Notice U/S 148A(b) Flagging Bogus Transactions Cannot Be Faulted For Merely Mentioning Sale Entry As That Of Purchase: Gauhati HC

The Gauhati High Court has dismissed a challenge to an order under Section 148A of the Income Tax Act, 1961, deeming the Petitioners' case fit for issuance of notice for escapement of income assessment under Section 148. Justice Devashis Baruah observed, “From the replies so submitted by both X and Y to the Show Cause notices would show that both X and Y admitted transactions… transactions in question being bogus transactions, the efficacy of the contentions made by the Petitioners that the transactions were of sale and not purchase had lost its effect.” Initially, notices were issued to the Petitioners based on information received through the Department's Insight Portal that X and Y had made bogus purchases. Section 148A stipulates that before issuing any notice under Section 148, the Assessing Officer shall conduct necessary enquiry with respect to the information which suggests that income chargeable to tax had escaped assessment; provide an opportunity of being heard to the assessee; consider the reply of the assessee furnished, if any; decide whether it is a fit case to issue a notice under Section 148 and the Assessing Officer is required to pass a specific order within the time stipulated. Agreeing with the Department, the High Court said, “The materials on record and more particularly the replies submitted by both X and Y would show that there was no denial by both X and Y that there were no transactions between X and M/s Swastik Traders and M/s Kalki Trading Company and between Y and M/s Swastik Traders.