2017 (10) TMI 822 - AT - Income Tax

Reopening of assessment - Held that - Though, the assessee had filed its return of income voluntarily, however, no assessments under section 143(3) of the Act have been made. Subsequently, the Assessing Officer was in possession of specific information that certain purchases made by the assessee were not genuine as they were effected from hawala operators. Thus, as could be seen, there was tangible material before the Assessing Officer to form his belief that income has escaped assessment. That being the case, the Assessing Officer has properly exercised his power under section 147 of the Act to re open the assessment for the impugned assessment years. Therefore, ground no.1 in all these appeals of the assessee are dismissed. Bogus purchases addition - Held that - It is evident that the assessee was unable to prove the genuineness of purchases conclusively by producing documentary evidences such as transportation bills, delivery challans, lorry receipts, etc., to prove actual delivery of goods at its premises. Further, the notices issued under section 133(6) of the Act to the concerned parties also returned un served. Moreover, the assessee also failed to produce the concerned parties before the Assessing Officer or confirmations from any such parties. In these circumstances, the disputed purchases cannot be accepted as genuine. However, the Assessing Officer has recorded a finding of fact that consumption of material to sales have been proved which pre supposes that the goods might have purchased from some undisclosed sources and to regularise them assessee has obtained accommodation entries. In these circumstances, the normal gross profit rate as adopted by the learned Commissioner (Appeals) cannot be applied for making addition since such gross profit rate is applicable to genuine purchases. In these types of cases, the Tribunal is taking a consistent view of sustaining addition at 12.5% of the bogus purchases. Applying the same yardstick, the profit estimated at 12.5% of the alleged bogus purchases as done by the Assessing Officer is reasonable

Summary

Issues:
- Dispute over addition made on account of alleged bogus purchases.
- Challenge to the re-opening of assessment under section 147 of the Act.
- Appeal against the reduction of additions by the learned Commissioner (Appeals).

Analysis:
1. The judgment involved cross appeals against separate orders passed by the Commissioner (Appeals) for the assessment years 2007-08, 2008-09, and 2009-10, concerning the addition made on alleged bogus purchases. The Assessing Officer re-opened the assessment under section 147 of the Act based on information suggesting non-genuine purchases. The Assessing Officer found that the purchases were not verifiable, leading to the conclusion that they were bogus. The appellant failed to provide conclusive evidence of the purchases' genuineness, resulting in an estimation of income at 12.5% of bogus purchases for all assessment years.

2. The first issue addressed was the challenge to the re-opening of assessment under section 147 of the Act. The Tribunal upheld the Assessing Officer's decision to re-open the assessment, citing tangible material indicating income escapement. The Tribunal dismissed the appellant's challenge to the re-opening, emphasizing the Assessing Officer's proper exercise of power under section 147.

3. The second issue involved the additions sustained by the Commissioner (Appeals) on account of alleged bogus purchases. The Assessing Officer estimated profits at 12.5% of the purchases, while the Commissioner (Appeals) reduced it to 3.65%. The Tribunal found that the appellant failed to prove the purchases' genuineness with documentary evidence. As a consistent approach, the Tribunal upheld the Assessing Officer's 12.5% profit estimation on bogus purchases, rejecting the Commissioner (Appeals) reduction. The Tribunal set aside the Commissioner (Appeals) decisions and restored the additions made by the Assessing Officer for all assessment years.

In conclusion, the Tribunal dismissed the appellant's appeals and allowed the Revenue's appeals, affirming the additions on alleged bogus purchases.