The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the reassessment proceedings due to inconsistency between the reasons for reopening and the addition made.
Bhawani Castings P. Ltd.,appellant-assessee,filed its income tax return for Assessment Year ( AY ) 2018-19 on 28.09.2018, reporting a loss of Rs. 12,52,594/-. A notice under section 148A(b) of the Act was issued, along with reasons for reopening the assessment. The assessee responded on 22.03.2022, stating it had not made purchases from the mentioned parties. However, the Assessing Officer ( AO ) rejected the objections and continued the reassessment.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
On 30.03.2023, the AO passed an order, adding Rs. 1,35,40,359/- for alleged bogus purchases from M/s. G.S Industries. The addition was based on a statement from Shri Deepak Sharma, recorded after the reasons for reopening. The assessee argued that the statement was inadmissible because it was not signed by the officer who recorded it.
The assessee also pointed out that the reasons for reopening mentioned different companies linked to Shri Deepak Sharma, not M/s. G.S Industries, so the addition was incorrect.
On the merits, the assessee provided invoices for purchases from M/s. G.S Industries, with payments made through banking channels. The AO had accepted the sales and books of accounts, but passed the assessment order without reviewing the documents. The Commissioner of Income Tax (Appeals) [CIT(A)] raised doubts about the transactions, but the invoices included the address, contact details, and vehicle numbers, proving the legitimacy of the purchases.
The tribunal reviewed the submissions from both sides and the orders of the authorities. The assessee challenged the validity of the reopening of the assessment. The reasons for reopening, provided with the notice on 17/03/2022, stated that a search was conducted on the Deepak Sharma group, during which he allegedly admitted to providing bogus purchase entries through two concerns, M/s. Mahinderpal & Sons and M/s. Jai Bhole Traders.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The AO claimed the assessee was involved in these bogus purchases. However, the assessee denied making any purchases from these concerns. On 14/07/2022, Deepak Sharma gave a new statement referring to M/s. G.S. Industries as a paper concern, and based on this, the Assessing Officer made an addition of Rs. 1,35,40,359/- for bogus purchases from G.S. Industries.
The appellate tribunal noted that the reasons for reopening did not mention G.S. Industries, only the two concerns, and the addition made did not match the reasons for reopening.
The two member bench comprising Vikas Awasthy ( Judicial Member ) and Naveen Chandra ( Accountant Member ) concluded that since the third-party statement was recorded after the reopening notice and the reasons for reopening did not align with the addition, the reassessment was invalid and quashed the proceedings.
In short,the appeal filed by the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
