2017 (4) TMI 1465 - AT - Income Tax

Reopening of assessment u/s 147 - bogus purchases - HELD THAT - After recording reasons for reopening the AO has issued notice u/s.148. Thus there is no infirmity in the order of CIT(A) for upholding the reopening. Coming to the merit of the addition we found that allegation of the AO was as per information from the Sales Tax Department assessee has taken accommodation purchases. However the corresponding sales have not been denied by the AO. Without purchases there cannot be sale. Therefore adding entire amount of purchases in assessee s income is not justified. Referring to nature of assessee s business restrict addition to the extent of 12.5% of such bogus purchases. - Decided partly in favour of assessee.

Summary

Issues Involved:
- Consolidation of appeals before CIT(A)
- Genuineness of purchase transactions
- Validity of reopening assessment
- Justification of addition to income based on alleged bogus purchases

Consolidation of Appeals before CIT(A):
The appeal was filed against an exparte order of CIT(A)-37, Mumbai for the A.Y. 2007-08. The assessee requested consolidation of appeals due to a similar issue, but the CIT(A) dismissed the appeal as nobody appeared on behalf of the assessee. The learned AR contended for the matter to be restored back to the CIT(A) for a new order after providing an opportunity to the assessee.

Genuineness of Purchase Transactions:
The assessing officer received information that the appellant had taken bogus purchase entries from two parties, M/s Sun Diam and M/s Vatrag Jewels. Despite various opportunities, the assessee failed to produce evidence supporting the genuineness of the purchases. The AO added the entire purchase amount to the assessee's income, which was confirmed by the CIT(A). The appellant appealed this decision.

Validity of Reopening Assessment:
After receiving information about bogus purchases, the AO initiated proceedings u/s 147 by issuing notices u/s 148. The AO also issued notices u/s 143(2) and 142(1) to the assessee. The AO's actions in reopening the assessment were upheld by the CIT(A) and found to be in order.

Justification of Addition to Income Based on Alleged Bogus Purchases:
The AO alleged that the appellant engaged in accommodation purchases based on information from the Sales Tax Department. However, the corresponding sales were not denied. The tribunal noted that without purchases, there cannot be sales, and therefore, adding the entire purchase amount to the assessee's income was deemed unjustified. Considering the nature of the business, the tribunal restricted the addition to 12.5% of the bogus purchases, ultimately allowing the appeal in part.

This comprehensive analysis addresses the issues of consolidation of appeals, the genuineness of purchase transactions, the validity of reopening assessment, and the justification of adding alleged bogus purchases to the income, providing a detailed overview of the legal judgment.