2018 (12) TMI 1449 - AT - Income Tax

Reopening of assessment - bogus purchases - Reopening within four years from the end of assessment year - Held that - We uphold the validity of the reopening of assessment u/s 147 of the 1961 Act as originally return of income was processed u/s 143(1) and no assessment was framed u/s 143(3) of the 1961 Act. The notice u/s 148 was issued within four years from the end of assessment and first proviso to Section 147 of the 1961 Act is not applicable. Fresh and new tangible and material incriminating information was received by the AO as detailed above from DGIT(Inv.), Mumbai which in turn was based on incriminating information received from Maharashtra VAT authorities incriminating assessee to be beneficiary of alleged bogus purchases and accommodation entries which in our considered view keeping in view factual matrix of the case was sufficient to reopen the concluded assessment within parameters of Section 147 of the 1961 Act. Thus, based on our detailed reasoning as set out above, we affirm the appellate order passed by learned CIT(A) and dismiss the appeal of the assessee.

Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income-tax Act, 1961.
2. Addition of ?47,91,826/- on account of estimated profit from alleged bogus purchases.
3. Adequacy of evidence provided by the assessee to substantiate the genuineness of the purchases.
4. Right to cross-examination of witnesses.

Issue-wise Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147:
The assessment was reopened based on information received from the DGIT(Inv) Wing, Mumbai, which was based on findings from the Maharashtra Sales Tax Department. The information indicated that the assessee was involved in a scam where bogus bills were issued without actual supply of goods. The AO issued a notice under Section 148 within four years from the end of the assessment year, making the first proviso to Section 147 inapplicable. The tribunal upheld the reopening of the assessment, noting that the original return was processed under Section 143(1) and no assessment was framed under Section 143(3). The new and tangible incriminating information justified the reopening under Section 147.

2. Addition of ?47,91,826/- on Account of Estimated Profit from Alleged Bogus Purchases:
The AO added 12.5% of the alleged bogus purchases, amounting to ?47,91,826/-, to the assessee's income. This estimation was based on the inability of the assessee to link the purchases with corresponding sales or produce books of accounts and other relevant documents. The CIT(A) upheld this addition, citing the assessee's failure to reconcile purchases with sales and produce crucial evidence like proof of delivery, transport challans, and goods inward register. The tribunal affirmed this decision, referencing the Supreme Court's decision in Kachwala Gems v. JCIT, which supports the estimation of reasonable profits in such cases.

3. Adequacy of Evidence Provided by the Assessee to Substantiate the Genuineness of the Purchases:
The assessee failed to furnish adequate evidence to substantiate the genuineness of the purchases. The CIT(A) noted that the assessee could not reconcile the purchases with the items sold and failed to provide crucial evidence like proof of delivery, transport challans, and goods inward register. The tribunal agreed with this assessment, noting that the assessee had conceded to the AO to estimate reasonable profits embedded in the alleged bogus purchases during the reassessment proceedings.

4. Right to Cross-Examination of Witnesses:
The assessee argued that the right to cross-examine the witnesses who made adverse reports was not provided. The CIT(A) held that the right to cross-examination is not automatic and is incumbent only when the assessee can prima facie demonstrate the onus cast on them to establish their version of affairs based on primary evidence. The tribunal upheld this view, noting that the assessee failed to lead any primary evidence to show that the supplies were indeed made.

Conclusion:
The tribunal dismissed the appeal of the assessee, affirming the CIT(A)'s decision to uphold the reopening of the assessment under Section 147 and the addition of ?47,91,826/- on account of estimated profit from alleged bogus purchases. The tribunal noted that the assessee failed to provide adequate evidence to substantiate the genuineness of the purchases and did not have an automatic right to cross-examine witnesses without prima facie evidence.

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