Merely non furnishing of purchase & sale register would not amount to escapement of income
In a recent judgment, the Hon’ble Supreme Court dismissed the SLP against the judgment of Gujarat High Court holding that and merely non furnishing of purchase and sale register would not amount to escapement of income
ABCAUS Case Law Citation:
4680 (2025) (08) abcaus.in SC
The assessee was a partnership firm and was carrying on the business of trading of cotton yarn and spare parts of textiles machinery related products.
For the AY 2018-19, the assessee had made huge amount of sale during the year under consideration but the net profit declared was very small. On the basis of such variance in turnover and the income offered by the assessee, information was uploaded on Insight portal. Further on the basis of survey action conducted on one person engaged in trading in Cotton Yarn/Cotton scrap, name of the assessee was also mentioned with regard to sale of Yarn/Cotton scrap on which no TCS was deducted.
The Assessing Officer (AO) issued notice under section 148A(b) calling upon the assessee to show cause as to why the notice under section 148 of the Act should not be issued.
The AO inter alia observed that with respect to the sale as per the GSTR data, the assessee had furnished only the sum of party wise sales figures as per GSTR data. However, the assessee had not furnished the sales register of the period under consideration.
The AO passed the impugned order under section 148A(d) holding that income had escaped assessment for the year under consideration since the petitioner had failed to prove the genuineness of the transactions, source of income for making such huge transactions.
Being aggrieved by the impugned order, the assessee preferred a writ petition before the Hon’ble High Court.
It was submitted that that the Assessing Officer had failed to consider the explanation furnished and documents/evidence produced. It was submitted that the assessee offered explanation with documentary evidence which clearly established that there was no escapement of income in respect of any of the items mentioned in notice under section 148A(b) of the Act.
It was submitted that while passing the order under section 148A(d) of the Act, Assessing Officer had only recorded that the petitioner did not furnish the purchase register or sales register and only because of non furnishing of the purchase and sale register, it was concluded that there is escapement of income and to arrive at such conclusion there was no application of mind on the part of Assessing Officer.
It was pointed out that along with the reply, the assessee had furnished all the summary of purchase report in GSTR-1 filed with GST department and had also submitted required details by submitting party-wise sales report and purchase report with the GST department. It was therefore, submitted that the contention raised by AO to come to the conclusion that it was a fit case for reopening the assessment was without jurisdiction ignoring the explanation tendered in absence of any escapement of income.
The Hon’ble High Court observed that with regard to sales and purchase data from GSTR-I register, the Assessing Officer had observed that the petitioner failed to submit sales and purchase register and therefore, there was escapement of income. However, the assessee had placed on record the details of Form GSTR-I wherein all the details of sale and purchase as submitted to GST department were provided to the AO.
The Hon’ble High Court further found that the Assessing Officer by considering the total of party-wise purchases and party-wise sales as stated in Form GSTR-I had come to the conclusion that there was escapement of income without there being any material/information on record. The AO however, had accepted the explanation tendered by the petitioner in respect of all the transactions except observing that the assessee did not furnish the Sales and Purchase Register and therefore, the source for sales and purchase was not known ignoring the fact that the petitioner had filed the return of income for the year under consideration along with audit report and audited balance sheet and Profit and Loss Account.
The Hon’ble High Court held that the AO failed to justify any of the reasons assigned to come to the conclusion that it is a fit case to reopen the assessment for the year under consideration. The impugned order passed under section 148A(d) of the Act, clearly showed that the Assessing Officer had arrived at conclusion to hold that it is a fit case to reopen only on the ground that the petitioner did not furnish the Sales and Purchase Register.
Accordingly, the Hon’ble High Court allowed the Petition and the impugned order passed under section 148A(d) as well as the impugned notice issued u/s 148 of the Act were quashed and set aside.
Not satisfied, the Assessing Officer challenging the judgment of the High Court before the Hon’ble Supreme Court by way of filing a Special Leave Petition (SLP).
However, the Apex Court declined to entertain the Petition and dismissed the SLP with the following observations,
“In the facts and circumstances, we are not inclined to condone the delay or even to entertain the special leave petition on merits. Accordingly, the present petition stands2 dismissed on the ground of delay as well as on merits.”
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