Raika Ispat Udyog Pvt. Ltd. V. The Principal Commissioner Of Income Tax - 1, Raipur and The Assistant Commissioner Of Income Tax, Circle-1(1), Raipur

WPT/108/2023

AI Insights

Raika Ispat Udyog Pvt. Ltd. challenged the orders and notices issued by the Income Tax authorities, alleging that the purchases recorded from certain suppliers were bogus and involved in issuing fake bills. The petitioner argued that the total purchases were misrepresented and that they were not allowed to cross-examine the witnesses whose statements were used against them. The respondents countered that the petitioner was provided ample opportunity to contest the claims and that the transactions were part of a larger scheme of bogus purchases. The court examined the procedural adherence and the substantive evidence presented, ultimately dismissing the petition.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 675729 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 18-07-2023
• Assessment Year: misc
• Other Referred Cases: M/s. Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II, Kishinchand Chellaram Vs. The Commissioner of Income Tax Bombay City II, Bombay, Arise India Limited Vs. Commissioner of Trade and Taxes, Delhi and others, PR. Commissioner of Income Tax, Surat-1 Vs. Tejua Rohitkumar Kapadia, PR. Commissioner of Income Tax-20 Vs. Dhananjay Mishra, Suryalakshmi Cotton Mills Ltd. Vs. Assistant Commissioner Of Income Tax, Raymond Woollen Mills Limited Vs. Income Tax Officer, Centre XI, Range Bombay and Others, Gian Castings Private Limited Vs. Central Board of Direct Taxes and others, Barbrik Projects Ltd. Vs. Union of India and others, Union of India and others Vs. Ashish Agrawal
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: AJAY KUMRANI
• Assessee Lawyers: MOOLCHAND JAIN
• Keywords: Assessment; Bogus purchases; Escaped income; Income Tax Act
• Section: 148; 149; 148A(b); 148A(d); 151(ii); 148A(a)

Judgement Text

"-1- NAFR HIGH COURT OF CHHATTISGARH, BILASPUR WPT No. 108 of 2023 Raika Ispat Udyog Pvt. Ltd. A Private Limited Company Situated At Ring Road No.20, Village Gondiya Urla Industrial Area, Raipur (C.G.) Through Its Director Vikas Raika, S/o Late Vijay Raika Aged About 44 Years, R/o 173, Sapphre Green, Vidhan Sabha Road, Aama Sivani, Raipur (C.G.) ---- Petitioner Versus 1. The Principal Commissioner Of Income Tax - 1, Raipur Central Revenue Building Civil Lines, Raipur. 2. The Assistant Commissioner Of Income Tax, Circle-1(1), Raipur Central Revenue Building Civil Lines, Raipur (C.G.) ---- Respondents (Cause Title is taken from Case Information System) For Petitioner : Mr. Moolchand Jain, Advocate For Respondents : Mr. Ajay Kumrani, Advocate holding the brief of Mr. Amit Choudhari, Advocate Hon'ble Shri Justice Rakesh Mohan Pandey Order on Board 18.07.2023 Heard. 1) By way of this petition, the petitioner has challenged the order dated 19.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961 and notice dated 21.03.2023 issued under Section 148 of the Income Tax Act, 1961 (for short ‘the Income Tax Act’). 2) The facts of the present case are that the petitioner is a -2- manufacturer and trader of H.B. Wire and Steel Products. In the course of business, the petitioner purchased Steel from the following three parties : S.No. Name Net Value of Goods GST Gross Amount 1 M/s. Abhishek Enterprises, Ryp. 47,34,800/- 8,52,266/- 55,87,066 2. M/s. Pratyush Steels, Ryp 5,56,320/- 1,00,138/- 6,56,458/- 3. M/s. Rajendra Ispat Ryp. 14,20,819/- 2,55,748/- 16,76,567/- Total 67,11,939/- 12,08,152/- 79,20,091/- 3) The notice was issued to the petitioner under Section 148A (a) of the Income Tax Act after getting information uploaded under High-Risk CRIU/VRU data that the petitioner has made bogus purchases of Rs.1,83,35,526/-, Rs.16,76,567/- and Rs.6,56,458/- from M/s. Abhishek Enterprises, M/s. Rajendra Ispat and M/s. Pratyush Steels respectively and it is also found that the petitioner is indulged in issuing fake bills to certain parties. 4) The petitioner submitted copies of bills and ledger accounts of the supplier for Financial Year 2018-19. Learned ACIT issued notices under Section 148A (b) of the Income Tax Act on 02.03.2023 and in response, the petitioner filed a reply on 16.03.2023. The petitioner requested for cross-examination of the persons whose statements have been relied on by the department. Learned ACIT after taking into consideration the -3- documents along with the reply filed by the petitioner passed an order under Section 148A (d) of the Income Tax Act on 19.03.2023 and issued notice under Section 148 of the Income Tax Act on 21.03.2023. 5) Learned counsel for the petitioner would submit that total purchases during the Financial Year 2018-19 were only Rs.55,87,066/- and not Rs.1,83,35,526/-. He would also submit that the petitioner had sold the entire purchases from the above- stated three parties to M/s. K.K. Construction, Raipur through direct delivery from the supplier’s premises through the same trucks and confirmation letter has already been submitted before the learned ACIT on 06.03.2023. He would further submit that the learned ACIT passed order under Section 148A (d) of the Income Tax Act based on statements of some persons but the petitioner was not permitted to cross-examine those persons and documents were also not supplied therefore, the order passed under Section 148A (d) and notice issued under Section 148 of the Income Tax Act are required to be set aside. He would further submit that the procedure adopted by the revenue is bad in law and it vitiates the entire proceedings. He would also submit that the learned ACIT has obtained sanction from the Pr. C.I.T. whereas, the proposal for escaped income was for more than Rs.50 lacs, therefore, sanction was required to be taken from the Chief C.I.T., who is the specified authority according to Section 151(ii) of the Income Tax Act. He would next submit that the -4- learned ACIT has wrongly assessed the escaped income. The alleged escapement is in respect of ‘expenditure’ and not in respect of ‘asset’. The word ‘expenditure’ has been inserted in Section 149 by the Finance Act, 2022 w.e.f. 01.04.2023. Thus, the learned ACIT has erred in law and on facts in treating the entire purchase as escaped income, which is perverse, wrong and bad in law. He has placed reliance on the judgments passed by the Hon’ble Supreme Court in the matters of M/s. Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II passed in Civil Appeal No.4228 of 2006, the judgment passed by the Hon’ble Supreme Court in the matter of Kishinchand Chellaram Vs. The Commissioner of Income Tax Bombay City II, Bombay, reported in 1981 SCC (1) 720, the judgment passed by the High Court of Delhi in the matter of Arise India Limited Vs. Commissioner of Trade and Taxes, Delhi and others passed in WPC No.2106 of 2015 and other connected matters, the order passed by the High Court of Gujarat at Ahmedabad in the matter of PR. Commissioner of Income Tax, Surat-1 Vs. Tejua Rohitkumar Kapadia passed in Tax Appeal No.691 of 2017, the order passed by the Bombay High Court in the matter of PR. Commissioner of Income Tax-20 Vs. Dhananjay Mishra passed in Income Tax Appeal No.971 of 2017 and the judgment passed by the High Court of Telangana in the matter of Suryalakshmi Cotton Mills Ltd. Vs. Assistant Commissioner Of Income Tax, reported in 2022 Latest -5- Caselaw 2468 Tel. 6) On the other hand, leaned counsel for the respondents would submit that an opportunity of being heard as per provisions of Section 148A(b) of the Income Tax Act was provided to the petitioner on 02.03.2023 wherein the assessee was given show cause as to why the bogus purchase of Rs.1,83,35,526/-, Rs.16,76,567/- and Rs.6,56,458/- during Financial Year 2018-19 from M/s. Abhishek Enterprises, M/s. Rajendra Ispat and M/s. Pratyush Steels respectively should not be treated as income chargeable to tax which has escaped the assessment within the meaning of provisions of Section 147 of the Income Tax Act for the assessment year 2019-20. It is further submitted that in response to the notice, the petitioner submitted his reply on 06.03.2023. It is further argued that from a perusal of the reply, it is apparent that the petitioner was fully aware of the documents relied upon by the department and in this regard, a detailed reply was filed by him. He would submit that based on similar nature of bogus transactions in the immediately preceding year 2017-18, the case of the petitioner was reopened and an assessment order was passed by the faceless AO thereby making an addition to the impugned amount of bogus purchases. All related third- party statements were duly provided to the petitioner. He would further submit that according to the provision of Section 151(i) of the Income Tax Act specified authority i.e. Pr. CIT-1, Raipur had accorded approval vide order dated 19.03.2023. He has placed -6- reliance on the judgments passed by the Hon’ble Supreme Court in the matter of Raymond Woollen Mills Limited Vs. Income Tax Officer, Centre XI, Range Bombay and Others, reported in 2008(14) SCC 218, the judgment passed by the High Court of Punjab and Haryana at Chandigarh in the matter of Gian Castings Private Limited Vs. Central Board of Direct Taxes and others in CWP No.9142 of 2022 and the order passed by the Hon’ble Division Bench of this Court in the matter of Barbrik Projects Ltd. Vs. Union of India and others in Writ Appeal No.473 of 2022. 7) I have heard learned counsel for the parties and perused the documents carefully. 8) Section 148A has been introduced in the Income Tax Act from 01.04.2021. This Section says that before issuing any notice the Assessing Officer shall conduct an inquiry and provide an opportunity of being heard to the assessee. After taking into consideration the reply filed by the assessee, the Assessing Officer shall decide by passing an order, whether the case is fit for issuance of notice under Section 148 of the Income Tax Act and a certified copy of such order along with such notice have to be served upon the assessee. The time limitation for issuance of notice under Section 148 of the Income Tax Act is provided in Section 149 of the Income Tax Act. In normal cases, no notice shall be issued if three years have elapsed from the end of the relevant assessment year. Notice beyond the period of three -7- years from the end of the relevant assessment year can be issued where the Assessing Officer would not be in possession books of accounts or other documents or evidence which would reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year. Then notice can be issued beyond the period of three years but not beyond the period of 10 years from the end of the relevant assessment year. Notice under Section 148 of the Income Tax Act can be issued when there is information with the Assessing Officer which suggests that the income chargeable to the tax has escaped assessment in the case of an assessee for the relevant assessment year. The specified authority for approving inquiries, providing the opportunity to pass an order under Section 148 of the Income Tax Act and for issuance of notice under Section 148 of the Income Tax Act is 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 or Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. 9) From a perusal of the order passed under Section 148A(d) of the Income Tax Act, it is quite vivid that during the survey proceedings of Abhishek Enterprises on 20.08.2020, it was found -8- that the Raika Ispat Udyog Pvt. Ltd. made bogus purchases of Rs.1,83,35,526/-, Rs.16,76,567/- and Rs.6,56,458/- during the Financial Year 2018-19 from M/s. Abhishek Enterprises, M/s. Rajendra Ispat and M/s. Pratyush Steels respectively, were found indulged in providing accommodation entries to the beneficiaries. According to the provision of Section 151 of the Income Tax Act, prior approval was taken from the specified authority and notice was issued under Section 148A(a) of the Income Tax Act to the petitioner to furnish its books of accounts etc. for FY 2018-19 and to explain the issues. The petitioner submitted his reply on 06.03.2023 and stated that his total basic purchase value is Rs.67,11,939/- and not Rs.2,06,68,551/-. The department found that M/s. Abhishek Enterprises, M/s. Rajendra Ispat and M/s. Pratyush Steels are ‘suspicious’ dealers i.e., a person who is suspected of issuing fake bills without selling the goods. A copy of the confirmation of K.K. Construction supplied by the petitioner was also taken into consideration and the submission of the petitioner has been carefully perused and considered according to the provision of Section 148A(c) of the Income Tax Act. The statement recorded on oath during the proceedings was also considered by the department where there are admissions. The department based on the evidence in the form of documents, statements of entry operators and other key persons involved, facts and other circumstantial evidence found a fit case to initiate proceedings and thereafter notice under -9- Section 148 of the Income Tax Act was issued after recording satisfaction. 10) Now it would be advantageous to deal with the judgments cited by the learned counsel for the petitioner. In the matter of M/s. Andaman Timber Industries (supra), the Hon’ble Supreme Court has held that not allowing the assessee to cross- examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity since it amounted to a violation of principles of natural justice because of which the assessee was adversely affected. 11) In the matter of Arise India Limited and other connected matters (supra), the Constitutional Validity of Section 9(2)(g) of the Delhi Value Added Tax, 2004 was challenged on the ground that the same is violative of Article 14 of the Constitution of India and Section 9(2)(g) of the Delhi Value Added Tax, 2004, the Hon’ble Supreme Court in para 53, 54 and 55 observed thus:- “53. In light of the above legal position, the Court hereby holds that the expression dealer or class of dealers occurring in Section 9 (2) (g) of the DVAT Act should be interpreted as not including a purchasing dealer who has bona fide entered into purchase transactions with validly registered selling dealers who have issued tax invoices in accordance with Section 50 of the Act where there is no mismatch of the transactions in Annexures 2A and 2B. Unless the expression dealer or class of dealers in Section 9 (2) (g) is read down in the above manner, the entire provision would have to be held to be violative of Article 14 of the Constitution. 54. The result of such reading down would be that the Department is precluded from invoking Section 9 (2) (g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling -10- dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. Where, however, the Department is able to come across material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under Section 40A of the DVAT Act. 55. Resultantly, the default assessment orders of tax, interest and penalty issued under Sections 32 and 33 of the DVAT Act, and the orders of the OHA and Appellate Tribunal insofar as they create and affirm demands created against the Petitioner purchasing dealers by invoking Section 9 (2) (g) of the DVAT Act for the default of the selling dealer, and which have been challenged in each of the petitions, are hereby set aside.” In the above referred matter, it was held that a purchasing dealer who in a bonafide manner entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number, the department is precluded from invoking Section 9(2)(g) of the New Delhi Value Added Tax, 2004. In the present case, there are admissions by the witnesses and the department has found certain documents in the nature of bogus transactions and earlier also the petitioner was found involved in similar activity therefore, the decision cited by the petitioner is of no help. 12) In the matter of Tejua Rohitkumar Kapadia (supra), the Hon’ble Supreme Court in para 3 held as under :- “3. It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no -11- question of law arises.” In the above referred matter, it was found that purchases made by the assessee from M/s. Raj Impex were duly supported by bills and all the payments were made by account payee cheques. But in the present case, the department has found that there were purchase bills however actually no goods were purchased to evade the tax, therefore, the facts of the case cited by the petitioner are different from the facts of the present case. 13) In the matter of Dhananjay Mishra (supra), the Hon’ble Supreme Court observed that the third-party statement relied upon by the Assessing Officer was not supplied to the petitioner and none of those points were discussed in the assessment order. It was also observed that the assessee was not permitted to cross-examine the two persons whose affidavits; the Assessing Officer had relied upon to conclude that respondent had made certain purchases from those persons identified as Hawala Traders and consequently, the petition preferred by the Revenue was dismissed whereas, in the present case, the persons who have been examined, have admitted and further there are sufficient documents to demonstrate that in the business the bogus bills were issued, therefore, this judgment is also distinguishable from the facts of the present case. 14) In the matter of Kishinchand Chellaram (supra), the Hon’ble Supreme Court set aside the orders passed by the -12- Tribunal on the ground that the Manager of the Bank on whose evidence the order was passed was not permitted to cross- examine and documents produced by the assessee were not relied upon. Further, it was held that there was no evidence at all before the Tribunal on the basis of which the Tribunal could come to the finding that the amount of Rs.1,07,350/- was remitted by the assessee from Madras and that it represented the concealed income of the assessee. In the present case, there are sufficient documents like bogus bills, ledger, statements of the witnesses, and bogus transactions, therefore, the facts of the present case are distinguishable from the case law cited by the petitioner. 15) In the matter of Raymond Woollen Mills Limited (supra), the Hon’ble Supreme Court observed that 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 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. 16) In the present case, there are other documentary materials which have been considered by the Adjudicating Authority while passing the order under Section 148A (d) of the Income Tax Act. The statements of the witnesses are not the sole basis for passing the order therefore; the facts of the present -13- case are different from the facts of the cited cases. 17) In the matter of Suryalakshmi Cotton Mills Ltd. (supra), the notices issued under the unamended provision of Section 148 of the Income Tax Act were set aside in terms of the judgment passed by the Hon’ble Supreme Court in the matter of Union of India and others Vs. Ashish Agrawal, reported in 2023 (1) SCC 617, whereas, in the present case, facts are entirely different as notice has been issued according to the amended provision of Sections 148 and 148A of the Income Tax Act. 18) Now coming to the judgments cited by learned counsel for the respondents. In the matters of Gian Castings Private Limited Vs. Central Board of Direct Taxes and others, CWP No.9142 of 2022 dated 02.06.2022, and Anshul Jain Vs. Principal Commissioner of Income Tax and another, CWP 10219 of 2022, the Punjab and Haryana High Court at Chandigarh while dealing with a similar issue 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. It is further held that it is not a case where from a bare reading of notice it can be axiomatically held that the authority has clutched upon the jurisdiction not vested in it. The correctness of order under Section 148A (d) of the Income Tax Act is being challenged on the factual premise contending that jurisdiction though vested has been wrongly exercised. There is a vexed distinction between jurisdictional error and error of law/fact within the -14- jurisdiction and for rectification or errors statutory remedy has been provided. The order passed by the High Court of Punjab and Haryana has been affirmed by the Hon’ble Supreme Court in SLP(C) No.10762 of 2022 order dated 17.06.2022 and SLP No.14823/2022 order dated 02.09.2022 respectively. 19) The Division Bench of the High Court of Chhattisgarh in the matter of Barbrik Projects Ltd. Vs. Union of India and others, passed in Writ Appeal No.473 of 2022, dated 15.12.2022 while dealing with a similar issue in paras. 31(12), 32 & 33 observed as under : “31(12). After considering the reply of the assessee 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.” 20) At the same time, the respondents have cited certain judgments passed by the various High Courts and some of them -15- have been affirmed by the Hon’ble Supreme Court where it is categorically held that if there is no procedural fault, the Writ Court should not interfere at such a premature stage when the proceeding initiated against the assessee is yet to be concluded by the statutory authority and in one of the decisions passed by the Division Bench of this Court it was held that the bogus purchases can be made basis for issuance of notice under Section 148 of the Income Tax Act and the said writ petition preferred by the assessee was dismissed. 21) With regard to ground raised by the learned counsel for the petitioner that the learned ACIT has obtained sanction from the Principal Commissioner of Income Tax, whereas, since the proposal for escaped income was for more than 50 lacs, sanction was required to be taken from the Chief Commissioner of Income Tax according to the provision of Section 151 (ii) of the Income Tax Act. The ground raised by the petitioner is factually incorrect since the assessment year involved is Financial Year 2019-20, provision of Section 151(i) of the Income Tax Act is applicable and according to provision of Section 151(i) of the Income Tax Act, the Principal Commissioner of Income Tax would be the specified authority and same authority has accorded approval on 19.03.2023. 22) In view of the above, it is quite vivid that the documents have -16- been supplied to the petitioner in pursuance of the order passed by the ACIT; thereafter notice was issued under Section 148A(b) of the Income Tax Act; the reply was filed by the petitioner; thereafter the order was passed under Section 148A(d) of the Income Tax Act and at the same time, notice under Section 148 of the Income Tax Act was issued; the matter is still pending before the authority and the petitioner has sufficient opportunity to take all defences available to him, in that view of the matter, I do not find any good ground to interfere with the order passed by the authorities under Section 148A(d) and notice issued under Section 148 of the Income Tax Act. Consequently, the present petition fails and is hereby dismissed. Sd/- (Rakesh Mohan Pandey) Judge Rekha "