Case Law Details

Case Name : Kalu Singh Vs ITO (ITAT Bangalore)
Appeal Number : ITA No.784/Bang/2023
Date of Judgement/Order : 15/11/2023
Related Assessment Year : 2018-19

Kalu Singh Vs ITO (ITAT Bangalore)

Introduction: The recent order by the Income Tax Appellate Tribunal (ITAT) Bangalore has stirred attention in the case of Kalu Singh Vs ITO. The appeal is against the order passed by the NFAC under section 250 of the Income-tax Act, 1961, for the assessment year 2018-19, dated 30.8.2023. The appellant challenges the order on grounds of non-consideration of material, lack of natural justice, and disputing the characterization of purchases as bogus.

Detailed Analysis: The appellant raised multifaceted grounds against the lower authorities, emphasizing non-consideration of material and absence of principles of natural justice. Key contentions include the alleged error in concluding purchases of Rs. 9,99,250 as bogus and disallowing the amount under section 69C of the Act.

The ITAT’s observation highlights the need for detailed consideration of the evidence provided by the appellant, such as ledger statements, purchase invoices, GST records, and bank statements. The tribunal questioned the basis of the alleged bogus purchases and the absence of specific information from the income tax department.

In the course of the proceedings, the draft assessment order proposed disallowance of the entire sum of Rs. 9,99,250 without proper computation of tax liability. The subsequent assessment order confirmed this disallowance, charging it to tax under section 115BBE of the Act, accompanied by substantial interest.

The appellant’s plea for relief from interest payments and denial of liability sets the stage for a comprehensive re-evaluation of the case.

Conclusion: The ITAT, acknowledging the importance of natural justice, has partly allowed the appeal for statistical purposes. The decision directs the National Faceless Assessment Centre (NFAC) to re-examine the case, providing the appellant with another opportunity to present relevant details and documents.

This development underscores the significance of due process and meticulous consideration of evidence in tax assessments, particularly in cases involving allegations of bogus purchases. Taxpayers and practitioners alike await the outcome of the re-adjudication, as it holds implications for the broader understanding of procedural fairness in tax matters.


This appeal by assessee is directed against order passed by NFAC u/s 250 of the Income-tax Act,1961 [‘the Act’ for short] for the assessment year 2018-19 dated 30.8.2023. The assessee has raised following grounds of appeal:

The orders of lower authorities are bad in law and liable to be quashed for:

a) non-consideration of material on record and submissions of the appellant

b) want of application of principles of natural justice. (Tax act of above ground: 10,68,536/-)

 Without prejudice:

2.1 The learned assessing officer has erred in concluding and the learned CIT(A) has erred in confirming that the purchases of the appellant to the tune of Rs. 9,99,250/- are bogus purchases and has also erred in disallowing the said sum as unexplained expenditure u/s 69C of the Act.

2.2 On the facts of the appellant’s case, all the purchases of the appellant are genuine and supported by documentary evidence. In the appellant’s cake there are no bogus purchases at all.

2.3 The disallowance being based on surmises and conjectures is without any basis and is contrary to the facts of the appellant’s case. The conclusion of the learned assessing officer being erroneous has to be disregarded. The consequent disallowance u/s 69C also being erroneous and bad in law has to be deleted.

2.4  Without prejudice and without acceding the appellant submits that, the disallowance as made is excessive.

(Tax effect of above ground: 10,68,536/-)

Without further prejudice:

3. The lower authorities have also erred in taxing the disallowance u/s. 115BBE of the Act. The provisions of Section 115BBE are not at all applicable to the appellant and the levy and calculation of tax Us. 1 15BBE is to be quashed.

(Tax Effect of above ground: 10,68,536/-)

4. The appellant denies liability to pay interests. The interests having been levied erroneously have to be deleted.

5. In the light of above and other grounds to be adduced at the time of hearing, the appellant prays that the impugned assessment order be quashed or at least:

a) disallowance made be deleted.

b) levy of taxes u/s 115BBE be quashed and

c) interests levied be deleted.

(Cumulative tax effect of all the grounds above: 10,68,536/-)

2. Facts of the case are that the assessee is an individual and the year under appeal is AY 18-19. For the year, the assessee had filed the return of income on 10.2018 declaring taxable income of Rs. 4,23,020/-. The assessee’s return of income was selected for scrutiny and has been assessed u/s 143(3) of the Act. In the assessment order dated 30.03.2021 the assessee’s returned income has been assessed at Rs.14,’2 270/- For the year under appeal, the assessee was served with a notice u/s 143(2) of the Act dated 28.09.2ð19. As per the notice, the assessee’s return of income was selected for scrutiny for examination of following issue:

a. “Specific Information pointing tax evasion has been received from other agency”

2.2 The assessee vide response dated 12.2019 sought details of specifìc information pointing tax evasion and also sought list of specific details/information to be furnished by the assessee. Thereafter the assessee was served with notices u/s 142( l) requiring the assessee to serve general information like statement of income, purchase register, purchase bills etc. These were duly responded to by the assessee. However, the assessee’s specific request for details of information pointing tax evasion was never acceded to.

2.3 On 03.2021 the assessee was served with a show cause notice proposing to conclude assessee’s assessment on the basis of draft assessment order. As per the draft assessment order it was alleged that the assessee has made bogus purchases from M/s. Mahendra Sales Corporation to the tune of Rs.9,99,250/-. The entire alleged bogus purchase was proposed to be disallowed as bogus expenditure u/s 69C of the Act. In the draft assessment order assessee’s income was proposed to be assessed at 14,22,270/- However, the draft assessment order failed to compute the assessee’s tax liability.

2.4 In response to the draft assessment order, the assessee filed detailed reply on 03.2021. The assessee rebutted the allegation of bogus purchases and filed documents such as ledger statements. purchase invoices. Form GSTR 2A as downloaded from the GST portal, bank statements etc. in support of the purchases made from M/s. Mahendra Sales Corporation. The assessee also sought copy of the material and statements relied upon by the department in support of the allegation that assessee’s purchases from a particular vendor are bogus in nature.

2.5 The assessee’s assessment has been concluded passing of assessment order u/s 143(3) of the In the assessment order dated 30.3.2021 the draft assessment order has been confirmed without considering assessee’s response to the draft assessment order. In the impugned assessment order it has been stated that specific information of bogus purchases in the assessee’s case has been received by the income tax department from Regional Economic Intelligence Committee (REIC). This information has been brought on record for the first time during the entire assessment of assessee’s income. However even in the impugned order there are no further details forthcoming as regards the purported information received from REIC. Copy of such information was never provided to the assessee for rebuttals. The assessee on at least two occasions had sought details of information and other materials sought to be relied upon in the assessee’s case for making of additions in the hands of the assessee.

2.6 It is pertinent to note that for the year under consideration the assessee’s purchases from M/s. Mahendra Sales Corporation was only to the tune of 4,24,000/-. The assessee in response to draft assessment order had brought this to the notice of the learned assessing officer. However, in the assessment order it has been concluded that the assessee has made bogus purchases from M/s. Mahendra Sales Corporation to the tune of Rs. 9,99,250/- and has disallowed the entire sum of Rs.9.99 lacs as bogus expenditure u/s 69C of the Act. There are no other adjustments to the returned income of the assessee

2.7 Assessee’s income has been assessed at 14,22,270/-. The income disallowed Ills 69C of the Act has been charged to tax u/s 115BBE of the Act. Taxes payable been computed at Rs.10,68.536/- and following interests also been levied.

Interest u/s 234A                      Rs. 15,616/-

Interest u/s 234B                   Rs.2,81,088/-

2.8 Aggrieved by the assessment order, income as computed thereunder, levy of taxes u/s 115BBE and levy of interests, assessee went in appeal before NFAC given various opportunities to file the documents and submissions before it through e-mail. But no response was received from the assessee. In view of the above, NFAC having no option, considering the material on record dismissed the appeal of the assessee and against this assessee is in appeal before us. Before me, the ld. A.R. has pleaded for one more opportunity to file the documents and submissions before NFAC so as to render substantial justice. In my opinion, since the order of NFAC has been passed ex-parte and it is appropriate to give one more opportunity to the assessee, accordingly, the entire issue in dispute is remitted to the file of NFAC for fresh consideration. The assessee shall cooperate with the NFAC and file necessary details and documents in support of its claim. Accordingly, the appeal of the assessee is partly allowed for statistical purposes.

3. In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 15th Nov, 2023

Download Judgment/Order

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