Majestic Handicraft Private Limited vs. Deputy Commissioner Of Income Tax

Held

The Court held that the Assessing Officer (AO) had not conducted sufficient due diligence to establish that the petitioner's claim of purchasing readymade garments from Balaji Enterprises and Dev Sales Corporation was false. The Court noted that the impugned order under Section 148A(d) did not deal with the petitioner's submission regarding the GSTR-2A and the matching GSTINs of the suppliers. The AO's reliance on Balaji Enterprises not being found at its address was considered insufficient without further investigation into the petitioner's assertion of actual supply and export. The Court reasoned that the AO needed to prima facie establish the falsity of the petitioner's stand regarding the procurement of goods. Consequently, the Court set aside the order dated March 28, 2022, passed under Section 148A(d) and the consequential notice dated March 28, 2022, issued under Section 148. The AO was granted liberty to conduct a de novo exercise, examine the petitioner's documents related to the receipt of readymade garments and their exports, and provide the petitioner an opportunity to respond to any further material and a personal hearing.

Facts

The petitioner, Majestic Handicraft Private Limited, filed a writ petition challenging a notice dated March 21, 2022, issued under Section 148A(b) of the Income Tax Act, 1961, an order dated March 28, 2022, passed under Section 148A(d) of the Act, and a consequential notice dated March 28, 2022, issued under Section 148 of the Act. The revenue alleged that the petitioner was a beneficiary of accommodation entries totaling Rs. 2,05,90,186/- from Balaji Enterprises (Rs. 1,44,56,180/-) and Dev Sales Corporation (Rs. 61,34,006/-). The petitioner contended that it purchased readymade garments from these entities and exported them, claiming duty drawback. The petitioner submitted its GSTR returns, including GSTR-2A, which showed the GSTIN of the suppliers matching those on the invoices.

Key Issues

1. Whether the Assessing Officer (AO) had conducted due diligence to establish that the petitioner's claim of purchasing readymade garments from Balaji Enterprises and Dev Sales Corporation was false, as required under Section 148A of the Income Tax Act, 1961? Petitioner's arguments: The petitioner argued that it had purchased readymade garments from Balaji Enterprises and Dev Sales Corporation and exported them, providing GSTR returns and GSTR-2A as evidence. The GSTINs on these documents matched the suppliers' GSTINs. The petitioner asserted it had not taken accommodation entries. Revenue's arguments: The revenue's primary contention, as reflected in the impugned order, was that Balaji Enterprises was not found at the given address. The revenue did not appear to have addressed the petitioner's submission regarding the GSTR-2A and the matching GSTINs.