2017 (9) TMI 1293 - HC - Income Tax

Reopening of assessment - Addition of bogus purchases and export sales under Section 68 - reopening on the basis of a report of the Directorate of Revenue Intelligence ( DRI ) - Held that - Despite the AO being aware of the above development, he did not himself undertake any inquiry into the question whether the purchases and sales were made from and to bogus entities. No additions allowed on cases of borrowed information - Decided in favour of assessee.

Summary

Issues:
1. Appeal against ITAT order for AY 2000-01
2. Deletion of additions on account of alleged bogus purchases and export sales under Section 68 of the Income Tax Act

Analysis:
1. The Revenue appealed against the ITAT order for the Assessment Year 2000-01, questioning the deletion of additions totaling &8377; 16,34,83,676/- and &8377; 61,69,546/- by the AO and further restricted to &8377; 80,22,802/- by the CIT(A) on grounds of alleged bogus purchases and export sales under Section 68 of the Income Tax Act.

2. The AO's basis for the additions was that purchases were made from four alleged bogus entities by the Assessee, with corresponding sales to bogus entities. Despite a notice under Section 148 and a report from the Directorate of Revenue Intelligence (DRI), the AO did not conduct an inquiry into the transactions. The CIT(A) limited the additions to peak credits, leading to appeals by both the Revenue and the Assessee before the ITAT.

3. The ITAT, in its order, referenced the CIT(A)'s decision and concluded that the additions made by the AO were not legally sustainable. After hearing arguments from both parties, the Court found no legal infirmity in the ITAT's order and dismissed the appeal, stating that no substantial question of law arose for consideration.