While upholding an income tax addition, a division bench of the Delhi High Court has held that mere filing of the VAT Returns will not be sufficient to prove the genuineness of the purchase without conducting an inquiry by the income tax department.
A re-assessment notice was issued against the assessee, M/S Mahalaxmi Dye India Pvt. Ltd alleging to have escaped assessment without considering that no accommodation entry was taken by the Petitioner.
The petitioner contended that it has filed their DVAT returns which were duly acknowledged by the Department and the Forms 2A and 2B duly matched upon verification by the Income Tax Department.
Rejecting the above contentions, Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that “a perusal of the paper book reveals that during the investigation it has been found that M/s Seema Enterprises is not involved in any real business and hence the contention of the learned counsel for the petitioner that it made payments in the course of business was not accepted. Further, in the impugned order the Assessing Officer has specifically recorded that the proprietor Smt. Seema Gupta has accepted that her firm was not engaged in real business activities. This Court is of the view that merely filing of VAT returns cannot be held to establish genuineness of transaction especially when it was not shown that the VAT Department had made any physical or spot enquiry. Moreover, neither M/s Seema Enterprises nor the Petitioner had produced before the Assessing Officer the transport details, purchase contract or bills with regard to the alleged purchases. Therefore, prima facie this Court is also of the view that income has escaped assessment.”
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