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TMI Blog2025 (1) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... ies that certain entities were engaged in issuing/generating/providing fake/bogus invoices to pass on a fraudulent "Input Tax Credit" ("ITC") without supply of goods. In so far as the petitioner is concerned, this was in relation to an entity M/s Flash Forge Private Limited ("M/s. Flash Forge" for short) which according to the assessing officer has issued fake invoices in favour of the petitioner amounting to Rs. 10,97,500/- for the assessment year in question. It is on such count the case of the department is that income in the sum of Rs. 10,97,500/- chargeable to tax had escaped assessment, as the petitioner has not set out as to what kind of professional services were rendered by it to M/s Flash Forge. The assessing officer hence has found it appropriate to reopen the petitioner's assessment. 3. Briefly, the relevant facts are : On 24 August 2018, petitioner filed its return of income for the A.Y. 2018-2019. The petitioner claims to be a firm of Chartered Accountants. It was established in the year 1984 and since then is engaged in practice of Chartered Accountancy. Since the year 2010, the firm started rendering services related to audit and assurance, also taxation services t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed copies of the department's record namely the Form 26-A, which contained the details of professional fees and TDS deducted thereon by M/s Flash Forge. The petitioner also provided with the screenshots of GSTR-1 filed by the petitioner for the year under consideration reflecting invoices issued through M/s Flash Forge. It was also pointed out that an amount of Rs. 1,05,300/- was still receivable from M/s. Flash Forge. The petitioner also pointed out that the receipts amounting to Rs. 10 lakhs were inclusive of TDS deducted of Rs. 1 lakh which were duly incorporated in the books of account under the head 'professional receipt' and offered to tax for the year under consideration. It was further submitted that the petitioner was maintaining its books of account on cash basis and in support of such explanation, petitioner also annexed the ledger account of M/s Flash Forge as also copies of its bank statement, reflecting the amount received from M/s Flash Forge. It was thus, categorically pointed out that the petitioner had taken into consideration professional fees received from M/s Flash Forge, while filing return of income and duly offered to tax the amount of professional fees rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee submitted its reply dated 15.03.2022. The same is discussed herein. The Assessee has stated that it is a CA firm engaged in rendering services relating to Audit & Assurance and taxation to corporate and non corporate assesses. The Assessee submitted that they neither purchased any goods nor sold any goods to M/s Flash Forge Pvt Ltd but rendered their professional services to them. However, the assess has not mentioned what kind of professional services have been rendered and since how long has it been associated with this company, M/s Flash Forge Pvt Ltd. They have not shared any contract entered into with M/s Flash Forge Pvt Ltd. to deliver services, invoices raised against the company, proof of billable hours or delivery of service, project details etc. No such documents have been submitted. M/s Flash Forge Pvt Ltd is a company registered outside Maharashtra, the Assessee has however deducted CGST/SGST and not IGST in this case. Further, merely depositing the GST amount collected into government treasury does not verify the genuineness of the transaction made. Thus the documents presented by the Assessee do not confirm the genuineness of the transaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner had no transaction for supply of goods with M/s. Flash Forge and for which no invoices were raised by the petitioner on M/s Flash Forge, so as to infer that any income had escaped assessment. It is submitted that the record clearly indicated that the petitioner had not received any goods or invoices from M/s Flash Forge which can be categorised as bogus invoices for any utilisation of any fraudulent ITC. It is submitted that also no payment was made to such entity and in fact, what was rendered by the petitioner was professional services and for which fees were received, on which the GST amount was deposited as also income tax on such receipt was deposited. It is next submitted that the income received by the petitioner by way of professional fees from M/s Flash Forge was offered to tax, and such receipts and tax paid on the same was part of the return as filed by the petitioner. Also in the accounts as maintained by the petitioner, the details of such receipts were appropriately made and already provided to the assessing officer. It is thus Mistri's contention that there was no question of the assessing officer making additions on the basis of the information received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention to the reply affidavit filed on behalf of the Revenue in supporting the case of the Revenue in issuance of the notice under Section 148. She has taken all efforts to buttress the case of the Revenue to submit that this is a case where the assessing officer was justified in considering the information which was flagged in the risk management strategy formulated by the CBDT. She would submit that the information which was available from the CGST authorities in fact questioned the invoices which were issued by the petitioner, and taking into consideration such materials, the impugned notice under Section 148A (b) as also order passed thereon under Section 148A (d) and the notice under Section 148 as assailed, was issued to the petitioner. Learned counsel for the Revenue has also urged that the petitioner has an alternate statutory remedy available to file an appeal, for such reason, this petition should not be entertained. She would hence submit that the petition be accordingly dismissed. Reasons and Conclusions 14. We have heard learned counsel for the parties. With their assistance, we have also perused the record. 15. At the outset, we may observe that the petitioner is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om fradulent ITC so that income in that regard had escaped assessment, so as to initiate such action under Section 148A (b). The information which was gathered by the department indicated that M/s Flash Forge had made payments of Rs. 10,97,500/- to the petitioner. However, there was no material for the assessing officer to jump to a conclusion, that having received such amount, the petitioner was deemed to be involved and/or was the beneficiary of any bogus input tax credit as being portrayed by the CGST authorities. In our opinion, when tested on record it was a wholly unwarranted and a wholly erroneous assumption of the assessing officer and the PCIT to reopen the petitioner's assessment on such count. In fact, this is a case depicting a mechanical approach being adopted by both these officers. 19. To us it also appears to be a classic case wherein certain information which may be relevant in so far as the CGST authorities are concerned in relation to the transactions qua a registered person under the CGST Act is being mechanically and without application of mind, taken to be relevant, in so far as the proceedings under the IT Act are concerned, more so, when it is a case of re- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from M/s Flash Forge, the TDS amount as deposited, the GST amount as deposited, the 26A statement and all other possible information which would show not only the professional standing, but the bona fides of the petitioner. 22. It is also noteworthy that the invoices for professional fees were issued by the petitioner to the said M/s Flash Forge, accordingly amounts were received by the petitioner qua the said invoices and no other amounts were received. However, surprisingly it appears that all this was not considered relevant by the assessing officer. He decided to overlook the detailed reply to the show cause notice submitted by the petitioner, moreover the order passed by the assessing officer under clause(d) of Section 148A would show a gross non-application of mind, and more particularly, when he makes an observation that the assessee has not mentioned the kind of professional services which were rendered by it to M/s. Flash Forge and since how long the petitioner was associated with M/s Flash Forge. Such observations as made by the assessing officer has created a serious doubt in our mind as to whether the assessing officer can be said to be at all aware on his ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), we may observe that if such high officers act with such colossal non-application of mind, amounting to an abuse of the authority and powers which are vested in him in law, which is coupled with a serious duty and an obligation to adhere to the correct facts of the case and on appropriate understanding of the law in grant of an approval, what can be the plight of the assessee. We have a serious doubt whether the concerned PCIT who has granted such approval can at all continue to discharge his duties on such post. This is required to be seriously considered by the CBDT, in deciding the competence of an officer who is being conferred with such enormous powers, considering the approval as accorded in the present case. 26. We are not happy to make the abovesaid observations. Suffice it to observe that we cannot overlook such gross non-application of mind and totally irrelevant remarks which are alien to the petitioner's case, has caused serious prejudice to the petitioner, leading the petitioner to knock the doors of this Court and invite an adjudication on this petition. This is not the first time that the Court is required to observe on such conduct of the PCIT. In Samp Furniture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such information in regard to its relevance, in so far as the assessee is concerned and the returns the assessee had filed. The following observation as made by the Court are required to be noted, which reads thus: "16. The assessee has happily accepted such finding as this has benefited the assessee, looked from any angle. However, in a given case if the Income Tax Authorities are of the view that there are questionable and/or bogus purchases, in that event, it is the solemn obligation and duty of the Income Tax Authorities and more particularly of the A.O. to undertake all necessary enquiry including to procure all the information on such transactions from the other departments/authorities so as to ascertain the correct facts and bring such transactions to tax. If such approach is not adopted, it may also lead to assessee getting away with a bonanza of tax evasion and the real income would remain to be taxed on account of a defective approach being followed by the department." 28. Similar view was taken by the Court in Ashok Kumar Rungta vs. Income Tax Officer [2024] 167 taxmann.com 429 (Bombay) [15-10-2024] in which the Court has also followed the decision in SVD Resins & Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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