2017 (11) TMI 318 - AT - Income Tax

Bogus purchases - Assessee was found to have taken accommodation entry - Held that - Credible and cogent information was received in this case by the Assessing Officer that certain accommodation entry provider / bogus suppliers were being used by certain parties to obtain bogus bills. AO has made the necessary enquiry. The issue of notice to all the parties have returned unserved. Assessee has not been able to provide any confirmation from any of the party. Assessee has also not been able to produce any of the parties. Necessary evidence relating to transportation of the goods was also not on record. In this factual scenario it is amply clear that assessee has obtained bogus purchase bills. Mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills are bogus and non-existent. The Sales Tax Department in its enquiry have found that parties to be providing bogus accommodation entries. The Assessing Officer also issued notices to these parties at the addresses provided by the assessee. All these notices have returned unserved. Assessee has not been able to produce any of the parties. The assessing officer has noted that there is no cogent evidence of the provision of goods. Neither the assessee has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent. I find it further strange that assessee wants the Revenue to produce assessee s own venders, whom the assessee could not produce. The purchase bills from these non-existent / bogus parties cannot be taken as cogent evidence of purchases. In light of the overwhelming evidence the revenue authorities cannot put upon blinkers and accept these purchases as genuine. - Decided against assessee.

Summary

Issues:
1. Addition of estimated profit element on treating genuine purchases as non-genuine.
2. Validity of reopening assessment under section 147.

Issue 1: Addition of estimated profit element on treating genuine purchases as non-genuine:

The case involved the appellant challenging the addition of a specific amount out of total purchases as estimated profit element, contending that the purchases were genuine. The Assessing Officer concluded that the purchases were non-genuine based on information received from the Sales Tax Department about hawala parties issuing bogus bills without delivering goods. The appellant failed to produce these parties for verification, leading to the disallowance of a portion of the purchases as unexplained income. The CIT(A) reduced the addition, but the appellant appealed to the ITAT. Despite multiple adjournments due to the appellant's absence, the ITAT considered the case. The ITAT upheld the reopening of assessment based on incriminating material showing the appellant's involvement in bogus purchase entries. The ITAT cited relevant legal precedents to justify the reopening and concluded that the appellant's reliance on other case laws was not supportive. The ITAT found that the appellant had obtained bogus purchase bills from non-existent parties, as confirmed by the Sales Tax Department's investigation. The ITAT rejected the appellant's argument to consider the documents as genuine purchases and cited Supreme Court decisions to support its decision. Additionally, the ITAT referred to a High Court decision regarding the disallowance percentage for bogus purchases, ultimately dismissing the appeal and confirming the CIT(A)'s order.

Issue 2: Validity of reopening assessment under section 147:

The ITAT examined the validity of reopening the assessment under section 147 based on tangible and cogent incriminating material indicating the appellant's involvement in bogus purchase entries. The ITAT noted that the Assessing Officer received information from the Sales Tax Department about hawala parties providing accommodation entries through bogus bills. The ITAT emphasized the need for a prima facie belief of income escapement at the initiation stage, citing legal precedents to support this requirement. The ITAT justified the reopening based on the information received by the Assessing Officer, which had a live link to the income escapement belief. The ITAT rejected the appellant's argument against the validity of reopening, citing relevant legal principles and Supreme Court decisions. The ITAT upheld the credibility of the information leading to the reopening and concluded that the appellant's reliance on other case laws was not applicable to the present case. Ultimately, the ITAT confirmed the reopening of assessment and dismissed the appellant's appeal based on the incriminating material and legal precedents supporting the decision.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, and the ITAT's reasoning and conclusions for each issue, maintaining the legal terminology and significant phrases from the original text.