HC Quashes Income Tax Reassessment for Alleged GST Component in Bogus Purchases
HC Quashes Income Tax Reassessment for Alleged GST Component in Bogus Purchases
The petitioner, Guruvayur Infratech Private Limited, engaged in civil construction, had made cement purchases during FY 2020–21 from two suppliers, M/s Dhairya Enterprise and M/s Shree Enterprise. A survey by the Directorate General of GST Intelligence revealed that these entities were involved in bogus billing. Without contesting the matter, the petitioner reversed the Input Tax Credit and paid GST along with interest and penalty amounting to Rs. 5.13 crore.
In its income-tax return for AY 2021–22, the petitioner declared income of Rs. 28.63 crore, which was later assessed under Section 143(3) after detailed scrutiny, including examination of purchases from non-filers. The Assessing Officer later issued a notice under Section 148A(1) alleging bogus purchases of Rs. 14.07 crore. The AO passed an order alleging, for the first time, that Rs. 3.67 crore representing GST expenditure had escaped assessment, followed by issuance of notice under Section 148.
Main Issue: Whether reassessment proceedings could be sustained when the Assessing Officer introduced a new basis of alleged escapement in the Section 148A(3) order, beyond the scope of the original show-cause notice, despite the issue having been examined earlier in scrutiny assessment.
HC Decided: The Hon’ble High Court held that the AO acted beyond jurisdiction by shifting the basis of reopening from bogus purchases of Rs. 14.07 crore to an alleged GST component of Rs. 3.67 crore without putting the petitioner to notice. The Court found that the petitioner had already written off the disputed amount as bad debt, added it back to income, and separately paid GST, interest, and penalty following the DGGI survey.
The Court concluded that no income had escaped assessment and that the reopening amounted to a change of opinion on an issue already scrutinised under Section 143(3). Thus, the impugned order under Section 148A(3) and notice under Section 148 were quashed.
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