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2017 (9) TMI 1956 - AT - Income TaxReopening of assessment u/s 147 - reason to belive - information received from the DGIT(Inv) Mumbai - assessee availed the accommodation/fictitious bills from the 13 parties - HELD THAT - The case of the assessee was reopened u/s 147 of the Act after finding the information from DGIT(Inv) Mumbai dated 13.03.2014 in which it was conveyed that the assessee has availed the accommodation/fictitious bills from the 13 parties. Prima facie there is reason to believe that the income chargeable to tax has escaped assessment. The CIT(A) relied upon the case law title as Raymond Woollen Mills Ltd. 1997 (12) TMI 12 - SUPREME COURT - this issue was not under consideration at the time of assessment therefore there is no question of change of opinion. The present case is in connection of availing of accommodation/fictitious bills entries by the assessee which was not on record at the time of the assessment of the assessee. These facts are totally new facts which came into notice before the AO through the letter dated 13.03.2014 received from the DGIT(Inv) Mumbai. Accordingly we are of the view that the CIT(A) has rightly upheld the reopening of the proceedings u/s 147 of the I.T. Act. - Decided in favour of the revenue. Estimation of income - bogus purchases - addition of the profit element to the extent of 0.25% on the bogus purchase of 13 parties - contention of the assessee is that the addition should not be more than 1% specifically in view of the nature of the business of diamond of the assessee - HELD THAT - As per CIT-A purchase of cut and polished diamond from the open market was made mainly to save 1% vet levied thereon and in addition the buyer get the benefit of lower rate/ cash discount. In the said circumstances the CIT(A) was of the view that the addition of extra profit @ 7.3% of purchases was not held to be justified and reduced the profit embedded in the transaction @ of 2% of purchase value record in the books of accounts. No distinguishable material has been placed on record even after service of the notice to assessee to the contradict the finding of the CIT(A) on record. Nothing came into notice that the assessee produced some material earlier which was not considered by the CIT(A). Taking into account all the facts and circumstances we are of the view that the CIT(A) has rightly estimated the profit @ 2% on gross profit of the purchase value - CIT(A) has passed the order judiciously and correctly which is not liable to be interfere with at this appellate stage. Decided in favour of the Revenue.
Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961. 2. Addition of profit element on bogus purchases. 3. Levy of interest under Sections 234B, 234C, and 234D of the Income Tax Act, 1961. 4. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: ISSUE NO.1: Reopening of assessment under Section 147 of the Income Tax Act, 1961 The assessee challenged the reopening of the assessment under Section 147, arguing that the prescribed conditions were not satisfied. The case was reopened based on information from DGIT (Inv), Mumbai, indicating that the assessee availed accommodation/fictitious bills from 13 parties amounting to ?16,74,69,611/-. The CIT(A) upheld the reopening, stating that the information was concrete and credible, and not based on subjective opinion or suspicion. The CIT(A) referenced the case of Raymond Woollen Mills Ltd. vs. ITO 236 ITR 34 (SC) to support that the sufficiency or correctness of the material is not to be considered at this stage. The Tribunal affirmed the CIT(A)'s decision, noting that the issue was not under consideration during the original assessment, thus ruling out the possibility of a change of opinion. ISSUE NO.2: Addition of profit element on bogus purchases The assessee contested the addition of a profit element on bogus purchases from 13 parties, arguing that the addition should not exceed 1%. The CIT(A) reduced the profit element from 7.33% (estimated by the AO) to 2%, considering the nature of the diamond business and the savings on VAT. The CIT(A) noted the absence of purchase orders, delivery challans, and angadia receipts, which supported the AO's finding of non-genuine purchases. The Tribunal upheld the CIT(A)'s decision, agreeing that the profit element embedded in the purchases was reasonably estimated at 2%, and no new material was presented to contradict this finding. ISSUE NO.3: Levy of interest under Sections 234B, 234C, and 234D of the Income Tax Act, 1961 This issue was deemed consequential and not requiring separate adjudication. The provisions of Sections 234B and 234C were to be applied as per law. ISSUE NO.4: Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 The initiation of penalty proceedings was considered premature and thus dismissed. The Tribunal noted that since the penalty was not under challenge, this issue did not require further consideration. Conclusion: The appeals filed by the assessee were dismissed, with the Tribunal affirming the CIT(A)'s decisions on all issues. The reopening of the assessment under Section 147 was upheld, the profit element on bogus purchases was reasonably estimated at 2%, and the levy of interest under Sections 234B and 234C was to be applied as per law. The initiation of penalty proceedings was deemed premature and dismissed.
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