2017 (3) TMI 1749 - AT - Income Tax

Reopening of assessment u/s 147 - Bogus purchases - eligibility of reasons to believe - HELD THAT - No additions having been made by the Assessing Officer to the total income of the assessee on account of suppression of sales, the very reasons for the initiation of reassessment proceedings had ceased to survive and in our opinion, it was not permissible to the AO to make additions to the total income of the assessee in the reassessments on the issue of bogus purchases, which was not the subject matter of reasons recorded by him for reopening the assessment as held by the Hon ble Delhi High Court in the case of Ranbaxy Laboratories Limited 2011 (6) TMI 4 - DELHI HIGH COURT and Jet Airways (I) Limited 2010 (4) TMI 431 - HIGH COURT OF BOMBAY - Decided in favour of assessee.

Summary

Issues:
Appeals against orders related to additions of alleged bogus purchases to the total income of the assessee for three consecutive assessment years.

Analysis:

1. Common Issue of Alleged Bogus Purchases:
The appeals were filed against orders confirming additions of amounts related to alleged bogus purchases made by the Assessing Officer for the assessment years 2009-10, 2010-11, and 2011-12. The Assessing Officer reopened the assessments under section 147 after initially processing the returns under section 143(1) due to doubts about the genuineness of certain purchases. The Assessing Officer treated these purchases as bogus as the assessee failed to establish their genuineness, resulting in additions to the total income.

2. Validity of Assessments and Merits of Additions:
The assessee challenged the validity of the reassessments and disputed the additions made on the grounds of bogus purchases before the ld. CIT(Appeals). However, the ld. CIT(Appeals) dismissed the appeals, leading to the current appeals before the Tribunal. The Assessing Officer's actions were questioned as the reasons for reopening the assessments were based on alleged suppression of sales, not bogus purchases.

3. Legal Precedents and Interpretation:
The Tribunal analyzed legal precedents, including the case of CIT vs. Jet Airways (I) Limited and Ranbaxy Laboratories Limited vs. CIT, to determine the scope of reassessment proceedings. It was noted that if the reasons for initiation of proceedings cease to exist, it is impermissible for the Assessing Officer to make additions on different grounds. Citing these precedents, the Tribunal held that since no additions were made for suppressed sales, the Assessing Officer's actions on the issue of bogus purchases were not justified.

4. Decision and Outcome:
After considering the arguments and relevant material, the Tribunal found that the Assessing Officer's additions on account of alleged bogus purchases were not in line with the reasons for reopening the assessments. Therefore, the Tribunal allowed the appeals of the assessee, deleting the additions made by the Assessing Officer and confirmed by the ld. CIT(Appeals) for all three assessment years. The Tribunal's decision was based on the legal principles established in the cited cases, emphasizing the importance of adhering to the reasons for initiating reassessment proceedings.

In conclusion, the Tribunal's judgment favored the assessee by overturning the additions related to alleged bogus purchases, highlighting the necessity for Assessing Officers to adhere to the grounds for reopening assessments and make additions only on the basis of the reasons recorded.