VILDirect | Updates on Income Tax

Income Tax Act, 1961 – Sections 139(1), 143(3), 147, 148 and 148A – Escaped assessment – Initiation of reassessment proceedings – Petitioner/company is engaged in execution of civil construction works – Petitioner filed return of income tax under Section 139(1) of the Act for AY 2018-2019 – Assessing Officer completed assessment under Section 143(3) of the Act by determining total income as per return – On basis of information which suggests that income chargeable to tax for AY 2018-2019 has escaped assessment within meaning of Section 147 of the Act, AO reopened assessment and passed order under Section 148A of the Act and also issued notice under Section 148 of the Act – Single Judge dismissed writ petition filed by Petitioner challenging order passed by AO under Section 148-A of the Act and notice issued under Section 148 of the Act – Petitioner filed appeal against order passed by Single Judge dismissing writ petition – HELD – Relevant information was clearly indicated in SCN under Section 148A(b) of the Act to effect that Panveen Trading was found indulging in generating and selling tax invoices to Petitioner/Appellant without physical supply of underlying goods/services for passing irregular Input Tax Credit – Petitioner was a beneficiary of transaction in form of bogus purchase from Panveer Trading who are involved in providing of accommodation entries in form of bogus sale/purchase for commission – In reply to show cause notice issued under Section 148A(b) of the Act, no material has been produced by Petitioner to counter the allegations – There is, prima facie, some material on basis of which Department could reopen the case – Petitioner had not even made an attempt to assert that material facts relied on in SCN is erroneous – No interference is called for with order of Single Judge dismissing writ petition – Appeal is dismissed

2022-VIL-266-CHG-DT

HIGH COURT OF CHHATTISGARH

WA No. 473 of 2022

Date: 15.12.2022

BARBRIK PROJECTS LTD

1. UNION OF INDIA

2. PRINCIPAL COMMISSIONER OF INCOME-TAX (CENTRAL)

3. ADDITIONAL COMMISSIONER OF INCOME TAX

4. ASSISTANT COMMISSIONER OF INCOME TAX

For Appellant: Mr. S. Rajeshwar Rao, Advocate

For Respondent No. 1: Mr. Ramakant Mishra, Deputy Solicitor General

For Respondents No. 2 to 4: Ms. Naushina Afrin Ali, Advocate

Bench

Hon'ble Mr. Arup Kumar Goswami, Chief Justice

Hon'ble Mr. Deepak Kumar Tiwari, Judge

C A V Judgment

Per Arup Kumar Goswami, Chief Justice

Heard Mr. S. Rajeshwar Rao, learned counsel, appearing for the appellant. Also heard Mr. Ramakant Mishra, learned Deputy Solicitor General, appearing for the respondent No. 1 as well as Ms. Naushina Afrin Ali, learned counsel, appearing for the respondents No. 2 to 4.

2. This writ appeal filed by the petitioner is presented against an order dated 28.07.2022 passed by the learned Single Judge in WP(T) No. 186/2022 dismissing the writ petition. The writ petition was filed challenging the order dated 31.03.2022 passed by the Assessing Officer (for short, the AO) under Section 148-A of the Income Tax Act, 1961 (for short, the Act) and the notice issued under Section 148 of the Act.

3. The petitioner is a company engaged in execution of civil construction works and it had filed return of income tax under Section 139(1) of the Act for the Assessment Year (for short, AY) 2018-2019 on 26.03.2019 declaring total income at Rs.43,14,13,840/-. A notice under Section 143(2) of the Act was issued to the assessee on 23.09.2019. By an order dated 12.04.2021 passed under Section 143(3) of the Act, the total income was determined as per the return. Thereafter, the AO, i.e., the respondent No. 4 issued a show cause notice (for short, the SCN) under Section 148A(b) of the Act on 24.03.2022 stating that he has information which suggests that income chargeable to tax for the AY 2018-2019 has escaped assessment within the meaning of Section 147 of the Act. Alongwith the said SCN, details of the information was enclosed as Annexure A and the assessee was asked to show cause as to why in view of the details contained in Annexure A, notice under Section 148 of the Act should not be issued. The assessee was accordingly asked to submit its response to the extent technologically feasible, with supporting documents, if any, electronically in ‘e-proceeding’ facility through its account in e-filing portal on or before 30.03.2022. It was indicated that the said notice was issued after obtaining prior approval of the Principal Commissioner of Income Tax (Central), Bhopal, dated 24.03.2022.

4. It will be appropriate to extract Annexure A at this juncture for better appreciation:

“SHOW CAUSE NOTICE NOTICE U/S 148A (b) OF THE I.T. ACT, 1961 IN THE CASE OF SHRI BARBRIK PROJECT LIMITED, PAN: AADCB4662P FOR A.Y. 2018-2019

Consequent to the information under High Risk CRIU/VRU cases obtained from Insight portal, this office is in possession of information that M/s. Panveen Trading Private Limited has certain transaction with you. M/s. Panveen Trading Private Limited has shown sale of Rs.2,20,00,275/- to Barbarik Project Limited during the financial year 2017-2018.

However, on the basis of Credible information is received that M/s. Valeska Trading Private Limited, M/s. Panveer Trading Private Limited & M/s. Shwetpushp Commercial Private Limited were found indulging generating and selling of tax invoices to various entities without physical supply of underlying goods/services for passing irregular input tax credit to other business entities and for doing this they have also availed and utilized Input Tax Credit (ITC) against fake invoices issued by others.

As per detailed information available with this office, you are beneficiary of transaction for an amount of Rs. 2,20,00,275/- made during the financial year 2017-2018 relevant to the A.Y. 2018-19 in the form of accommodation entry.

In view of the above discussion, it is evident that income chargeable to tax amounting to Rs.2,20,00,275/- has escaped assessment for A.Y. 2018-2019 and this is a fit case for issue of notice to show cause u/s. 148A(b) of the Income Tax Act, 1961. You are therefore requested to show cause as to why a notice u/s. 148 should not be issued on the basis of the above flagged information.

By the show cause notice, you are being provided an opportunity of being heard as per Section 148A (b) of the Income Tax Act, 1961. Please also note that due to paucity of time, no adjournment will be granted. In case nothing is heard from you within the time specified, it will be presumed that you have no explanation to offer and accordingly, the notice u/s. 148 of the Act, will be issued in your case. This notice is issued after obtaining prior approval of the specified authority.

Pradeep Kumar Swarnakar

Central Circle, Bilaspur”

5. A perusal of the SCN dated 24.03.2022 goes to show that the AO was in possession of information under High Risk Case Related Information Upload (CRIU) / Verification Report Upload (VRU) obtained from INSIGHT portal that M/s. Panveen Trading Private Limited had shown sale amount of Rs. 2,20,00,275/- to the petitioner during the financial year 2017-2018. On the basis of credible information, it was found that three entities, namely, M/s. Valeska Trading Private Limited, M/s. Panveen Trading Private Limited and M/s. Shwetpushp Commercial Private Limited, were found indulging in generating and selling tax invoices to various entitles without physical supply of underlying goods/services for passing irregular Input Tax Credit (ITC) to other business entities and thereby they had also availed/utilized ITC against fake invoices issued by others. Accordingly, it was recorded that as per detailed information available with the office, the petitioner was a beneficiary of all the transactions to the tune of Rs.2,20,00,275/- made during the financial year 2017-2018 relevant to the AY 2018-2019 in the form of accommodation entry and accordingly, made an observation that it was evident that the income chargeable to tax amounting to Rs.2,20,00,275/- had escaped assessment for the AY 2018- 2019 and thus, it was a fit case to issue SCN under Section 148A(b) of the Act. Accordingly, the petitioner was asked to show cause as to why notice under Section 148 of the Act should not be issued on the basis of the above information, also stating that an opportunity of being heard is given to the petitioner in terms of Section 148A(b) of the Act.

6. The petitioner submitted its reply on 30.03.2022 denying the allegations and asserting that it had not undertaken any transaction with M/s. Panveen Trading Private Limited during the period under consideration and to that extent, a certificate from a practicing Chartered Accountant was enclosed as Annexure-1. Accordingly, while requesting to drop the proceedings, a request was also made to supply a copy of the information obtained from the INSIGHT portal under the High Risk CRIU/VRU which was in possession of the office as also to supply the referred credible information received regarding the entities mentioned in the SCN, copies of fake invoices in which the assessee’s name is mentioned as well as the prior approval obtained from the specified authority. In the certificate of the Chartered Accountant, it is stated that the petitioner has not executed any transaction including purchase of any materials/services etc. with Panveen (or Panveer) Trading Private Limited. There was no ledger account of Panveen (or Panveer) for the year under consideration till then and that the petitioner had not taken any ITC on account of supply as reflected in GST-2A from Panveen (or Panveer) Trading Private Limited, while filing GST returns.

7. The AO passed an order on 31.03.2022 under Section 148A (d) of the Act with prior approval of the competent authority under Section 151 of the Act and accordingly, the AO also issued notice under Section 148 of the Act on 31.03.2022.

8. By the Finance Act of 2021, the procedure with regard to reopening of assessment was substituted in Section 147 and 148 w.e.f. 01.04.2021.

9. It is relevant to state that Section 148A of the Act was also brought into force with effect from 01.04.2021. It will be relevant to extract Section 148 and Section 148A of the Act, which read as follows:

“148. Issue of notice where income has escaped assessment.- Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.

Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section.

Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,—

(i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;

(ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or

(iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or

(iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or

(v) any information which requires action in consequence of the order of a Tribunal or a Court.

Explanation 2.—For the purposes of this section, where,—

(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or

(ii) a survey is conducted under section 133A, other than under sub-section (2A) of that section, on or after the 1^st day of April, 2021, in the case of the assessee; or

(iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1^st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1^st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee,

the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.

148A. Conducting inquiry, providing opportunity before issue of notice under section 148 - The Assessing Officer shall, before issuing any notice under section 148,—

(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

Provided that the provisions of this section shall not apply in a case where,—

(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1^st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee; or

(d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.

Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.”

10. In support of the assailment with regard to order under Section 148A (d) and notice under Section 148 of the Act, Mr. Rao has urged as follows:

(a) There is no valid information which suggests that income chargeable to tax has escaped assessment as defined under Section 148.

(b) The AO did not conduct verification under Section 148A (a) of the Act.

(c) The AO did not consider appellant’s reply as required under clause (c) of Section 148A while passing the order under Section 148A (d) of the Act.

(d) The AO did not supply copies of documents asked for vide reply dated 30.03.2022.

(e) The specified authority has granted sanction under Section 151 of the Act in a routine manner without application of mind.

11. It is further contended by him that in this case, no enquiry was conducted which was necessary as the information uploaded under the High Risk CRIU/VRU is not accurate which is accepted by the Central Board of Direct Taxes (CBDT) when it had issued guidelines dated 01.08.2022. Relying on the CBDT guidelines dated 01.08.2022, he submits that the AO is required to supply copies of all relevant information on which reliance is placed. It is submitted that the order passed under Section 148A (d) is not appellable under Section 246A of the Act and therefore, writ petition is maintainable. In support of his contentions, Mr. Rao relies on the judgment rendered by the Calcutta High Court in Excel Commodity & Derivative Pvt. Ltd. v. Union of India & Others, reported in 2022 (9) TMI 310, by Gujarat High Court in Studio Virtues v. Income Tax Officer Ward 5(3)(1) or His Successor, reported in 2022 (6) TMI 520, by Allahabad High Court in Dharmendra Kumar Singh v. Union of India & 2 others, reported in 2022 (5) TMI 1390, by Delhi High Court in Aten Capital Private Limited v. Assistant Commissioner of Income Tax, Circle (1) Delhi & Another, reported in 2022 (5) TMI 1069 and the judgment of Hon’ble Supreme Court in M/s. Sahara India (Firm), Lucknow v. CIT, Central-I & Another, reported in 2008 (4) TMI 4 – SC.

12. Ms. Naushina Afrin Ali, learned counsel, appearing for the respondents No. 2 to 4 submits that the appellant has relied only on a certificate of a Chartered Accountant to contend that no income chargeable to tax had escaped assessment. The appellant also did not ask for any personal hearing though the notice dated 24.03.2022 provided opportunity of hearing to the appellant. It is submitted by her that in all cases, enquiry is not required and all the information as required under the provisions of the Act was furnished to the appellant. She places reliance on the decision rendered on 02.06.2022 by a Division Bench of the Punjab & Haryana High Court in Gian Castings Private Limited v. Central Board of Direct Taxes & Others, CWP No. 9142/2022, the order of the Hon’ble Supreme Court in Petition for Special Leave to Appeal (C) No. 10762/2020 whereby the Hon’ble Supreme Court, by order dated 17.06.2022, dismissed the appeal preferred by Gian Castings Private Limited, the judgment dated 28.03.2022 passed by the Hon’ble Supreme Court in Deputy Commissioner of Income Tax, Central Circle 1(2) v. M/s. M.R.Shah Logistics Pvt. Ltd. in Civil Appeal No. 2453/2022, arising out of Special Leave to Appeal (C) No. 22921/2019, the judgment dated 05.03.2019 passed by the Hon’ble Supreme Court in Principal Commissioner of Income Tax, Central-1 v. NRA Iron and Steel Pvt. Ltd., in Civil Appeal No. 2463/2019, arising out of SLP(C) No. 29855/2018, and the judgment of the Delhi High Court dated 07.04.2022 rendered in WPC No. 4787/2022 in the case of Gulmuhar Silk Pvt. Ltd. v. Income Tax Officer, Ward 10(3) Delhi.

13. The learned Single Judge held that a complete mechanism for determination of escape amount has been provided under the statute and the AO, while considering the reply made by the petitioner, has applied his mind and accordingly, passed the impugned order under Section 148A (d) of the Act. It was observed that the plea taken by petitioner is his defence which can be examined while conducting proceeding under Section 148A of the Act. Taking a view that the learned counsel for the petitioner was unable to point out how the findings recorded by the AO are contrary to the materials on record, the learned Single Judge held that the writ petition, at that juncture, was not maintainable and accordingly, the writ petition was dismissed.

14. Before proceeding further, it will be appropriate to take note of the judgments relied on by the learned counsel for the petitioner.

15. In Excel Commodity & Derivative Pvt. Ltd. (supra), notice under Section 148A(b) of the Act was issued on the allegation that the assessee had done fictitious derivative transactions with M/s. Blueview Tradecom Pvt. Ltd. The assessee had submitted reply to the said notice enclosing all relevant documents in support of its claim to justify that it had not indulged in any fictitious derivative transactions. The Division Bench of Calcutta High Court, on perusal of the order passed under Section 148A(d), held that the AO had indirectly accepted the explanation given by the assessee as the AO had held that the assessee had taken accommodation entry by way of fund transfer from M/s. Brightmoon Suppliers Pvt. Ltd., which is a different company and as such, held that the order passed under Section 148A(d) of the Act is unsustainable and taking that view, had interfered with the order of the learned Single Judge by which the matter was remanded back to the AO for fresh consideration.

16. In Studio Virtues (supra), the High Court of Gujarat, not being satisfied with the reasoning given in the order under Section 148A(d) of the Act, had set aside the order and remanded the matter back to the authorities for fresh consideration with a further direction to afford an opportunity of hearing to the petitioner.

17. In Dharmendra Kumar Singh (supra), the judgment relied on is an interim order.

18. In our considered opinion, the above three decisions are not attracted in the facts and circumstances of the case.

19. In M/s. Sahara India (Firm), Lucknow (supra), the question that had fallen for consideration on a reference made by a two-Judge Bench was as to whether the decision in Rajesh Kumar & Others v. Deputy Commissioner of Income Tax & Others, to the extent it tends to lay down as an absolute proposition that in every case where the AO issues a direction under Section 142(2A), the assessee has to be heard before such an order is passed, is correct. In other words, the two-Judge Bench had felt that it may not be necessary to afford an opportunity of hearing to an assessee before ordering special audit in terms of Section 142(2A) of the Act. The Hon’ble Supreme Court held that exercise of powers under Section 142 (2A) of the Act leads to serious civil consequences and, therefore, in the absence of express provision for affording an opportunity of pre-decisional hearing to an assessee, and Section 142(2A) having not barred giving of reasonable opportunity to an assessee, the requirement of observance of principles of natural justice is to be read into the said provision.

20. In M/s. M.R.Shah Logistics Pvt. Ltd. (supra), notice under Section 147/148 of the Act was issued on 31.03.2017 seeking to re-open the assessment for the AY 2010-2011, i.e. prior to the amendment of Section 147/148 of the Act by the Finance Act, 2021. The Hon’ble Supreme Court held that the basis for a valid re-opening of the assessment should be availability of tangible material which can lead the AO to scrutinize the returns for the previous assessment year in question, to determine whether a notice under Section 147 of the Act is called for. As long as there is objective tangible material, the sufficiency of that material cannot dictate the validity of the notice based on “reasons to believe” forming part of Section 147 of the Act.

21. In Gian Castings Private Limited (supra), the issue that had arisen for consideration was whether at the stage of notice under Section 148 of the Act, writ Court should venture into the merits of the controversy when the AO was yet to frame assessment/re-assesment in discharge of statutory duty cast upon him under Section 147 of the Act. The same was a case relating to notice issued under Section 148A (b) of the Act. Reliance was a placed on decisions of the various High Courts and also on Raymond Woollen Mills Limited v. Income Tax Officer, Centre XI, Range Bombay & Others, reported in (2008) 14 SCC 218. In the said case, the Hon’ble Supreme Court had observed that at this stage, the Court had to see only whether there was prima facie some material on the basis of which the Department could reopen the case. Sufficiency or correctness of the material is not a thing to be considered at this stage and it was observed that it would be open to the assessee to prove that the assumption of facts made in the notice was erroneous. Relying on the precedent, the High Court of Punjab and Haryana held that where the proceedings have not even been concluded by the statutory authority, the writ Court should not interfere at such a premature stage.

22. A special leave petition filed against the aforesaid order was dismissed by the Hon’ble Supreme Court in Special Leave to Appeal (C) No. 10762/2022, by an order dated 17.06.2022, leaving all the contention of the petitioner open to be urged at an appropriate stage.

23. Gulmuhar Silk Pvt. Ltd. (supra) is also a case where challenge was made to an order passed by the AO under Section 148(A) (d) of the Act. In the aforesaid case also, the decision in Raymond Woollen Mills Limited (supra) was relied on. The Court noted that the assessee had only submitted bank statements and not the books of accounts before the AO. It was observed that the assessee would have ample opportunity during the course of the proceedings before different statutory forums to show that the finding of fact arrived at was erroneous as at that stage, no assessment order was passed and it was only observed that it was a fit case for issuance of notice under Section 148 of the Act. It was further observed that is not a case which would fall under the exceptional grounds on which a writ petition is maintainable at the interim stage in tax matters.

24. The issue that had fallen for consideration in NRA Iron & Steel Pvt. Ltd. (supra), was that in a case where share capital/premium is credited in the books of accounts of the assessee company, the onus of proof is on the assessee to establish by cogent and reliable evidence of the identity of the investor companies, the credit-worthiness of the investors and genuineness of the transaction, to the satisfaction of the AO. The issue before the AO was whether the amount of Rs.17,60,00,000/- allegedly raised by the assessee through share capital/premium were genuine transactions or not. The assessee had urged that the entire share capital had been received through normal banking channels by account payee cheques/demand drafts and produced documents such as income tax return acknowledgments to establish the identity and genuineness of the transaction. The AO independently got field enquiries conducted with respect to the identity and credit-worthiness of the investor companies and to examine the genuineness of the transactions. Based on the enquiries, the AO held that the assessee had failed to prove the existence of the identity of the investor companies and genuineness of the transactions as a result of which the amount of Rs. 17,60,00,000/- was added back to the total income of the assessee for the assessment year in question. The appeal preferred by the assessee before the Commissioner of Income Tax (Appeals)-I, was allowed as against which the Revenue filed an appeal before the Income Tax Appellate Tribunal, which dismissed the appeal of the Revenue. The appeal preferred by the Revenue before the High Court of Delhi also came to be dismissed. On consideration of the materials on record, the Hon’ble Supreme Court held that the assessee failed to discharge the onus required under Section 68 of the Act and that the AO was justified in adding the income back to the income of the assessee.

25. In Aten Capital Private Limited (supra), validity of an order passed under Section 148(d) and the notice issued under Section 148 of the Act, was under challenge. As the reply submitted by the petitioner was not considered while passing the order under Section 148A (d), the said order as well as the notice issued under Section 148 of the Act were set aside.

26. Much emphasis is laid by Mr. Rao on the guidelines for issuance of notice under Section 148 of the Act, issued by the CBDT on 01.08.2022, the relevant portion of which reads as follows:

“vii. If the result of enquiry/information available suggests that the income chargeable to tax has escaped assessment, the AO shall provide an opportunity of being heard to the assessee by issuing a show cause notice u/s 148A(b) of the Act. The said notice shall provide between 7 to 30 days’ time to the assessee for submitting the reply. A template of show cause notice is enclosed at Annexure A1.

viii. If an assessee requests for a personal hearing, the same may be dealt with following the principle of natural justice by giving a reasonable period for compliance of notice specifying the date of hearing.

xi. The AO has to consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b) of section 148A before passing the order u/s 148A (d).

xii. The AO shall mandatorily pass a speaking order u/s 148A (d) in all cases with the ‘prior approval of the specified authority’ (Annexure-A2) for such order u/s. 148A (d) except in the cases covered in para 2.1 (iii) above of these guidelines, irrespective of whether issuance of notice u/s 148 is being recommended or not. A template of such order u/s. 148A (d) is enclosed at Annexure A3.”

27. Emphasis is also laid by Mr. Rao on the communication issued by the CBDT on 22.08.2022 on the subject ‘Instruction regarding uploading of data on functionalities/portal of the Income Tax Department - reg’, the relevant portion of which reads as follows:

“3. Further it is re-emphasized that-

i) Before initiating proceedings under Section 148/147 of the Act, any information available on data-base/portal of the Income Tax Department shall be verified before drawing any adverse inference against the taxpayers. It is not out of place to mention here that the information made available/ data uploaded by the reporting entities may not be fully accurate due to inter alia, error of human nature, technical nature, etc. Therefore, due verification may be carried out and opportunity of being heard be given to the taxpayer before initiating proceedings under Section 148/147 of the Act.

ii) The supervisory authorities are hereby advised to keep an effective supervision so as to ensure that all extant Instructions/Guidelines/Circulars/SOPs are duly followed by the Assessing Officers in their charge.”

28. The guidelines dated 01.08.2022 and the communication dated 22.08.2022 were not in force when the AO passed the order. Naturally, in the writ petition which was filed on 19.07.2022, the same could not have been placed on record. However, in the appeal also, which was filed on 26.08.2022, there is no reference to the guidelines dated 01.08.2022 or the communication dated 22.08.2022.

29. In the reply to the SCN under Section 148A (b) of the Act dated 24.03.2022, no material has been produced by the petitioner to counter the allegations. Merely on the basis of a certificate issued by a Chartered Accountant, the petitioner wanted the proceedings to be dropped and as an after-thought, requested for supply the referred credible information received regarding M/s. Valeska Trading Pvt. Ltd., M/s. Panveer Trading Pvt. Ltd. and M/s. Shwetpushp Commercial Pvt. Ltd. It is not the case projected in the reply to the SCN that in absence of any such information as sought for, the assessee was not in a position to file appropriate reply. The assesse also did not ask for fixing a date of hearing, although the SCN dated 24.03.2022 clearly indicated that an opportunity of hearing is being provided and the appellant did not avail any such opportunity.

30. In the appeal memo, at paragraph 5, the appellant had stated that it had verified common GST portal and found that transactions aggregating to Rs.2,20,00,275/- are reflected in Form No. 2A reportedly showing sales of Rs.2,20,00,275/- in the appellant’s name and uploaded by M/s. Panveen Trading Private Limited. Thus, this information was very much available on the GST portal. The relevant information was clearly indicated in the SCN dated 24.03.2022 under Section 148A(b) of the Act that M/s. Panveen Trading Pvt. Ltd. had shown sale of Rs. 2,20,00,275/- to the appellant during the financial year 2017-2018 and that M/s. Panveer Trading Pvt. Ltd. was found indulging in generating and selling tax invoices to various entities without physical supply of underlying goods/services for passing irregular ITC to other business entities and for doing this, they have also availed and utilized ITC against fake invoices issued by others and that the appellant was a beneficiary of such transaction made during the financial year 2017-2018 relevant to the AY 2018-2019 in the form of accommodation entry.

31. Source of information is not relevant. What is relevant is the tangible material against the appellant. The petitioner did not even submit bank statements or the books of accounts. In respect of the Income Tax Returns filed by M/s. Panveer Trading Private Limited, the AO observed as follows:

“…..

8. Income Tax returns filed by M/s. Panveer Trading Limited were perused and it is observed that this entity has shown huge growth in its turnover from Rs. 3,27,60,580/- in FY 2016-17 to Rs. 57,43,72,422/- in FY 2017-18. Despite such huge jump in turnover, the entity has recorded very low PBT e.g. less than 1%, during FY 2017-18. Besides these entities have no place of business or warehouse for procuring and storing goods.

9. In view of the above, it can be construed that M/s. Panveer Trading Private Limited is a paper entity with no financial worth, and is used for providing accommodation entries in the guise of invoice issuance. Therefore, transactions made by the entity were sham transactions and all the sales made by the entity are bogus sales and all the sales proceeds in the hand of the recipients are actually bogus purchases in the hands of the invoice recipients, by which profit of the recipients have been suppressed. Therefore, all the expenses incurred by the recipients and/or the ultimate beneficiaries in the guise of purchases from M/s. Panveer Trading Private Limited and other shell entities involved in issuing fake invoices are nothing but accommodation entries.

10. List of entities to whom sales were made by M/s. Panveer Trading Private Limited during FY 2017-18 was sorted out from insight portal. ITRs of recipients’ entities were perused and financial analysis were done so as to ascertain the financial creditworthiness of these entities and also to ascertain as to whether these entities are genuine or paper entities.

11. All these entities had made substantial number of bogus transactions to the following entities during the FY 2017-18, relevant to the AY 2018-19, the details of which is furnished below:

Sl.No	PAN	Name of Entity	Aggregated Transaction Value	Remarks
PANVEER TRADING PRIVATE LIMITED (PAN: AAICP8094Q)
1	AADCB4662P	BARBARIK PROJECT LIMITED	2,20,00,275	Beneficiary

12. After considering the reply of the assesse and data available on the record, it is well settled that the assessee has made transactions of Rs. 2,20,00,275/- during the FY 2017-18 in form of bogus purchase from the M/s. Panveer Trading Private Limited who are involved in providing of accommodation entries in form of bogus sale/purchase for commission. The assessee is the beneficiary company in this case and the above transaction where no goods were transferred from the seller to purchaser. Only entries have been made in the books. By making accommodation entries the assessee has raised bogus expenditure in terms of bogus purchase. Thus, the amount of purchase made from the above parties of Rs. 2,20,00,275/- has escaped assessment during the AY 2018-19. The information suggests that the income chargeable to tax has escaped assessment by Rs. 2,20,00,275/-. … ”

32. There is, prima facie, some material on the basis of which the Department could reopen the case. The petitioner had not even made an attempt to assert that the material facts relied on in the SCN is erroneous.

33. In view of the above, we are of the opinion that no interference is called for with the order of the learned Single Judge. Accordingly, the writ petition is dismissed.

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that publisher is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.

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