Bogus Purchase, Claim of Expense Denied without Corroborative Evidence: Delhi HC quashes Reassessment Order [Read Order]

The Delhi High Court quashed the reassessment as alleging a Bogus Purchase, the claim of expense denied without corroborative evidence.

Mr Shlok Chandra, learned senior standing counsel, accepts notice on behalf of the respondent/revenue. 

The writ petition was filed by Luv Impex Private Limited challenging the notice issued under Section 148A(b) of the Income Tax Act, 1961 [“Act”] and the order passed under Section 148A(d) of the Act. Also challenged the notice intimating to the petitioner that the assessment will be completed, by procedure prescribed under Section 144B of the Income Tax Act. 

The allegation against the petitioner/assessee is that it has taken benefit of bogus purchase entries.   The respondent/revenue has referred to four individuals, the details concerning the same are found in the order dated 28.03.2023, passed under Section 148A(d) of the Act. The alleged bogus purchases have been pegged at the amount of Rs.24,31,89,457/- 

The petitioner filed a reply in part, albeit, on 21.03.2023 which was considered by the Assessing Officer (AO) while passing the impugned order dated 28.03.2023. 

Mr. V. Siddharth, who appeared on behalf of the petitioner, stated that the aspect concerning the genuineness of the purchase transactions has been flagged by the AO, by referring to the information which has not been supplied to the petitioner. 

Mr Shlok Chandra, Standing Counsel, who appeared on behalf of the respondent/revenue, relied upon the impugned order dated 28.03.2023 to demonstrate that this is a case where the assessment proceeding should be allowed to continue.

The assessee provided a copy of the bank statement to substantiate its claim that it was a genuine transaction. But it missed the point that it was never alleged that transactions were done outside the banking channel. Bogus purchases were made through the banking channel and such amount was claimed as expense. Also, tax invoices will not prove the assessee's case, as the information available is that bogus GST refund/ITC claims are being made through such transactions.

It was found that these entities did not respond to the summons issued by the office making enquiries or the summons were returned undelivered. While perusing the way bills submitted by the assessee it was found that, certain vehicles like Vehicle No. HR99 ACH0410 does not exist. For certain vehicles, their validity, insurance and national permit are found to be expired on the alleged date when these are used to transport goods.

A division bench comprising Justice Rajiv Shakdher and Justice Anish Dayal viewed that the AO did not consider bank statements and tax invoices to be relevant evidence. It also appeared that the petitioner placed on record documents to demonstrate that the transactions had been made through a banking channel.

“Despite these documents having been placed by the petitioner/assessee before the AO, the AO concluded that the petitioner had nothing to submit by way of a proper explanation regarding the transactions in issue. It was viewed by the court that if AO had material to demonstrate that the sellers were dubious or non-existent, that material/information should have been put to the petitioner.”, the Court held. 

The Court set aside the impugned order, with the liberty to AO to pass a fresh order. 

To Read the full text of the Order CLICK HERE

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