Ahmedabad: The Income Tax Appellate Tribunal bench has said that once the I-T department accepts sales and calculates income tax based on them, it cannot say that the purchases were bogus.The tribunal has allowed two appeals filed by an individual trader for assessment years 2019-20 and 2020-21, quashing reassessment proceedings initiated on the basis of alleged bogus purchases.CA Sulabh Padshah said, “This order suggests that reason to believe [a discrepancy] must be substantiated with documentary evidence. Assessing officer (AO) has to record his own satisfaction in writing before reopening the case.”Padshah said, “Merely relying upon the information from GST department or wing, AO cannot reopen the case. Once sales/receipts are accepted, purchases alone cannot be doubted.”He added, “If GST department has not taken any adverse action on the information passed by it, AO cannot proceed further without having concrete evidence.”The case concerned a trader of copper scrap and ingots. For the assessment year 2020-21, the returns were originally processed under the routine summary procedure.The matter was later picked up after an alert on the department’s risk platform, citing information from an investigation unit. The information was that the taxpayer had allegedly benefited from accommodation entries through a bill provider. That involved purported fictitious purchases of about Rs 22.5 crore during the financial year.According to Padshah, following the pre-notice procedure under section 148A, the AO issued a show-cause notice and reopened the assessment.In the reassessment order, the officer held that the taxpayer had not produced complete primary records such as a purchase register, detailed ledgers with party identifiers, transport documents, and commodity-wise stock records.A verification notice reportedly remained unanswered. The officer treated the purchases as non-genuine and disallowed the full amount as unexplained expenditure, raising the assessed income sharply.On first appeal, the faceless appellate authority upheld both the reopening and the addition, emphasising the taxpayer’s burden to prove the genuineness of expenditure.The tribunal, however, found that the reassessment trigger was based on general and vague information and that the assessing officer had not carried out an inquiry required under the post-2021 reassessment framework.It noted that the investigation remarks themselves indicated that transactions were “unsubstantiated” rather than conclusively proven bogus.The tribunal held that the officer should have verified the information and considered the taxpayer’s reply and documents.The tribunal also recorded that the parallel indirect tax scrutiny on input tax credit issues had ended with acceptance of the taxpayer’s explanation, weakening the basis for reopening the case.On the merits, the tribunal observed that sales had been accepted, that extensive documentation had been produced, and that no specific defects had been identified in the material submitted.
