The Delhi High Court has held that the re-assessment order passed completely inconsistent with the previous assessment without a valid reason is invalid.
Prem Kumar Chopra, the petitioner, a senior citizen, being the proprietor of M/s Chopra Brothers is an authorized dealer for Kirloskar Electric Motors and is engaged in trading of industrial electric motors, mono-block pumps and generator sets etc.
The petitioner filed a return of his income, declaring the same to be Rs. 19,94,970/-, which was processed under Section 143(1) of the Income Tax Act, 1961. On 07.04.2021, respondent no. 1 issued notice under Section 148 of the Act, which on being challenged by the petitioner, was set aside in terms ofthe decision in the case of Mon Mohan Kohli vs CIT, (2021).
A notice dated 26.05.2022 under Section 148A(b) of the Income Tax Act, alleging that on search in the premises ofan entry operator, Shri Rajeev Khushwaha admitted to having provided bogus sale/purchase bills in exchange for cash; and that during the year relevant to the assessment year 2015-16, M/s Chopra Brothers through its proprietor Shri Prem Kumar Chopra was one of the beneficiaries of such accommodation entries to the tune of Rs. 13,71,00,000/-.
The petitioner contended that the two contradictory final outcomes pertaining to assessment years 2015-16 and 2016-17 clearly show not just non-application of mind but even extreme arbitrariness, more so, because the officer serving as the decision-making authority of Assistant Commissioner Income Tax is the same officer.
On search and seizure action under Section 132 of the Income Tax Act in the case of Mohit Garg and others on 26.11.2016, the entry operator Rajeev Singh Khushwaha made an admission of having used dummy entities to provide bogus sale/purchase bills on commission to various parties including the present petitioner in the financial year 2015-16; and that to the present petitioner, he advanced seven bogus sale entries to the total tune of Rs. 38,41,89,957/- through a shell entity M/s Divya International.
A two-judge bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia observed that the decision taken first in point of time (order dated 28.07.2022) was a reasoned decision, based on the analysis of material on record, but the decision taken subsequently (order dated 31.07.2022) not just took a view completely inconsistent with the previous view but even without an iota of reason.
While allowing the petition, the Court set aside the impugned notice and order dated 31.07.2022 under Section 148 of the Income Tax Act, 1961.
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