2019 (8) TMI 1202 - AT - Income Tax

Validity of Reassessment order u/s 144 r.w.s 147 - tangible material - addition on account of non genuine purchases - HELD THAT - Undisputedly, in assessee s case there was no scrutiny assessment earlier and the return of income filed by the assessee was only processed u/s 143(1). Subsequently, material came to the possession of the Assessing Officer indicating that the assessee had availed accommodation entries by way of bogus purchase bills. Therefore, in our considered opinion, the AO had sufficient tangible material available before him to form belief that income chargeable to tax has escaped assessment. That being the case, the re opening of assessment u/s 147, in our view, is valid. Bogus purchases - HELD THAT - Undisputedly, before AO the assessee had not furnished any evidence to prove the genuineness of purchases allegedly made from hawala operators. Therefore, he added such purchases to the income of the assessee. Commissioner (Appeals) has even added back the rest of the purchases to the income of the assessee. To a query from the Bench as to whether the assessee can furnish quantitative details to show purchases and consumption of material in construction activity, the learned Authorised Representative submitted, given an opportunity, the assessee would furnish the details before the AO. In view of the aforesaid submission of the learned Authorised Representative, we are inclined to restore the issue to the AO for de novo adjudication after due opportunity of being heard to the assessee. Accordingly, grounds raised in the memorandum of appeal are allowed for statistical purposes. Penalty u/s 271(1)(c) - HELD THAT - Restored the issue relating to the addition made on account of non genuine purchases to the Assessing Officer for de novo adjudication. Thus, for the present, the addition made does not survive. That being the case, penalty imposed u/s 271(1)(c) on such addition cannot survive. Accordingly, we set aside the impugned order of learned Commissioner (Appeals) sustaining the penalty imposed u/s 271(1)(c)

Summary

Issues:
1. Validity of ex-parte assessment order under section 144 r/w section 147 of the Act.
2. Merits of the addition made on account of non-genuine purchases.
3. Validity of re-opening of assessment under section 147 of the Act.
4. Imposition of penalty under section 271(1)(c) of the Act.

Issue 1: Validity of ex-parte assessment order under section 144 r/w section 147 of the Act:
The assessee's appeal challenged the validity of the ex-parte assessment order passed under section 144 r/w section 147 of the Act. The Assessing Officer re-opened the assessment based on information indicating non-genuine purchases. The assessee failed to provide evidence to prove the genuineness of the purchases, leading to the addition of the alleged bogus purchase amount to the income. The learned Commissioner (Appeals) enhanced the income further, disallowing all purchases shown by the assessee. The Authorized Representative argued that the assessee, engaged in construction activity, needed materials like steel and cement, and had evidence of genuine purchases. The Tribunal found the re-opening of assessment valid due to tangible material supporting the belief of escaped income. The issue was restored to the Assessing Officer for re-adjudication.

Issue 2: Merits of the addition made on account of non-genuine purchases:
The Assessing Officer added the alleged non-genuine purchases to the income, which was further enhanced by the learned Commissioner (Appeals). The Authorized Representative argued that the assessee had evidence of genuine purchases necessary for construction work. The Tribunal decided to restore the issue for re-adjudication based on the submission that the assessee could provide quantitative details of purchases and material consumption in construction activity.

Issue 3: Validity of re-opening of assessment under section 147 of the Act:
The Authorized Representative contended that the re-opening of assessment under section 147 of the Act was invalid as the Assessing Officer lacked tangible material. However, the Departmental Representative argued that the re-opening was valid based on information about accommodation entries from hawala operators. The Tribunal upheld the validity of the re-opening due to tangible material supporting the belief of escaped income.

Issue 4: Imposition of penalty under section 271(1)(c) of the Act:
The appeal against the penalty imposed under section 271(1)(c) of the Act was based on the addition made for non-genuine purchases. As the Tribunal had restored the issue for re-adjudication, the penalty imposed could not survive. The Tribunal set aside the penalty imposed by the learned Commissioner (Appeals) and allowed the grounds raised by the assessee for statistical purposes.

In conclusion, the Tribunal partly allowed the assessee's appeal for statistical purposes and set aside the penalty imposed under section 271(1)(c) of the Act. The issues related to non-genuine purchases were restored for re-adjudication, emphasizing the need for the assessee to provide evidence of the genuineness of purchases in the construction activity.