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2023 (1) TMI 1321 - AT - Income TaxValidity of reopening of assessment - Estimation of income - bogus purchases - HELD THAT - We note that assessee has neither filed cross-objection nor filed any request under the Income Tax Appellate Rules (vide Rule 27) to argue the issue on the validity of reopening of assessment. Since the assessee has not filed the cross-appeal nor any application filed before the Tribunal under the Income Tax Appellate Tribunal Rules to argue the issue on reopening of assessment. That is, the assessee has not filed an application under Rule 27 of the Income Tax Appellate Tribunal Rules, therefore argument of the assessee on the technical issue of validity of reassessment under section 147 of the Act cannot be entertained and it is hereby rejected. Estimation of income - Since, the issue is squarely covered by the judgment of the Co-ordinate Bench in the case of Pankaj K. Chaudhary ( 2021 (10) TMI 653 - ITAT SURAT we direct the Assessing Officer to make the addition at the rate of 6% of bogus purchases / unverifiable purchases. Hence, we allow the appeal of Revenue partly.
Issues Involved:
1. Validity of Reopening of Assessment under Section 147. 2. Treatment of Bogus Purchases. 3. Determination of Commission Income. 4. Admissibility of Evidence and Cross-Examination Rights. Detailed Analysis: 1. Validity of Reopening of Assessment under Section 147: The Revenue initiated the reopening of the assessment based on information from the DIT(Inv), Mumbai, indicating that the assessee was a beneficiary of bogus purchase bills provided by the Gautam Jain Group. The Tribunal upheld the reopening, stating that the AO had "reason to believe" that income had escaped assessment, which justified the reopening under Section 147. The Tribunal referenced the Hon'ble Gujarat High Court's decisions in Peass Industrial Engineers (P) Ltd and Pushpak Bullion (P) Ltd, emphasizing that credible information from the Investigation Wing is sufficient for reopening. 2. Treatment of Bogus Purchases: The AO added the entire amount of Rs. 20,48,83,051/- as bogus purchases to the assessee's income. However, the CIT(A) and the Tribunal found that the assessee acted as a commission agent (Pucca Artiya) and had not claimed these purchases as expenses in the Profit & Loss account. The Tribunal, following the precedent set in the case of Pankaj K. Chaudhary, directed the AO to estimate the commission income at 6% of the bogus purchases, thereby partially allowing the Revenue's appeal. 3. Determination of Commission Income: The CIT(A) concluded that the assessee was a commission agent, not a trader, and had earned commission income from the impugned purchases. The Tribunal upheld this view, noting that the assessee maintained proper stock records and had not claimed the purchases as expenses. The Tribunal estimated the suppressed commission income at 6% of the bogus purchases, aligning with the decision in Pankaj K. Chaudhary. 4. Admissibility of Evidence and Cross-Examination Rights: The assessee argued that the AO did not provide copies of the statements and materials relied upon, violating the principles of natural justice. The CIT(A) acknowledged this procedural lapse but did not quash the reopening, citing fairness and equity for the Revenue. The Tribunal did not entertain the assessee's argument on this technical issue, as the assessee had not filed a cross-appeal or an application under Rule 27 of the Income Tax Appellate Tribunal Rules. Conclusion: The Tribunal upheld the validity of the reopening of the assessment under Section 147. It directed the AO to estimate the commission income at 6% of the bogus purchases, following the precedent in Pankaj K. Chaudhary. The Tribunal also noted the procedural lapse regarding the non-provision of evidence but did not quash the reopening on this ground. All appeals filed by the Revenue were partly allowed.
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