2021 (8) TMI 1246 - AT - Income Tax

Reopening of assessment u/s 147 - Bogus purchases u/s 69C - HELD THAT - In view of the AO s as well as the CIT(A) s respective detailed discussions justifying the impugned re-opening(s) based on the Investigation Wing Mumbai s information pinpointing the specific inputs in search proceedings including M/s.Bhanwarlal Jain group authorised persons statement(s) to have been providing bogus accommodation entries. We therefore hold that the Assessing Officer had rightly initiated the impugned re-opening process in all these three cases. The assessee fails in its identical first and foremost ground therefore. Quantification of the impugned bogus purchases - As considered the foregoing rival submissions and find no reason to delete the impugned bogus purchases disallowance/addition in entirety in all these three assessment years. This is for the precise reason that going by the circumstances before us it can be safely inferred that the assessee obtained bogus purchase invoices from M/s.Bhanwarlal Jain group and further sourced its purchases from other suppliers - this tribunal s coordinate bench in ITO Vs. M.Shailesh and Co. 2019 (1) TMI 1922 - ITAT MUMBAI as well as various other similar orders hold that only a percentage of such purchases than the entire amount(s) thereof has to be disallowed - interest of justice that the impugned bogus purchases in all these three year(s) deserve to be restricted to disallowance @8% only in the given facts and circumstances with a rider that the same shall not be taken as a precedent in any other case. Necessary computation shall follow as per law.

Summary

Issues:
- Reopening of assessment without satisfying mandatory conditions
- Allegation of bogus purchases
- Validity of impugned reopening
- Quantification of bogus purchases disallowances/additions

Reopening of Assessment without Satisfying Mandatory Conditions:
The appeals arose from the CIT(A)-6, Hyderabad's orders involving proceedings under section 143(3) r.w.s.147 of the Income Tax Act, 1961. The assessee contended that the reopening of the assessment was illegal and lacked mandatory conditions. However, the Assessing Officer and the CIT(A) justified the re-opening based on specific inputs from the Investigation Wing, Mumbai, regarding bogus accommodation entries provided by M/s.Bhanwarlal Jain group authorized persons. The Tribunal held that the re-opening was rightly initiated based on tangible material, dismissing the assessee's argument against it.

Allegation of Bogus Purchases:
The assessing authority received information that the assessee sourced purchases from M/s.Bhanwarlal Jain group concerns, particularly M/s.Prime Star, involving varying sums in three assessment years. Following a search and seizure operation in the group, the Assessing Officer disallowed the alleged bogus purchases. The Tribunal noted that the assessee obtained bogus purchase invoices from the group and sourced purchases from other suppliers. Referring to precedent cases, the Tribunal decided to restrict the disallowance of bogus purchases to 8% in the given circumstances, emphasizing that such estimation should be case-specific and not set a precedent.

Validity of Impugned Reopening:
The Tribunal upheld the impugned reopening of assessments, emphasizing the detailed discussions justifying the re-opening process based on specific inputs from the Investigation Wing, Mumbai. Despite the assessee's argument against the reopening, the Tribunal found the re-opening valid and in accordance with the law.

Quantification of Bogus Purchases Disallowances/Additions:
Regarding the quantification of bogus purchases disallowances/additions, the Tribunal considered the argument that disallowing the purchases would result in abnormally high profit rates. However, as the department relied on information from the Investigation Wing, the Tribunal found no reason to delete the disallowances/additions entirely. Instead, the Tribunal decided to restrict the disallowance to 8% in the interest of justice, emphasizing that this decision should not be considered a precedent in other cases.

In conclusion, the Tribunal partly allowed the assessee's appeals, restricting the disallowance of bogus purchases to 8% in all three assessment years, with a caution that this decision should not be treated as a precedent in other cases.