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Facts
The assessee filed an appeal against the order of the Ld. CIT(A) confirming an addition of Rs. 43,17,081/- on account of alleged bogus purchases. The reopening of assessment was based on information from a search action at "Deepak Sharma Group", which allegedly supplied bogus purchase bills without actual delivery of goods.
Held
The Tribunal held that the reopening of the assessment was based on vague information from the investigation wing without any concrete evidence. The mere statement of a third party without corroborating documents cannot form valid reasons for reopening the case.
Key Issues
Whether reopening of assessment based solely on the statement of a third party, without corroborating documentary evidence, is valid.
Sections Cited
147, 148, 132, 148A(d), 69A
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Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI LALIET KUMAR & SHRI KRINWANT SAHAY
आदेश/Order Per Krinwant Sahay, AM : Appeal in this case has been filed by the assessee against the order dated 19.05.2025 passed by the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi 868-Chd-2025 Akbar Ali, Mandi Gobindgarh 2
Grounds of appeal, as raised by the Assessee are reproduced as under:
1. 1. 1. That the Ld. Assessing Officer has erred in reopening the assessment u/s 147 and making an addition of Rs.43,17,081/- on account of alleged bogus purchases from M/s G.S. Industries, Mandi Gobindgarh.
2. That the confirmation of addition by the Ld. CIT(A) in respect of bogus purchases amounting to Rs. 43,17,081/- is against the facts and circumstances of the case.
3. That the reopening of the case u/s 148 merely on the basis of statement of third party 1.e. supplier is not justified, since there is no other material on record.
4. That the Ld. Assessing Officer/CIT(A) has failed to appreciate that no evidencery value can be attached to the statement recorded during search/post search/survey for the purposes of reopening of the case u/s 148. 5. That the Ld.AO/CIT(A) has failed to appreciate that merely on the basis of statement recorded during survey, no valid reopening of the case can be made out. 6. Notwithstanding the above said ground of appeal
, the confirmation of addition by the CIT(A) in respect of alleged bogus purchases amounting to Rs. 43,17,081/- is not justified.
7. That the Ld. CIT(A) has failed to appreciate that complete 'stock tally' alongwith 868-Chd-2025 Akbar Ali, Mandi Gobindgarh 3 confirmation of the party has been submitted and, thus, the sales having not been doubted and, thus, the sustaining of addition of Rs. 43,17,081/- as bogus purchases is not justified and deserves to be deleted.
8. That the CIT(A) has failed to appreciate that all the compliance with regard to GST has been made and, thus, under such circumstances, the addition is not justified.
9. That the CIT(A) has failed to appreciate that the binding judgment of Hon'ble Apex and different High Courts and judgment of Jurisdictional Bench of the ITAT, wherein, on similar facts and circumstances, the said addition has been deleted.
That the appellant craves leave to add or the amend the grounds of appeal before the appeal is finally heard or disposed off.
3. During the proceedings before us, ld. Counsel for the Assessee has filed a brief synopsis, which is reproduced herein under: - 1. This is an appeal filed by the assessee on the issue of alleged bogus purchases made by the AO to the tune of Rs. 47,17,081/- from one party namely M/s. G.S. Industries Prop. Deepak Sharma as per information gathered after search action conducted u/s 132 at ‘Deepak Sharma Group of Mandi 868-Chd-2025 Akbar Ali, Mandi Gobindgarh 4 Gobindgarh’, wherein as per the information provided to the assessee, vide order passed u/s 148A(d) dated 03.03.2023. The summary of search result revels that, the assessee has allegedly made bogus purchases from Sh. Deepak Sharma, and no such information have been provided as evident from copy of reasons to believe. The AO relied upon such information without providing and incriminating evidence in the shape of statement, document and some other receipt or documents. The AO made the addition of Rs. 47,17,081/-, without considering the documentary evidences filed by the assessee in the shape of Invoices, Books of accounts, stock register, confirmed ledger copies of the parties to whom the sales have been made out of the purchases made from doubtful party namely M/s. G.S. Industries Prop. Deepak Sharma.
2. Before the Ld. CIT(A) a detailed submission was filed but the Ld. CIT(A) has dismissed the appeal in a summary manner, though we had given the evidences of purchases/sales along with delivery of goods.
Now, we are in appeal before Hon’ble Tribunal and our brief facts of the case are as under:
868-Chd-2025 Akbar Ali, Mandi Gobindgarh 5 a) The assessee is a proprietor who is engaged in trading of ‘Iron and steel’ under the name and style of business namely M/s A.R Steels (India). The majority of trade made of ‘MS Billets and Old Iron Scrap’. The return of for the relevant year under consideration have been filed on the basis of ‘Audited Books of Accounts’. The case of the assessee was selected for scrutiny for the relevant year under consideration on an allegation that the assessee had made bogus purchases from M/s. G.S. Industries as per summary of search conducted at “Deepak Sharma Group”, and said summery report have been not provided to the assessee. b) Further, it submitted that, for the previous year i.e. AY 2018-19, case of the assessee was selected for reopening assessment u/s 148 on the same allegation of ‘Alleged Bogus Purchases’ made from M/s. G.S Industries Prop. Deepak Sharma, the issue pointed out by the then Ld. AO relating to ‘Bogus Purchases’ and relating to ‘Delivery of goods’ was well explained by the assessee and no adverse view have been taken in the assessment order for A.Y. 2018-19 as per copy of assessment order for A.Y 2018-19 passed vide order dated 17.03.2023.
868-Chd-2025 Akbar Ali, Mandi Gobindgarh 6
It is submitted that, the reopening proceeding for A.Y. 2019-20 i.e. the year under consideration, the case of the assessee was selected for the same reasons as per Asst. Year 2018-19 information provided to assessee vide order passed u/s 148A(d) dated 03.03.2023 i.e. reason for issuance of notice u/s 148 of the Income Tax Act as duly mentioned in the order of 148A(d) The reason mentioned in the reason to believe are as under:- i) As per page 2 relevant para No. 2 of the 148A(d) order i.e. reason to believe for issuance of notice u/s 148, the Ld. AO has mentioned the under the para with title that ‘Brief details of information collected/received’ that the summary of searched conducted at ‘Deepak Sharma Group on 17.01.2022’ reveals that assessee has made bogus purchases of Rs. 43,17,081/- without providing any documents/evidence that can form valid reasons for reopening of the case of the assessee, merely writing that the summary results of third-party search does not form valid reason to believe. This shows that the department has no documentary information or any evidence for reopening of the case of the assessee.
868-Chd-2025 Akbar Ali, Mandi Gobindgarh 7 ii) Further, it is submitted that, there is no such information available with the department that, proves any concrete evidence against the assessee and proves the ‘Allegation of Bogus Purchases from M/s. G.S Industries’. Further, we were not made aware as to what kind of material is with the department for allegation of bogus purchases. iii) The SCN notice issued on the assessee dated 24.01.2025 purposing additions of Rs. 43,17,018/- on an allegation of ‘alleged bogus Purchases’ as per page 3 of the SCN. This page of SCN reveals that, the AO relied on the vague information available with him and no documentary evidences filed by the assessee was considered, and no other material evidences were available with the AO as no reference have been given in throughout whole assessment proceedings. iv) Reliance is being placed on judgements on the issue that reopening based on vague reason to believe is not admissible for reopening of the case of the any assessee as per following case laws of different High Court and Hon’ble Tribunals as under:-
868-Chd-2025 Akbar Ali, Mandi Gobindgarh 8 J.K. Bullions (P.) Ltd. vs. Deputy Commissioner of Income-tax [2024] 169 taxmann.com 590 (Gujarat) [29-10-2024] Section 69A, read with section 148, of the Income-tax Act, 1961 - Unexplained moneys (Reopening of assessment) - Assessment years 2014-15 to 2016-17 - Assessee was engaged in business of trading in gold and silver bullion - Assessing Officer issued reopening notice on ground that assessee had made cash deposits and made cash sales without keeping proper documentary evidence and identity of customers - Assessee filed objections contending that same represented cash sales which were deposited in bank account and duly recorded in books of account - Assessing Officer disposed of objections in total disregard to explanation given by assessee - It was noted that Assessing Officer had failed to show even prima facie reason to believe as to how information received from Investigation Wing would amount to escapement of income as there was total lack of formation of reason to believe on part of Assessing Officer to prima facie arriving at a finding that it was a fit case to reopen assessment for escaping income - Whether since reasons recorded were cryptic, vague having no nexus and no application of mind, Assessing Officer could not assume jurisdiction to reopen assessment - Held, yes - Whether, therefore, impugned notices for all three assessment years were 868-Chd-2025 Akbar Ali, Mandi Gobindgarh 9 to be quashed and set aside - Held, yes [Paras 9 and 10] [In favour of assessee] iv. Form the above, it is very much evident that, the reason in the case of the assessee, are fully vague as no information have been supplied to the assessee that forms valid reasons for reopening, therefore the judgements above may please be considered and the assessment may please be quashed.
4. At the very outset, the ld. Counsel for the Assessee argued that there is no credible material available with the AO for reopening of the case and issuance of notice u/s 148 of the Income Tax Act, 1961 (in short 'the Act'). . On this issue, the Ld. CIT(A) has given his findings in the appellate order as under: - 6.2 I have perused the assessment order, ground of appeal submission filed by the appellant carefully. I find from the assessment order that the case reopened u/s 147 on the basis of information received from DCIT, Central Circle, Patiala according to which it was revealed during search operation u/s 132 in the case of Deepak Sharma Group of Mandi that the said group was involved in issuing bogus purchase bills without actual delivery of goods to the beneficiaries and the appellant was one of such beneficiary who 868-Chd-2025 Akbar Ali, Mandi Gobindgarh 10 had obtained purchase bills of Rs.43,17,081/-. During the course of assessment proceedings, the appellant was requested to prove the genuineness of the purchase transaction of Rs. 43 17,081/- made with Deepak Sharma. However, the appellant had failed to prove the same, therefore, the AO had made the addition by disallowing the purchase expenses. During appellate proceedings, the appellant has submitted that the genuineness of the transaction is proved with support of purchase bills, sale bill, bank statement and GST return. Therefore, the appellant requested to delete the addition. I have considered the facts of the case and submission of appellant carefully. I find that though the transaction reflected in the GST return and payment was made through banking channel, the actual delivery of goods is not proved by the appellant which is very important aspect in this case since the seller had admitted during search u/s 132 that the purchase bills were issued without actual delivery of goods. In view of the above facts, I find that the appellant has failed to prove the genuineness of the purchases of Rs. 43,17,081/-, hence the addition made by the AO is confirmed and ground of appeal raised by the appellant is dismissed.”
5. We have considered the findings given by the AO in the assessment order and the Ld. CIT(A) in the appellate order on issuance of notice u/s 147 and we find the 868-Chd-2025 Akbar Ali, Mandi Gobindgarh 11 Assessing Officer has issued a notice u/s 147 of the Act without bringing on record any concrete evidence regarding alleged bogus purchases by the Assessee from M/s. G.S Industries. In fact, the Assessing Officer in his possession did not have any documentary evidence for such alleged bogus purchases except the statement given by one Mr. Deepak Sharma recorded during operation u/s 132 of the Act in the case of Deepak Sharma Group of M/s. G.S Industries, Mandi Gobindgarh. It was revealed that during the search operation the group was informed about issuance of bogus purchases, bills without actually delivery of goods to the beneficiaries. The Assessing Officer found that the Assessee was also one of such beneficiaries and accordingly a notice was issued to the Assessee u/s 147 of the Act. Even the Ld. CIT(A) accepted that all the transactions recorded by the Assessee are reflected in its GST return. He has also noted that payments were made through banking channel but he his only point of suspicion is that Mr. Deepak Sharma in his statement has accepted that he was issuing bogus bills to 868-Chd-2025 Akbar Ali, Mandi Gobindgarh 12 different parties. In our considered view, it is just a suspicion of the CIT(A) without being backed by any documentary evidence against the Assessee. In our considered view, mere information from Investigating wing without bringing any concrete evidence on record cannot be a valid reason for reopening of a case. We are strengthened by the order of the Hon'ble Gujarat High Court in the case of J.K. Bullions (P.) Ltd. vs. Deputy Commissioner of Income-tax [2024] 169 taxmann.com 590 (Gujarat).
6. Since no concrete evidence has been brought by the Assessing Officer for issuance of show cause notice to the Assessee, therefore, just on the basis of a piece of information received form Investigation Wing, the reopening of the case u/s 147 of the act may not be considered a valid reason for reopening. Thus, the entire assessment proceedings in this case are vitiated because of it. Accordingly, we are not inclined to accept the findings of both the Assessing Officer and the Ld. CIT(A)
868-Chd-2025 Akbar Ali, Mandi Gobindgarh 13 passed on mere suspicion. Accordingly, the assessment order passed by the Assessing Officer is quashed.
Since, we have quashed the assessment order, therefore, we are not inclined to give any findings on other grounds of appeal on merit, as it will be just academic in nature. As such, Assessee’s appeal is allowed on this technical issue.