Allegation of Bogus Transaction in absence of Corroborative Evidence is invalid: Delhi HC Sets aside Notice issued u/s 148 of Income Tax Act [Read Order]

The Delhi High Court set aside the notice issued under section 148 of the Income Tax Act, 1961 in an allegation of bogus transaction in the absence of Corroborative Evidence is invalid.                                       

It was alleged that the petitioners/assessees, Gudwala and Sons and Another are beneficiaries of accommodation entry provided by one Mr Ankit Jain, proprietor of Rishabh Trading Company. The value of the accommodation entry adverted to in the notice issued under Section 148A(b) of the Income Tax Act, 1961 [Act],  has been pegged at Rs. 1,15,10,016/-. The petitioners/assesses filed two replies i.e., dated 31.03.2023 & 05.04.2023 to the notice. 

The petitioners/assessees took the stand that they had purchased goods worth Rs. 70,10,016/- from Rishabh Trading Company and also sold goods worth Rs. 45 lakhs to the said entity.  It was asserted that both transactions were genuine and not bogus as alleged by the Assessing Officer (AO). 

The AO, however, after noting the stand taken on behalf of the petitioners/assessees, proceeded to continue with the reassessment proceedings by rejecting the objections raised in the replies filed by the petitioners/assessees.

Mr Kapil Goel, the counsel, who appeared on behalf of petitioners/assessees, stated that apart from the fact that the AO had no material available with him to trigger the reassessment proceedings against the petitioners/assessees, the proceeding is flawed as the approval granted, if any, to the AO regarding commencement of the reassessment proceedings has not been submitted to the petitioners/assessees up until now.

There was no material available in favour of the respondents/revenue and it was evident that Mr Ankit Jain has accepted the fact that cash transactions amounting to Rs. 16,29,423/- were made outside the books of account. Significantly, however, no reference to the petitioners/assessees.

A division bench Justice Rajiv Shakdher and Justice Girish Kathpalia observed that the best option available to the AO would be to go back to the drawing board and if deemed necessary, reinitiate the proceedings against the petitioners/assessees, albeit, as per law.

The Court set aside the impugned notices and ordered with liberty the AO to recommence the proceedings.

To Read the full text of the Order CLICK HERE

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