SC Dismisses Income Tax Dept’s SLP against VIVO Mobile on Accomodation Entries of Rs. 7.35cr [Read Judgement]

The Supreme Court of India dismissed the Special Leave Petition (SLP) filed by the income tax department against VivoMobile India Private Limited on alleged bogus transactions of more than Rs. 7.5 crore with fictitious entity.

The show cause notice was issued to the petitioner on the basis of High Risk CRIU/VRU information available on the ‘Insight Portal’ on 09.08.2024 under Section 148A(b) of the Income Tax Act, 1961.

Vivo Mobile India Pvt Ltd replied that it had not transacted with M/s. Zhongmao (India) Eng. Pvt. Ltd. for the Assessment Year (AY) 2018-19, but in fact had transactions with a contractor by the name of M/s. Zhonghua (India) Eng. Pvt. Ltd. in the relevant AY.

The Revenue then issued a Clarificatory Letter dated 22.08.2024 noting the correction of the name of the entity. This entity's non-responsive nature was also noted. The office address was also found to be merely on paper and it was concluded by the Revenue that it was a paper entity used for the purpose of accommodation entries by entities like OPPO Mobiles India and the respondent/Vivo Mobiles India.

The Revenue had passed the impugned order under Section 148A(d) of the Act on 31.08.2024, concluding that a transaction amounting to Rs.7,35,47,572/- shown as expenses being bogus purchases made during FY 2017-18 should be disallowed and would be liable to be added to the total income of the petitioner for AY 2018-19 suggesting escapement of income of the aforesaid sum.

The Delhi High Court observed that a chance to explain the non-existence of the said entity at the address has not been given to Vivo Mobile and the procedure was deemed violative of the principles of natural justice as the show cause notice never mentioned the conclusion by the Revenue that a bogus entity was used by the assessee-petitioner. The High Court thus, set aside the orders under Section 148.

The Supreme Court, through Justices Manoj Misra and Manmohan, concurred with the earlier decisions of the Delhi High Court and dismissed the SLP filed by the income tax department, condoning the delay and exempting the filing of the certified copy of Delhi HC’s judgment.

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