2018 (4) TMI 7 - AT - Income Tax

Validity of reopening of assessment - sustaining 12.5% addition on account of bogus purchase - Held that - Tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the guilt. Decision of the Hon ble Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd 2007 (5) TMI 197 - SUPREME Court fully justify the validity of reopening in this case. For bogus purchases Mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills are bogus and nonexistent and there is no cogent evidence of transportation of goods. The sales tax Department in its enquiry have found the 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. Hence purchase bills from these non-existent the/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. Validity of reopening of assessment
2. Merits of addition on account of bogus purchase

Validity of Reopening of Assessment:
The case involves an appeal challenging the order of the ld. Commissioner of Income Tax (Appeals) regarding the reopening of assessment and the addition on account of bogus purchase. The Assessing Officer received information about the assessee's involvement in hawala transactions and issuance of bogus purchase bills. The AO reopened the assessment based on tangible and cogent incriminating material showing the assessee's connection to bogus purchase entries. The ITAT upheld the reopening, citing the need for a prima facie belief of income escapement, as per relevant legal precedents. The ITAT found no infirmity in the CIT(A)'s decision on reopening, supported by the Apex Court's decision.

Merits of Addition on Account of Bogus Purchase:
Regarding the addition on account of bogus purchase, the ITAT noted that the assessing officer received credible information about accommodation entry providers and bogus suppliers used by parties to obtain bogus bills. The ITAT found that the assessee had taken accommodation entry/bogus purchase bills from different parties. Despite the necessary enquiries and unserved notices to parties, the assessee failed to provide evidence or produce the parties. The ITAT concluded that the purchases from non-existent/bogus parties could not be considered genuine, supported by legal precedents like Sumati Dayal and Durga Prasad More. Referring to relevant court decisions, the ITAT dismissed the appeal, upholding the CIT(A)'s order on the merits of the addition.

In conclusion, the ITAT upheld the reopening of assessment based on incriminating material and rejected the addition on account of bogus purchase due to lack of evidence supporting the genuineness of the transactions. The decision was in line with established legal principles and precedents, resulting in the dismissal of the assessee's appeal.