2013 (4) TMI 944 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening assessment proceedings u/s 147.
2. Disallowance of expenses and additions u/s 40A(3).
3. Computation of income and benefit of expenditure incurred by the appellant.
4. Acceptance of fresh evidence without giving opportunity to the AO.

Summary:

Issue 1: Validity of Reopening Assessment Proceedings u/s 147
The Assessee challenged the reopening of assessment proceedings u/s 147 by issuing notice u/s 148. The Tribunal upheld the reopening, stating that the AO had jurisdiction to issue notice u/s 148 after recording reasons. The Tribunal confirmed the CIT(A)'s order, which held that the AO had bona fide reasons to believe that income chargeable to tax had escaped assessment, and thus, the reopening u/s 147 was valid.

Issue 2: Disallowance of Expenses and Additions u/s 40A(3)
For A.Y. 2005-06, the Revenue's appeal included multiple grounds of disallowance, such as cash payments in excess of Rs. 20,000/- u/s 40A(3), and various office, rent, printing, and salary expenses. The CIT(A) deleted these additions, stating that the appellant's transactions were sham and only accommodation entries. The Tribunal confirmed the CIT(A)'s order, agreeing that the disallowances were not warranted as the transactions were not genuine.

Issue 3: Computation of Income and Benefit of Expenditure Incurred by the Appellant
The CIT(A) directed the AO to compute the income at 0.25% of the turnover, which was upheld by the Tribunal. The Tribunal noted that the appellant was engaged in issuing bogus bills and earning commission, and thus, the income was correctly computed at 0.25% of the turnover. The Tribunal dismissed the Assessee's appeal regarding the benefit of expenditure, as the CIT(A) had already allowed the expenses claimed in the books of account.

Issue 4: Acceptance of Fresh Evidence Without Giving Opportunity to the AO
The Revenue contended that the CIT(A) erred in accepting fresh evidence without giving the AO an opportunity to examine it, as provided in Rule 46A of the I.T. Rules, 1962. The Tribunal did not specifically address this issue in detail but confirmed the CIT(A)'s order, which had deleted all the additions made by the AO.

Conclusion:
The Tribunal dismissed both the Assessee's and Revenue's appeals for A.Y. 2005-06 and 2006-07, confirming the CIT(A)'s orders. The reopening of assessment u/s 147 was held valid, and the computation of income at 0.25% of the turnover was upheld. The Tribunal also confirmed the deletion of various disallowances made by the AO.