO did not allow any chapter VI-A deductions as proof of payment was not furnished. No proof has been furnished during the present appeal proceedings. Hence the disallowance of chapter VI-A deductions is upheld and ground no. 7 is dismissed.

5. It is the case of the assessee that the satisfaction recorded was the basis of his statement recorded on 14.07.2022 for reopening was sought to be recorded on 17.03.2022 the statement of Shri Deepak Sharma void-ab-initio and liable to be quashed.

6. However, it appears from the records that on the basis of information available on official GST Portal, “services.gst.gov.in”. two GST numbers03BGPPS4292E2Z4 (Shri Salasar Balaji Indu stries) and 03BGPPS4292E1Z5 (GS Industries) were registered aga inst PAN BGPPS4292E of Sh. Deepak Sharma. The said GST numb er in favour of GS Industries was cancelled by GST Authorities suo-moto w.e.f 10.10.2017. There was also allegation that the Assessee was beneficiary of bogus accommodation entries with respect to purchases made from Shri Deepak Sharma. In the form 3CD, further Shri Deepak Sharma stated that he maintains books of accounts at 431, Sector-10A, Mandi Gobindgarh, but on such books of accounts was found. It was further mentioned in Form 3CD that Shri Sharma does wholesale trading of metal and metal ores but no such goods related to the said business was found. In that view of the matter, the Ld. A.O. was of the view that no genuine business activities was undertaken by Shri Deepak Sharma at the declared business address. It further appears that during the assessment proceedings in-spite of several notices having been served, no compliance was received from the Assessee. Finally on receipt of the show cause notice, a written submission dated 02.02.2023 along with some documents that too partial compliance to the notice before under Section 142(1) of the Act was made by the Assessee. However, no explanation has been rendered by the Assessee in regard to the issues raised in show cause notice but adjournment for compliance were sought for which was also granted. However, since nothing was forthcoming from the Assessee, the assessment was finalized upon making addition in the hands of the assessee. Therefore, it is clearly evident that the Assessee never participated in the proceeding under Section 148A(b)/148A(d) of the Act.

7. Even before the Ld. CIT(A) no written explanation was filed by the Assessee except uploading paperbook containing documents, whereas the Assessee was granted liberty to adduce evidence in support of the case made out. We further note that the statement made by Sh. Deepak Sharma, under these facts and circumstances of the matter, having no relevance as the information from GST as narrated hereinabove which is found enough to record satisfaction of prima facie view of escapement of assessment by the Assessee and, therefore, the argument advanced by the Ld. AR that the satisfaction recorded dated 14.07.2022 was on the basis of the statement recorded on 17.03.2022 since much prior to the statement of Shri Sharma, the entire proceeding is vitiated is found to be no legs to stand upon. In that view of the matter, in our considered opinion the matter may be sent for consideration of the issue before the Ld. CIT(A). Thus, with the above observation we set aside the issues to the file of the Ld. CIT(A) for consideration of the same afresh upon granting an opportunity of being heard to the assessee. The Ld. CIT(A) is further directed to pass a reasoned order upon considering the evidences on record or any other evidence which the assessee choose to file at the time of hearing of the matter.

8. In the result, appeal filed by the Assessee is allowed for statistical purposes.

Order pronounced in the open court on 18/08/2026.