Full Judgment Text
$~51
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 21.11.2024
+ W.P.(C) 15876/2024 & CM APPL. 66691-92/2024
MAJESTIC HANDICRAFT PRIVATE LIMITED
.....Petitioner
Through: Mr Prakash Sinha, Advocate.
versus
DY. COMMISSIONER OF INCOME TAX
CIRCLE -16(1) NEW DELHI
.....Respondent
Through: Mr Abhishek Maratha, SSC, Mr
Apoorv Agarwal, Mr Parth Samwal,
JSCs, Ms Nupur Sharma, Mr Gaurav
Singh, Ms Muskaan Goel, Mr
Himanshu Gaur and Mr Kamakshraj
Singh and Mr Yamit Jetley,
Advocates for the Revenue
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MS. JUSTICE SWARANA KANTA SHARMA
VIBHU BAKHRU, J. ( ORAL )
1. The petitioner has filed the present petition, inter alia, impugning a
notice dated 22.03.2024 (hereafter the impugned notice ) issued under
Section 148A(b) of the Income Tax Act, 1961 (hereafter the Act ) as well as
the order dated 31.03.2024 (hereafter the impugned order ) issued under
Section 148A(d) of the Act. Additionally, the petitioner also impugns the
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notice dated 31.03.2024 issued under Section 148 of the Act seeking to
reopen the petitioner’s assessment for the assessment year (AY) 2018-19.
2. The petitioner claims that during the financial year (FY) 2017-18, it
had entered into transactions of making purchases for export of garments to
Brazil and the same were exported through the export invoices dated
18.09.2017, 27.09.2017, and 28.09.2017. The petitioner filed its income tax
returns (ITRs) for the AY 2018-19 on 17.10.2018 and the same was
processed under Section 143(1) of the Act.
3. The Assessing Officer (AO) had certain information to suggest that
the petitioner’s income for the FY 2017-18 relevant to AY 2018-19 escaped
assessment. Accordingly, the AO issued a notice dated 21.03.2022 under
Section 148A(b) of the Act. One of the principal information as set out in
the said notice indicated that the Investigation Wing had found that one of
the entities (Balaji Enterprises) had purportedly supplied the goods to the
petitioner, was found to be non-existing at the principal place of business.
The petitioner responded to the said notice furnishing on record certain
documents regarding the export of the goods. It is the petitioner’s case that
its purchases were genuine and therefore, there were no grounds to suspect
that the petitioner’s income escaped the assessment. However, the said
explanation was not accepted and the AO passed an order dated 28.03.2022
under Section 148A(d) of the Act and also issued the notice dated
28.03.2022 under Section 148 of the Act seeking to reopen the assessment
for the AY 2018-19.
4. The petitioner challenged the said order dated 28.03.2022 and the
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W.P. (C) 15876/2024 Page 2 of 8
notice dated 28.03.2022 by filing a writ petition before this court being
W.P.(C) No.3797/2023. The said petition was disposed of by an order dated
27.03.2023.
5. This court had noted that the petitioner had placed on record the
returns filed in GSTR-2A, which had disclosed inward supplies. The
supplies were from the dealers, which were registered under the relevant
Goods and Services Tax Act. The Goods and Services Tax Identification
Number (GSTIN) of the suppliers also matched with the GSTIN printed on
the invoices issued by Balaji Enterprises and another entity namely, Dev
Sales Corporation.
6. This court found that the order passed under Section 148A(d) of the
Act did not deal with the aforesaid aspect of the matter. So far as the
allegations that the supplier was not found at the given address, this court
noticed that there could be several reasons for the same. Accordingly, the
AO was directed to conduct the de novo exercise.
7. Thereafter, the AO issued the impugned notice dated 22.03.2024. The
said notice indicates that the information was received in regard to one
Sanjeev Sharma, who is stated to be the sole proprietor of the concern
namely – Balaji Enterprises. The bank accounts for the FY 2017-18 and
2018-19 of the said person were analysed and it was found that the credits
and debits were almost matching. Summons under Section 131(1A) of the
Act were issued by the Investigation Wing to Balaji Enterprises on all
available addresses. However, the addresses were found to be fake and no
person by the name of Sanjeev Sharma was found residing at the addresses
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nor was there any trace of the entity named Balaji Enterprises. The analysis
of the bank accounts of Balaji Enterprises indicated that there were several
debit entries, which were followed by credit entries of almost the same
amount on the same date or the next date.
8. The matching of the inflow and outflow suggested that the same
pertains to the accommodation entries. It is also noted that the balance in the
bank account was minimal and there was exceptionally high turnover in a
short span. The bank account also indicated that the entries pertaining to the
petitioner. The Investigation Wing informed that Balaji Enterprises
(proprietor – Sanjeev Sharma) was not engaged in any genuine business
activities.
9. In addition, it is also alleged that the entry pertaining to the
transaction entered into by the petitioner with Balaji Enterprises is for a sum
of ₹1,44,56,180/-. It was also stated that they have the information that the
petitioner had taken an accommodation entry of ₹61,34,006/- from one Dev
Sales Corporation, which was a sole proprietorship concern of one Suresh
Kumar. This was also found to be one of the entities, which is linked with
Balaji Enterprises.
10. In view of the above, the AO stated that there was an amount of
₹2,05,90,186/-, which appear to have escaped the assessment during AY
2018-19.
11. The petitioner had responded to the said notice reiterating that its
purchases were genuine and also provided the documents as have been
provided in the earlier round. However, the AO was not persuaded to drop
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the proceedings and passed the impugned order dated 31.03.2024 under
Section 148A(d) of the Act concluding that it was a fit case for reopening
the assessment for the AY 2018-19.
12. The petitioner has assailed the impugned notice and the impugned
order on the ground that the AO has not followed the directions issued by
this court in order dated 27.03.2023 passed in W.P.(C) No.3797/2023. It is
earnestly contended by the learned counsel for the petitioner that the ground
for passing an order under Section 148A(d) of the Act remains the same and
the AO has not considered the documents, which established that the
petitioner had exported the goods in question. It is contended that the AO
has also not examined the GST returns filed by the petitioner, which reflect
that its purchases were genuine.
13. The learned counsel for the petitioner contends that the impugned
notice and impugned order suffers from the same vice as the notice and
order issued in the earlier round, which was the subject matter of challenge
in W.P.(C) No.3797/2023.
14. We are not persuaded to accept the aforesaid contention. A plain
reading of the impugned order indicates that the AO has examined the
relevant material and in particular the petitioner’s contention that its
purchases were genuine. The AO had noted that the petitioner had reflected
that the purchases made from the concerns Balaji Enterprises and Dev Sales
Corporation. The GST returns, also reflected the same.
15. The vendor – Balaji Enterprises had filed its monthly GST returns
(GSTR-01) – for output sales, and therefore, the same were reflected in the
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petitioner’s GST returns (GSTR-2A) as inward purchases. Similar is the
case with the purchases made from Dev Sales Corporation. The AO had
noted that the report was received from Investigation Wing [DDIT (Inv)
Unit 6(2), New Delhi] in regard to Balaji Enterprises. The AO had
extensively set out the finding /information of the said report, which
indicated that Balaji Enterprises was not engaged in genuine business
activities. A similar information was also received in regard to Dev Sales
Corporation.
16. Additionally, the AO had also made telephone call in the presence of
the learned counsel for the petitioner to the telephone numbers for the said
entities (Balaji Enterprises and Dev Sales Corporation) and the person
answering the telephone call responded by stating that he has no knowledge
of Balaji Enterprises or Dev Sales Corporation. The said conversation was
also heard by the learned counsel for the petitioner.
17. We have also considered the petitioner’s contention that the
transactions were through banking channel. Plainly, if the entries are
accommodation entries as suspected then at least one limb of the transaction
would necessarily be through banking channel. The petitioner had not
produced any material to establish the credibility of Balaji Enterprises or
Dev Sales Corporation.
18. The learned counsel for the petitioner submits that since the goods
have been exported, it was also necessary to make the Customs department a
party as the petitioner had availed duty drawback. This contention is also
insubstantial.
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19. At the stage of issuance of notice under Section 148 of the Act, the
AO is required to have reasons to assume that the income of the assessee has
escaped assessment. Section 148A of the Act sets out a mechanism for
ensuring that the AO’s decisions are not based on any unfounded suspicion.
The scheme thus, entails a preliminary enquiry, which in this case was done
by the department. It is then followed by a notice under Section 148A(b) of
the Act to enable the assessee to respond to the information that is available.
The AO is required to consider the assessee’s response under Section
148A(c) of the Act in taking an informed decision whether it is a fit case to
reopen the assessment by passing an order under Section 148A(d) of the
Act. This exercise is for a limited scope of merely determining whether the
assessment is required to be reopened. It does not foreclose the assessee’s
contention regarding the genuineness of the ITRs. All rights and contentions
of an assessee to support its declaration of ITR is available to the assessee.
20. At the stage of Section 148A of the Act, the AO is merely required to
form a view whether he has reasons which indicate that the assessee’s
income has escaped assessment. In the present case, there is material on
record – the sufficiency of which, this court is not required to examine –
which bears a live nexus to the opinion that the petitioner’s income has
escaped assessment. The material indicates that there is evidence that two of
the entities from whom the petitioner had procured materials are not
genuine. The bank accounts indicate matching of inflows and outflows
coupled with the high turnover in a short span of time. This provides the
reasons for the AO to question the purchases that are declared by the
petitioner.
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21. In view of the above, there are no grounds to interfere with the
impugned order, the impugned notice and the notice issued under Section
148 of the Act. The petition is, accordingly, dismissed. Pending applications
also stand disposed of.
VIBHU BAKHRU, J
SWARANA KANTA SHARMA, J
NOVEMBER 21, 2024
M
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