2015 (7) TMI 318 - AT - Income Tax

Validity of reopening of assessment - Held that - The assessee was duly provided the copy of reasons recorded for issuance of notice under section 148 of the Act on 16.04.2013. In para 4.2 of the assessment order, it has also been mentioned that the AO had specifically asked the A.R. of the assessee whether he has any objection for issuance of notice under section 148 of the Act, and in reply to that the Ld. A.R. has stated that he was not taking any objection in relation to reopening of the assessment under section 147 of the Act. Thereafter, a notice under section 142(1) was issued to the assessee to furnish the required details. In this case, a specific information was received by the Income Tax Authorities that certain parties were engaged in issuing bogus bills for the supply of material. During the survey action, the assessee was found to have made purchases from the said parties. There were certain discrepancies noted by the AO in the bills. The AO therefore, had reasons to believe that the income of the assessee relating to the purchases made from the above three parties had escaped assessment. Moreover, as stated above, the assessee had not raised any objection relating to reopening of the assessment during the assessment proceedings. We, therefore do not find any infirmity in the order of the Ld. CIT(A) in upholding the action of the AO for reopening of the assessment under section 147 of the Act. - Decided against assessee. Addition on bogus purchases - Held that - Solely on the basis of unconfronted and general statements of alleged suppliers made before sales tax authorities, purchases of the assessee can not be held to be bogus. We find that the contention of the assessee that the payments for the purchases were made by cheque which was further confirmed by bank statement of the parties, bills of the transporter supported with proof of payment by way of bank statement, quantitative details of the stock, corresponding sales made, increase in sales, gross profits and net profits and there being no incriminating material or discrepancy in stock found at the time of survey have not been examined by the AO. The matter is therefore restored to the file of the AO for the purpose of verification of the above documents and if the above contentions of the assessee are found to be correct from the evidences submitted, the additions in this case on account of bogus purchases will not be warranted.- Decided in favour of assessee for statistical purposes.

Summary

Issues: Reopening of assessment under section 147 of the Income Tax Act & Addition of bogus purchases

Reopening of Assessment under Section 147:
The appeals pertained to assessment years 2008-09 & 2009-10 challenging the Commissioner of Income Tax (Appeals) order dated 01.08.2014. The issues raised were the validity of the reassessment order under section 143(3)/147 and the addition of Rs. 1,15,63,283 as bogus purchases. The assessment was reopened based on information received that the assessee made bogus purchases from certain suppliers. The AO provided reasons for reopening, and the assessee did not object during the assessment proceedings. The Tribunal upheld the reopening, considering the information received and the absence of objections from the assessee.

Addition of Bogus Purchases:
The assessee, a wholesale dealer of CRCA coils, faced additions on account of bogus purchases. The AO held the purchases as bogus due to lack of documentary evidence, failure to request cross-examination, absence of stock register, and insufficient evidence of actual purchase, transportation, and consumption. The CIT(A) upheld the additions citing discrepancies in invoices and admissions by alleged suppliers. However, the assessee argued that purchases were genuine, supported by bank transactions, invoices, and stock details. The Tribunal agreed with the assessee, emphasizing the absence of incriminating evidence during survey action, banking transactions, and increased profits. The matter was remanded to the AO for further verification based on the evidence submitted by the assessee.

Conclusion:
The Tribunal allowed both appeals for statistical purposes, remanding the issue of bogus purchases to the AO for verification. The decision highlighted the importance of substantiating transactions with concrete evidence and ensuring proper examination of all relevant documents before making additions based on suspicions or external information.