Issuance Reassessment Notice Valid On Ground Disclosure Of Bogus Purchase Bills: Chhattisgarh High Court

The petitioner/assessee is running a rice mill in the name of M/s Shri Ji Rice Product. The petitioner filed his return for the assessment year 2016-17, declaring his total income as Rs. 13,330,000. His case was selected for compulsory scrutiny based on information received regarding three suspicious transaction reports. Upon examination, it was revealed that the petitioner obtained bogus purchase bills and that his income escaped assessment.

The petitioner submitted that the Department had issued notice under Section 148 of the Act of 1961 without there being any reason to believe, in terms of Section 147 of the Act of 1961, that income of assessees had escaped assessment. The Assessing Officer has not supplied reasons to believe along with the reassessment notice. Material based upon which the Assessing Officer recorded reason to believe was not supplied.

The petitioner contended that, except in the letter of approval or sanction, all the documents, which are forwarded to the petitioners, bear the digital signature of authority. In the absence of a digital signature on the sanction/approval under Section 151 of the Income Tax Act of 1961, it cannot be treated as a valid approval. In the absence of proper sanction or approval, the notice under Section 148 of the Act of 1961 could not have been issued. Remarks of approving authority, as appearing in approval under Section 151 of the Act of 1961, would show that there was total non-application of mind and approval, if any, had been granted in a mechanical manner.

The department urged that, based on information collected and received by the Assessing Officer, three suspicious transactions were revealed. Upon examination of all three suspicious transactions, it was revealed that the petitioner had obtained bogus purchase bills to the tune of Rs. 1,73,83,410 from proprietorship firms in the financial year 2015-16.

The court observed that Section 282-A of the Income Tax Act of 1961 was brought into force by way of an amendment for the purpose of authentication of notices and other documents. Sub-section (2) of Section 282-A of the Act of 1961 envisages that every notice or other document to be issued, served or given by any income tax authority shall be deemed to be authenticated if the name and office of the designated income tax authority are printed, stamped or otherwise written.

"​​In view of specific provisions under the Income Tax Act of 1961, the document, i.e. sanction/approval under Section 151 of the Act of 1961, issued by the competent authority in the case of petitioners will be deemed to be an authenticated document. In the 'Note' appended at the bottom of sanction/approval under Section 151 of the Act of 1961, it is mentioned that "if digitally signed", the date of signature may be taken as date of document," the court said.

Case Title: Jugal Kishore Paliwal Versus Joint Commissioner of Income Tax 

Case No: WPT No. 28 of 2022

Citation: 2022 LiveLaw (Chh) 30

Dated: 01/04/2022

Counsel For Petitioner: Advocate Ankit Singhal

Counsel For Respondent: Advocate Naushina Afrin Ali

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