2018 (6) TMI 1539 - AT - Income Tax

Legality of reopening of assessment - bogus purchases - Held that - Merely relying as some publication in the website of the Maharashtra Sales Tax authorities for making this addition cannot be sustained. No material/information was gathered by the AO from the authority which alleged that the dealers in question are Hawla Dealers. The assessee has discharged the burden of proof that lay on him. All possible evidences have been produced to prove the genuineness of the purchases by the assessee. On the other hand, the assessing officer has made this disallowance based on surmises and conjectures, that to, by giving contradictory findings on the factum of purchase. Thus, we deleted the addition made and allow this ground of the assessee. There is no application of mind by the Assessing Officer in the case on hand. The socalled confessions by Hawla agents are not in the record of the assessing officer either at the time of recording reasons for reopening or at the time of assessment. Thus the reopening of assessment is bad in law. Hence the ground of the assessee is allowed.

Summary

Issues:
1. Legality of reopening of assessment and addition made on merits.

Detailed Analysis:

Legality of Reopening of Assessment:
The Assessee, a partnership firm engaged in trading, challenged the reopening of assessment and addition of &8377; 25,17,112 as bogus purchases from hawala dealers. The Assessee contended that the reopening lacked proper application of mind by the Assessing Officer (AO) and was solely based on information from DGIT(Inv.), Mumbai. The Assessee argued that the information was not verified or cross-examined, citing various case laws. The AO's order was deemed self-contradictory as it mentioned both that the Assessee had made purchases but not from the mentioned parties. The AO relied on information from the Department of Sales Tax, Govt. of Maharashtra, regarding alleged hawala dealers. However, the Assessee provided extensive evidence including bills, payment details, and sales receipts to prove the genuineness of purchases. The Tribunal found that the AO's reliance on vague information without concrete evidence was unjustified, and the Assessee had sufficiently proven the legitimacy of the purchases. Thus, the addition was deleted, and the Assessee's ground was upheld.

Addition Made on Merits:
The AO's conclusion that the entire &8377; 25,17,112 purchases were bogus was found to be unfounded. The Tribunal noted that when purchases were made from certain parties and bills obtained from hawala dealers, the entire amount could not be added. The Assessee presented purchase bills, payment proofs, and delivery details, while the AO primarily relied on a letter from DIT(Inv)-Kolkata. The Tribunal ruled in favor of the Assessee, stating that the burden of proof was met with substantial evidence, whereas the AO's decision was based on conjectures and surmises. The AO's failure to gather additional evidence or verify claims led to the deletion of the addition. The Tribunal found the Assessee's evidence convincing and annulled the addition made by the AO.

Conclusion:
The Tribunal allowed the Assessee's appeal, concluding that the reopening of assessment lacked proper application of mind and the addition made on merits was unjustified. The Assessee successfully discharged the burden of proof regarding the legitimacy of purchases, while the AO's reliance on vague information without substantial evidence was deemed insufficient. The Tribunal's decision favored the Assessee, annulling the addition and upholding the appeal.