2017 (9) TMI 524 - AT - Income Tax

Re-opening of assessment u/s 147 r.w.s. 148 - Held that - We find from the record that the proceeding u/s 148 of the Act were rightly initiated within the period of 6 years from the end of the assessment year as the income escaping the assessment was of more than 1 lakh. There is nothing on record to controvert the findings of the ld.CIT(A) on this issue. We therefore are inclined to uphold the same. Accordingly grounds dismissed. Bogus purchases - Held that - CIT(A) after examining the various records correctly sustained the addition to the tune of GP rate of 12.5% of the total purchases as made by the AO on the basis that the AO did not doubt the corresponding sales thereof. CIT(A) also observed that the assessee might have purchased the material from the grey market and thus made savings of VAT octroi and other relevant taxes - Decided against assessee. Disallowance of expenses - assessee non produced bills and vouchers - Held that - We are fully in agreement with the ld.CIT(A) that the assessee has failed to produce necessary bills and vouchers of the said expenses and therefore the FAA has rightly disallowed the said expenses. Accordingly we uphold the action of the ld.CIT(A) - Decided against assessee Income from other sources - various receipts as appearing in the AIR data on which the TDS have been deducted by the respective parties - Held that - The assessee has failed to produce the evidences of 1, 64, 362/- with regards to various receipts as appearing in AIR on which TDS was also deducted. In our opinion the FAA has rightly directed the AO to verify whether the said income has been declared by the assessee in the return of income and if not assess accordingly. The AO is directed to decide as directed by the FAA. The ground allowed for statistical purposes.

Summary

Issues involved:
1. Re-opening of assessment under section 147 r.w.s. 148 of the Income Tax Act, 1961.
2. Confirmation of addition on account of bogus purchases.
3. Disallowance of expenses and addition to total income.
4. Addition of income from other sources.
5. Confirmation of addition on account of bogus purchases in subsequent assessment years.
6. Cross-appeals by the revenue.

Issue 1: Re-opening of assessment under section 147 r.w.s. 148:
The appeals challenged the order of re-opening the assessment under section 147 r.w.s. 148 of the Income Tax Act, 1961. The AO initiated proceedings based on information from the Sales Tax Department regarding hawala entries. The AO conducted a survey and reopened the assessment. The CIT(A) upheld the re-assessment, stating that the notice was issued within the permissible time frame of 6 years. The ITAT upheld the CIT(A)'s decision, noting that the income escaping assessment was over ?1 lakh, and the notice was issued within the statutory period.

Issue 2: Confirmation of addition on account of bogus purchases:
The AO made additions for bogus purchases after the assessee failed to respond to queries. The CIT(A) partially allowed the appeal by sustaining the addition at 12.5% of the total bogus purchases. The ITAT upheld this decision, considering that the assessee did not dispute the sales corresponding to the purchases. The ITAT found the GP rate of 12.5% reasonable based on past decisions and upheld the CIT(A)'s order.

Issue 3: Disallowance of expenses and addition to total income:
The CIT(A) confirmed the disallowance of expenses amounting to ?26,622 as the assessee failed to produce bills and vouchers. The ITAT agreed with the CIT(A), upholding the disallowance due to lack of supporting documentation. The ITAT directed the AO to verify if the income from other sources had been declared by the assessee and assess accordingly.

Issue 4: Confirmation of addition on account of bogus purchases in subsequent assessment years:
The issues in subsequent assessment years were similar to the first case. The ITAT applied the same analogy as the first case and upheld the CIT(A)'s decision regarding re-opening and bogus purchases. The appeals filed by the assessee were dismissed accordingly.

Issue 5: Cross-appeals by the revenue:
The revenue filed cross-appeals, which became infructuous after the ITAT partly allowed the appeals of the assessee by applying a GP rate of 8% of total bogus purchases. The ITAT dismissed the revenue's appeals as a result.

In conclusion, the ITAT upheld the re-opening of assessments, confirmed additions on account of bogus purchases, disallowed expenses for lack of documentation, and directed verification of income from other sources. The decisions were based on the facts of each case and relevant legal provisions, ensuring a fair and reasoned outcome.