The court emphasized that reopening assessments under the Income Tax Act requires adherence to mandatory procedures, and failure to provide necessary information to the assessee invalidates the proceedings.

ORDER :

AVNEESH JHINGAN, J.

1. This petition is filed seeking quashing of order dated 28.03.2022 passed under Section 148A(d) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

2. The relevant facts are that the petitioner is engaged in manufacturing of Seamless Extruded Copper, Nickle, Aluminum, Brass and related products. The petitioner filed income tax return for assessment year 2018-19 declaring income of Rs.10,97,83,780/-. Notice dated 14.03.2022 under Section 148A(b) of the Act was issued stating that the income tax department had information of petitioner having made bogus purchases from M/s.Flash Forge Pvt Ltd. (hereinafter ‘company’).

The notice was responded to on 17.03.2022 wherein the petitioner denied to have made any purchases from company. Rather the stand taken was that the petitioner had made sales to the company. In continuation of the notice, communication dated 20.03.2022 was issued wherein the petitioner was asked to explain the transactions with company. The petitioner filed reply on 21.03.2022 explaining the sales to the tune of Rs.1,22,46,936/- made to company. Along-with reply the purchase orders, copy of letter of credits, invoices wherein the GST was separately charged, dimension report, mill test certificates, deliver challan/ packing list, transport bilties and copy of sales register were annexed.

3. The AO decided that it is a fit case to proceed under Section 148 of the Act holding that the evidence of sending the material to the premises of the company was not produced and it was a case of an accommodation entry by getting bogus invoices.

4. Learned senior counsel for the petitioner submits that the reopening of assessment was on surmises and conjectures in absence of any material. Contention is that the material relied upon by the department was not supplied despite a specific request. Further that the stand taken by the department was changed during the course of the proceedings, yet the transactions of sale were duly explained.

5. As per contra, notice issued under Section 148A(b) of the Act was defective to the extent that instead of sales transaction purchase was mentioned and this was corrected by the later communication. The argument is that company was involved in getting bogus invoices and a deeper investigation is required.

6. The relevant portion of Section 148A of the Act and the guidelines dated 01.08.2022 for issuance of notice under Section 148 of the Act are reproduced:-

“Provisions & Guidelines

Section 148A

“[Conducting inquiry, providing opportunity before issue of notice under section 148.

148A. 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);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

(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 o