2019 (2) TMI 161 - AT - Income Tax

Addition of bogus purchases - rectification of mistake - information from the Sales Tax Department regarding the bogus purchase being from hawala traders - Held that - We find that the ITAT have gone through the order of the A.O. and the ld. CIT(A) and all the facts on record. In the facts and circumstances of the case, despite noting the decision of the Hon ble Apex Court wherein 100% bogus purchase was confirmed, the tribunal has proceeded to grant relief of 12.5% as against 25% addition sustained by the ld. CIT(A). There is no mistake apparent from the record in the order of the Tribunal as raised by the assessee. We are of the opinion that what the assessee is seeking is a review of the order which is not permissible in the law. None of the issues raised by the assessee in the miscellaneous applications can be termed as mistake apparent from record. Issues which can be taken up u/s.254(2) of the ITAT have to be obvious and patent mistake and not something which can be established by a process of arguments and reasoning. Further on the same basis, an error in judgment also cannot be taken up as mistake apparent from record liable for rectification u/s. 254(2). Accordingly, in the background of aforesaid discussion, we find that the issue raised in the miscellaneous application cannot be a subject matter of rectification of mistake apparent from record.

Issues involved:
Rectification of mistake apparent from the record in the common order of the tribunal regarding disallowance for bogus purchases, challenge to the provision of section 151 of the Income Tax Act, dealing in the grey market, validity of reopening, sufficiency of enquiry by the Assessing Officer, reliance on case laws, consideration of evidence for purchases, disallowance percentage determination, relevance of case laws in similar situations, review of tribunal's decision, and permissibility of rectification under section 254(2) of the ITAT.

Rectification of mistake apparent from the record - Disallowance for bogus purchases:
The assessee sought rectification of a mistake in the tribunal's order regarding the disallowance for bogus purchases. The tribunal had reduced the disallowance from 25% to 12.5%. The assessee contended that certain issues were not adjudicated by the tribunal, including the premature issuance of notice under section 143(2). However, the tribunal found no mistake apparent from the record as the grounds raised did not include the issue of premature notice. The tribunal also upheld the validity of reopening and the disallowance percentage based on substantial evidence, including the lack of confirmation from suppliers and transportation evidence. The tribunal cited relevant case laws to support the disallowance decision, emphasizing the need for cogent evidence for purchases and the non-existence of suppliers. Ultimately, the tribunal dismissed the application for rectification, stating that the issues raised did not constitute obvious or patent mistakes.

Challenge to the provision of section 151 and dealing in the grey market:
The assessee challenged the tribunal's decision on the provision of section 151 and the characterization of engaging in the grey market. The tribunal held that the Assessing Officer was justified in reopening the assessment and that the assessee's dealings in the grey market were supported by evidence, including information from the Sales Tax Department. Despite the assessee's arguments and reliance on case laws, the tribunal maintained its decision, considering the overall facts and circumstances. The tribunal emphasized the need for thorough enquiry and the failure of the assessee to provide substantial evidence to refute the bogus nature of purchases. The tribunal determined a 12.5% disallowance for bogus purchases based on the evidence presented, rejecting the assessee's contention for a different approach based on case laws.

Validity of reopening and sufficiency of enquiry by the Assessing Officer:
The tribunal analyzed the validity of the reopening and the sufficiency of the enquiry conducted by the Assessing Officer. It noted that the reopening was justified based on credible information and that the Assessing Officer's actions were within the legal framework. The tribunal highlighted the lack of confirmation from suppliers, unserved notices, and absence of transportation evidence as factors supporting the disallowance of purchases. Despite the assessee's objections and reliance on case laws, the tribunal upheld the reopening and the subsequent disallowance percentage, emphasizing the need for concrete evidence to substantiate purchases.

Reliance on case laws and consideration of evidence for purchases:
The tribunal extensively discussed the reliance on case laws and the importance of considering evidence for purchases. It cited various judgments, including decisions of the Hon'ble Apex Court and High Courts, to support its position on disallowance for bogus purchases. The tribunal emphasized the need for factual analysis and substantial evidence to determine the genuineness of transactions. It rejected the assessee's arguments based on case laws that did not align with the specific circumstances of the case, emphasizing the importance of evaluating each case on its merits. The tribunal's decision was guided by the principles established in relevant case laws and the specific evidence presented in the case.

Disallowance percentage determination and relevance of case laws in similar situations:
The tribunal deliberated on the determination of the disallowance percentage and the relevance of case laws in similar situations. It considered the specifics of the case, including the lack of confirmation from suppliers and the non-existence of parties involved in the transactions. The tribunal referred to judgments that supported a higher disallowance percentage for bogus purchases and explained its rationale for setting the disallowance at 12.5%. By analyzing the facts and circumstances, including the nature of transactions and the evidence provided, the tribunal arrived at a decision that aligned with the principles established in relevant case laws. It emphasized the need to consider each case individually and apply legal precedents judiciously.

Review of tribunal's decision and permissibility of rectification under section 254(2) of the ITAT:
The tribunal addressed the request for a review of its decision and the permissibility of rectification under section 254(2) of the ITAT. It clarified that issues raised for rectification must be obvious and patent mistakes, not subject to interpretation through arguments or reasoning. The tribunal emphasized that errors in judgment or requests for review were not grounds for rectification under section 254(2). After a detailed discussion of the issues raised by the assessee, the tribunal concluded that the application for rectification did not meet the criteria for addressing mistakes apparent from the record. The tribunal dismissed the miscellaneous applications filed by the assessee, affirming its original decision based on the evidence and legal principles presented during the proceedings.

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