2018 (5) TMI 1933 - AT - Income Tax

Addition u/s 69C - assessee failed to discharge the primary onus to establish the genuineness of purchases from these concerns - HELD THAT - AO asked the assessee to produce the these parties alongwith the books of accounts in order to prove the genuineness and verification of the transactions made. The assessee failed to do so. The notices sent by the AO to these concerns M/s. Ankit Exports, Mumbai and M/s. Natasha Enterprises, Mumbai were returned back unserved. The assessee could not prove the genuineness of the purchases made from M/s. Ankit Exports, Mumbai and M/s. Natasha Enterprises, Mumbai. The assessee failed to discharge the primary onus to establish the genuineness of purchases from these concerns. The assessee could not prove the genuineness of the purchases. AO made the addition of ₹ 52,36,462/- (i.e. 25% of the total purchases of ₹ 2,09,45,850/-). CIT(A) has restricted the disallowance to the extent of 15% in view of the decision of ITAT Jaipur bench in the case of Shri Anuj Kumar Varshney vs ITO and others 2015 (4) TMI 533 - ITAT JAIPUR .Since the ITAT, Jaipur Bench has already taken the decision of confirming the addition of 15% on unverifiable purchases in the similar line of cases, therefore, we concur with the findings of the ld. CIT(A). Thus the Ground No. 1 2 of the assessee are dismissed. Bogus purchases - AO initiated the proceedings u/s 147/148 - HELD THAT - Assessee is engaged in the business of gold and diamond jewellery. The AO had information in his possession that the assessee had taken accommodation entries from Shri Praveen Kumar Jain group who himself admitted in his statement recorded u/s 132(4) of the Act that he is providing accommodation entries for commission. He was issuing bogus invoices to the needy parties on commission basis. The assessee had made purchases from two concerns namely M/s. Ankit Exports, Mumbai and M/s. Natasha Enterprises, Mumbai, controlled and managed by Shri Jain. AO had sufficient reason to believe that the income had escaped assessment as the assessee had not disclosed all the material facts fully and truly necessary for assessment. The earlier the assessment was made u/s 143(3) however, the fact about the bogus purchases from the concerns controlled by Shri Jain was not disclosed by the assessee during assessment proceeding. The fresh information was received by the AO and the AO initiated the proceedings u/s 147/148. Thus, it is not the case of change of opinion as the assessment was reopened on the basis of fresh information received with regard to bogus purchases. Assessee has not disclosed truly and fully all materials facts which were necessary for determining the true and correct income of the assessee. During the course of hearing, it is also noted that the assessee could not controvert the findings of the CIT(A). - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of purchases made from two concerns
2. Addition on account of unverified purchases
3. Validity of reopening assessment under section 147

Issue 1: Validity of purchases made from two concerns
The assessee claimed purchases of ?2,09,45,850 from two concerns controlled by Shri Praveen Jain. The Assessing Officer (AO) found these purchases to be bogus as the appellant failed to prove their genuineness. The AO made an addition of 25% of the total purchases as per the decision of Hon'ble ITAT, Jaipur Bench in a similar case. During appellate proceedings, the appellant failed to establish the genuineness of the purchases, leading to a disallowance of 15% as per ITAT Jaipur's decision in another case. The Tribunal concurred with the findings of the lower authorities, dismissing the appeal on this issue.

Issue 2: Addition on account of unverified purchases
The appellant challenged the addition made by the AO on the grounds that the purchases were genuine. However, the Tribunal upheld the addition after considering the incriminating documents found during a search operation at the premises of Shri Jain, establishing the non-genuineness of the concerns from which the purchases were made. The appellant's failure to produce the concerned parties and books of accounts to prove the transactions' genuineness led to the confirmation of the addition by the Tribunal.

Issue 3: Validity of reopening assessment under section 147
The appellant contested the validity of the notice issued under section 148, arguing that it was a change of opinion based on existing facts. However, the Tribunal held that the AO had sufficient reason to believe that income had escaped assessment due to the appellant's failure to disclose material facts regarding bogus purchases. The assessment was reopened based on new information received from the Investigation Wing, and the Tribunal found no merit in the appellant's argument, upholding the validity of the reopening under section 147.

In conclusion, the Tribunal dismissed the appeal, affirming the additions on unverified purchases and upholding the validity of reopening the assessment under section 147 based on the appellant's failure to disclose material facts.