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Facts
The Revenue Department appealed an order by the Ld. Commissioner of Income Tax (Appeals) that deleted an addition made by the AO. The assessee had challenged the validity of the reopening notice u/s 148A of the Income Tax Act, 1961, on the grounds that the approval was obtained from an incorrect authority under Section 151, as the reopening was beyond three years.
Held
The Tribunal held that the approval for reopening the assessment, which was beyond three years, was obtained from an incorrect authority as per Section 151(ii) of the Act. Consequently, the notice u/s 148A and the subsequent assessment order were quashed as void-ab-initio. The Tribunal also observed that even on merits, the purchases were supported by evidence and made through banking channels, with the supplier confirming the transactions.
Key Issues
Whether the reopening of assessment beyond three years was validly approved by the specified authority under Section 151 of the Income Tax Act, 1961. Whether the addition made on account of alleged bogus purchases was justified on merits.
Sections Cited
151, 148A, 147, 148, 69C, 250
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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & MS. PADMAVATHY S
This appeal has been preferred by the Revenue Department against the order dated 12.08.2024, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
In this case, the Assessee by filing an application under rule 27 of the Income Tax Appellate Tribunal Rules, 1963 (in short “the Rules”) has raised various grounds including challenging the approval granted u/s 151(i) of the Act being erroneous in view of the recent judgment rendered by Hon’ble Apex Court in the case of Union of India vs. Rajiv Bansal (2024) 167 taxmann.com 70(SC).
The Assessing Officer (in short “AO”) in consequence to the directions issued by the Hon’ble Apex Court vide judgment/order dated 04.05.2022 passed in the case of Union of India Vs. Ashish Agarwal {civil appeal no.3005 of 2022}, has issued a notice u/s 148(A)(b) of the Act on dated 28.07.2022 after getting sanction/approval dated 28-07-2022 u/s 151 of the Act from the Ld. PCIT (Central-2), Mumbai and therefore the Assessee by filling a petition under rule 27 of the Income Tax Rules 1962 (in short “Rules”) has raised the contentious ground/issue challenging the approval granted u/s 151(i) of the Act, on the pretext that because this case pertains to AY 2017-18 and the assessment has been reopened beyond three years and therefore the approval/sanction was required to be taken from the specified Authority as specified under sub clause (ii) of section 151 of the Act but not from the Authority as specified in sub clause (i) of the said section and therefore the approval dated 28.07.2022 granted by the Ld. PCIT (Central-2), Mumbai is invalid being sans authority and thus would entail reopening of the case u/s 147 r.w.s. 148 of the Act and in consequence to that the assessment order, as void ab-initio.
We observe from the relevant provisions of section 151 of the Act that certain authorities are specified for granting of sanction/approval for the purposes of section 148 & 148A of the Act, such as:
5 (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;
(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. In simple terms, if the assessment is reopened after elapsing of 3 years from the end of the relevant assessment year then the specified authority for granting sanction for issue of notice u/s 148 & 148A would be – a Principal Chief Commissioner or Principal Director General or (iii) where there is no Principal Chief Commissioner or Principal Director General then Chief Commissioner or Director General would be the competent authority.
Here in the instant case, admittedly the assessment was reopened after elapsing of three years from the end of the relevant assessment year and therefore the approval of either of specified authorities as specified in sub clause (ii) of section 151 was required to be taken, which admittedly has not been taken but the approval dated 28.07.2022 for issuing the notice u/s 148A of the Act infact had taken from the Ld. Pr. Commissioner of Income Tax, Mumbai, which cannot be termed as valid/legal approval. Thus, on the aforesaid analyzations, the notice dated 28.07.2022 issued u/s 148 of the Act and in consequence to the said notice, the assessment order dated 28.03.2023 u/s 147 of the Act, is quashed being void-ab-initio.
Coming to the main appeal on merit, it is observed that vide order dated 28.03.2023 u/s 147 of the Act passed by the ACIT, Central Circle 3(2), Mumbai, the addition of Rs.2,15,30,000/- u/s 69C of the Act on account of accommodation entries, has been made by the Assessing Officer (AO).
The Assessee, being aggrieved, not only challenged the reopening of the case u/s 147 of the Act, which has been held as valid and as per law by the Ld. Commissioner, but has also challenged the addition on merit before the Ld. Commissioner. The Ld. Commissioner, by considering the deletion of the similar addition in the Assessee’s case for the A.Y. 2010-11 by the then Ld. CIT(A), deleted the addition under consideration on merit, by observing and holding as under:
“9.5 It is seen that the Ld CIT(A) in the assessee’s own case for AY 2010-11, on identical facts, has deleted the addition by observing that the assessee had provided the requisite evidence regarding purchases and that the purchases were made through banking channels. The assessee had been regularly dealing with M/s Swastic Corporation and out of several bills only one bill was alleged as non-genuine, which was not logical. The assessee was maintaining proper stock register in which the purchases, issue, receipt and sales were duly recorded and nothing adverse was observed by the AO regarding the same. The supplier had also duly confirmed the transactions. The statement made by the supplier Sh. Bijal Ashok Shah, Prop. M/s Swastic Corporation, was not only immediately retracted after the Survey but he also filed an affidavit before the AO duly confirming of having actually sold and having delivered the goods. Thus, the Ld CIT(A) held that there was no basis to consider the purchases made as bogus and accordingly deleted the addition.
9.6 The facts in the present AY 2017-18 are identical. The assessee has provided the requisite evidence regarding purchases and that the purchases were made through banking channels. The assessee had been regularly dealing with M/s Swastic Corporation and out of several bills only two bills have been alleged as nongenuine, which is again not logical. The assessee was maintaining proper stock register in which the purchases, issue, receipt and sales were duly recorded and nothing adverse was observed by the AO regarding the same. The supplier had also duly confirmed the transactions. The statement made by the supplier Sh. Bijal Ashok Shah, Prop. M/s Swastic Corporation, was not only immediately retracted after the Survey but he also filed an affidavit dated 30.05.2022 before the AO duly confirming of having actually sold and having delivered the goods.
9.7 Thus, in the present facts and circumstances of the case, reliance placed by my Ld Predecessor CIT(A) on the decision of the Hon'ble Supreme Court In the case of PCIT Vs. Tejua Rohitkumar Kapadia wherein the Hon’ble Apex Court has dismissed the Special Leave Petition (SLP) No. 12670/2018 order dated 04.05.2018 and confirmed the order of the Gujarat High Court Tax Appeal No. 691 of 2017 is again found relevant wherein it was held that purchases cannot be treated bogus if (a) they were duly supported by bills, (b) all payments are made by account payee cheques, (c) the supplier has confirmed the transactions, (d) there is no evidence to show that the purchase consideration has come back to the assessee in cash, (e) the sales out of purchases have been accepted & (f) the supplier has accounted for the purchases made by the assessee and paid taxes thereon.
9.8 In the present case also the purchase bills, ledger confirmation, bank statements, audited financial statements have been duly furnished before the AO. The payments have been made through banking channels. The supplier M/s Swastic Corporation has duly confirmed the transactions. Also, there is no evidence on record to prove that the purchase consideration has come back to the assessee in cash. Moreover, the AO has not cast any doubt over the sales made.
9.9 In view of the facts and circumstances of the case and the judicial precedents, I have no reason to differ from my Ld Predecessor CIT(A) that the impugned purchases cannot be considered to be bogus and the addition of Rs. 2,15,30,000/- made by the AO is accordingly deleted. The ground of appeal is accordingly allowed.”
8. As we have allowed the grounds raised by the Assessee under rule 27 of the Rules and has quashed the reopening of the proceedings and/or notice dated 28.07.2022 u/s 148 of the Act and in consequence to that the assessment order dated 28.03.2023 u/s 147 of the Act as well, and therefore the instant appeal has become infructuous, thus the same deserve dismissal.
In the result, the Assessee’s petition under rule 27 of the Rules is allowed, whereas the Revenue’s appeal is dismissed.
Order pronounced in the open court on 24.03.2025.