Facts of the Case

The appellant, Barbrik Projects Ltd., engaged in civil construction work, filed its income tax return for AY 2018-19 under Section 139(1). The return was scrutinized and an assessment under Section 143(3) was completed.

Subsequently, the Assessing Officer received information through the INSIGHT Portal (High Risk CRIU/VRU cases) indicating that M/s Panveer Trading Private Limited had shown sales amounting to ₹2,20,00,275 to the appellant. The information further suggested that Panveer Trading Pvt. Ltd. and certain related entities were allegedly engaged in issuing fake invoices without actual supply of goods for passing irregular Input Tax Credit (ITC).

On this basis, a notice under Section 148A(b) was issued proposing reassessment under Sections 147 and 148.

The assessee denied having entered into any transaction with the said company and submitted a Chartered Accountant's certificate. It also sought copies of the underlying information relied upon by the department.

The Assessing Officer rejected the reply, passed an order under Section 148A(d), and issued notice under Section 148. The writ petition challenging these proceedings was dismissed by the Single Judge, following which the present writ appeal was filed.

 

Issues Involved

  1. Whether the Assessing Officer possessed valid information suggesting escapement of income under Section 148.
  2. Whether conducting an enquiry under Section 148A(a) was mandatory in the facts of the case.
  3. Whether the Assessing Officer failed to properly consider the assessee's reply under Section 148A(c).
  4. Whether non-supply of underlying documents violated the principles of natural justice.
  5. Whether approval granted by the specified authority under Section 151 suffered from non-application of mind.
  6. Whether interference by the High Court was justified at the stage of reopening proceedings.

 

Petitioner’s Arguments

The petitioner contended that:

  • No legally sustainable information existed to justify reopening under Sections 147 and 148.
  • The Assessing Officer failed to conduct enquiry contemplated under Section 148A(a).
  • The reply filed by the assessee was not properly considered before passing the order under Section 148A(d).
  • Copies of documents, reports, fake invoices and information relied upon were not supplied despite request.
  • The approval granted under Section 151 was mechanical and without application of mind.
  • CBDT guidelines require disclosure of material relied upon and proper compliance with principles of natural justice.
  • The order under Section 148A(d) is not appealable and therefore writ jurisdiction was maintainable.

 

Respondent’s Arguments

The Revenue argued that:

  • Information received through the INSIGHT Portal constituted valid information for initiating proceedings.
  • Enquiry under Section 148A(a) is not mandatory in every case.
  • Adequate opportunity was provided under Section 148A(b).
  • The assessee merely produced a Chartered Accountant's certificate without furnishing supporting books of account or bank statements.
  • The assessee never sought personal hearing despite opportunity.
  • At the reopening stage, only existence of tangible material is required and sufficiency of evidence cannot be examined by the writ court.

 

Court Order / Findings

The Chhattisgarh High Court dismissed the writ appeal and upheld the reopening proceedings.

The Court held that:

  • Information obtained through the INSIGHT Portal regarding bogus purchase transactions and accommodation entries constituted prima facie tangible material for reopening assessment.
  • The assessee merely relied upon a Chartered Accountant's certificate and failed to produce books of account, bank statements or other documentary evidence disproving the allegations.
  • Section 148A does not require enquiry under clause (a) in every case.
  • The show cause notice adequately disclosed the basis of reopening and the assessee had sufficient opportunity to respond.
  • The assessee did not seek personal hearing despite the opportunity being available.
  • At the reopening stage, the Court only examines whether some tangible material exists and not whether the evidence conclusively establishes escapement of income.
  • Sufficiency or correctness of evidence is a matter to be examined during reassessment proceedings and not while testing the validity of reopening.
  • Accordingly, no interference with the reopening proceedings or the Single Judge's order was warranted.

 

Important Clarification

The High Court clarified several important principles regarding reassessment proceedings after the Finance Act, 2021:

  • Information generated through the INSIGHT Portal and Risk Management Strategy may constitute valid information under Section 148.
  • The source of information is less important than the existence of tangible material indicating possible escapement of income.
  • Enquiry under Section 148A(a) is discretionary depending upon the facts.
  • The writ court ordinarily should not interfere at the preliminary reopening stage where prima facie material exists.
  • The assessee retains full opportunity during reassessment proceedings to establish that the transactions were genuine.
  • Mere production of a Chartered Accountant's certificate is insufficient where substantive documentary evidence is expected.

 

Sections Involved

  • Section 139(1) – Return of Income
  • Section 143(2)
  • Section 143(3)
  • Section 147 – Income Escaping Assessment
  • Section 148 – Notice for Reassessment
  • Section 148A(a)
  • Section 148A(b)
  • Section 148A(c)
  • Section 148A(d)
  • Section 151 – Prior Approval
  • Section 68 (Discussed through precedent)
  • Section 142(2A) (Discussed through precedent)


Link to Download the order:https://www.mytaxexpert.co.in/uploads/1783932950_199compressed.pdf

 

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