2017 (1) TMI 1108 - AT - Income Tax

Reopening of assessment - Held that - We notice that the averments made by the assessee that the learned CIT(A) erred in confirming the action of the AO in reopening the assessment for A.Y. 2009-10 in the case on hand by issuing notice under section 148 of the Act dated 12.03.2013, without recording valid and proper reasons to show that any income chargeable to tax had escaped assessment; is patently and factually false and do not emanate from any finding rendered by the learned CIT(A) in the impugned order. In the factual circumstances of the matter, as discussed above, we dismiss the ground raised by the assessee. Estimation of Profit @ 12.5% on bogus purchases - Held that - On an appreciation of the facts on record and the findings rendered by the learned CIT(A) in the impugned order we find that apart from raising these grounds the assessee has failed to place on record any material evidence to controvert the findings of the learned CIT(A). In this view of the matter, we uphold the order of the learned CIT(A) on this issue of bringing to tax in the assessee s hands the profits embedded in the bogus purchase @ 12% of the purchase cost i.e. ₹ 5,15,377/-, since the direct one to one relationship/nexus between the said purchases and sales have not been established by the assessee. - Decided against assessee

Summary

Issues Involved:
1. Reopening under section 147 of the Income Tax Act, 1961.
2. Addition by estimating the profit at the rate of 12.5% on alleged bogus purchases.

Detailed Analysis:

1. Reopening under Section 147 of the Income Tax Act, 1961:
The assessee contested the reopening of the assessment for A.Y. 2009-10, arguing that the notice under section 148 was issued without valid reasons, and the reasons for reopening were not served to the assessee. The tribunal found that the issue of reopening was not raised before the CIT(A), and there was no evidence that the assessee requested the reasons for reopening from the AO or sought cross-examination of the persons whose statements were relied upon. Consequently, the tribunal dismissed the ground, stating that the grounds were factually erroneous and misleading.

2. Addition by Estimating the Profit at the Rate of 12.5% on Alleged Bogus Purchases:
The assessee challenged the CIT(A)’s decision to add ?5,15,377/- as estimated profit on alleged bogus purchases of ?41,23,015/-. The CIT(A) had upheld the AO’s findings that the purchases were from non-existent parties and thus bogus. The CIT(A) noted that the assessee failed to produce evidence of transportation or delivery of goods and did not produce the parties for verification. The CIT(A) determined that the profit element embedded in the bogus purchases should be taxed at 12.5%, following precedents from various judicial pronouncements.

The tribunal upheld the CIT(A)’s decision, noting that the assessee did not provide any material evidence to counter the findings. The tribunal agreed that since the direct relationship between purchases and sales was not established, taxing the profit element at 12.5% was justified. Consequently, the tribunal dismissed the assessee’s appeal on this ground as well.

Conclusion:
The tribunal dismissed the appeal for A.Y. 2009-10, upholding the CIT(A)’s decision on both the reopening of the assessment under section 147 and the addition of ?5,15,377/- as estimated profit on bogus purchases. The tribunal found no merit in the assessee’s arguments and confirmed the CIT(A)’s detailed and reasoned order.