S. 148A Of Income Tax Act- Movement of Goods Should Be Clearly Shown To Disprove Allegations Of Accommodation Entries: Delhi HC

The Delhi High Court has held that an assessee is required to clearly show the movement of goods to disprove the allegations of accomodation enteries levelled against him.

The Court was considering a Writ-Petition impugning notices passed under Sections 148 and 148A(b) of the Income Tax Act, 1961 as well as an order passed under Section 148A(d) of the Act.

The division bench of Acting Chief Justice Vibhu Bhakru and Justice Tushar Rao Gedela held, "The documents provided by the petitioner would establish that the payments had been made to Shri Ajay Gupta through banking channels. However, the same does not address the allegation of purchases reflected were accommodation entries............In the present case, the petitioner was required to clearly show the movement of goods to establish that the goods had in fact moved from Shri Ajay Gupta to the petitioner. However, it does not appear that any such information was provided by the petitioner to the AO."

The Petitioner was represented by Advocate Shahrukh Ejaz while the Respondent was represented by Senior Standing Counsel Gaurav Gupta.

It was the case of the Petitioner that he was not granted seven days to file a response to the Notice issued under Section 148A(b) of the Act. As three days out of the provided seven days were holidays, therefore, the petitioner claims that he did not get seven working days to respond to the said notice.

The Noitice indicates that the Assessing Officer (AO) had information to the effect that the Petitioner had made purchases from an individual who was the sole proprietor of an entity. The individual was a non-filer during the relevant period and had not responded to the summons issued to him. According to the information, it was not a genuine entity and payments received in its bank account were withdrawn in cash. The petitioner had filed his return for the assessment year (AY) 2020-21 and the AO was of the view that the said return was not commensurate with the reported transactions entered into by the petitioner. Although the petitioner claims that he did not have sufficient time to respond to the said notice, the petitioner did respond to the said notice in due time.

Counsel for the Petitioner claimed that the purchases made from the individual were genuine purchases and had also produced a copy of ledger account; a copy of confirmation of balance in the books of the petitioner; a copy of purchase invoices; and a copy of bank statement reflecting the payments made to the entity.

"It is well settled that the accommodation those entries are entries where payments are made through banking channels but the same are not against any genuine commercial transaction and are compensated by reverse payments in cash," the court observed.

The Court concluded that the Petitioner failed to clearly establish the movement of goods.

With respect to the contention that the Petitioner was not afforded sufficient time, the Court observed, "Clause (b) of Section 148A of the Act does not stipulate that the Assessee is required to be provided minimum of seven working days. The Assessee is required to be provided notice not being less than seven days but not exceeding thirty days for furnishing his reply....The contention that the petitioner was not afforded sufficient time to file a reply to the notice issued under Section 148A(b) of the Act is unpersuasive. The said ground clearly appears to be an afterthought as the petitioner had not made any request for further time to file a response to the said notice."

The Petition was accordingly dismissed.

Cause Title: Abhishek Bansal vs. Income Tax Officer

Appearances:

Petitioner- Advocate Shahrukh Ejaz, Advocate Abhishek Kukkar, Advocate Palak Singh Parihar, Advocate Jahnavi Singh

Respondent- Senior Standing Counsel Gaurav Gupta, Advocate Shivendra Singh, Advocate Yojit Pareek

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