2020 (11) TMI 521 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - As relying on M/s. Amy Diam Vega Jewellery Pvt. Ltd 2017 (10) TMI 236 - ITAT MUMBAI we direct the Assessing Officer to estimate the profit element from bogus purchases @4% and recompute the income of the assessee.

Summary

Issues:
1. Validity of reopening assessment under section 147 of the Income Tax Act.
2. Treatment of purchases made by the assessee as non-genuine.
3. Disallowance of expenses and addition to income.
4. Levying of penalty under section 271(1)(c) and charging of interest under sections 234A, 234B, 234C, and 234D.

Validity of Reopening Assessment:
The appeal challenged the reopening of assessment under section 147 of the Income Tax Act for the assessment year 2007-08. The appellate tribunal upheld the reopening, stating that it was based on tangible materials and information obtained later by the Assessing Officer. The tribunal dismissed the grounds raised against the reopening, concluding that it was justified due to specific information regarding alleged suppliers involved in issuing bogus bills and accommodation entries without actual delivery of goods. The tribunal found no valid reason to interfere with the Commissioner's decision affirming the reopening of assessment.

Treatment of Non-Genuine Purchases:
The Assessing Officer treated the purchases made by the assessee from certain suppliers as non-genuine based on information received, without conducting independent inquiries. The tribunal noted that the purchases were considered non-genuine solely on the basis of information from DGIT (Inv.), Mumbai, alleging accommodation entries without actual delivery of goods. The tribunal referred to a similar case where it was found that the assessee could not prove the movement of goods from suppliers, leading to the conclusion of obtaining bogus bills. The tribunal directed the Assessing Officer to estimate the profit element from these purchases at 4% and recompute the income of the assessee.

Disallowance of Expenses and Addition to Income:
The assessee's purchases were treated as non-genuine by the Assessing Officer, resulting in an addition to the income. The Commissioner upheld the reopening of assessment and restricted the disallowance to 30% of the alleged bogus purchases, sustaining 70% of the addition made by the Assessing Officer. The tribunal, following a previous decision, upheld the Commissioner's order, estimating the Gross Profit at 4% of the bogus purchases instead of the 8% estimated by the Assessing Officer. The tribunal found no reason to interfere with the decision and upheld the order for the relevant assessment years.

Penalty and Interest Charges:
The Assessing Officer levied a penalty under section 271(1)(c) and charged interest under sections 234A, 234B, 234C, and 234D. The tribunal's decision did not specifically address this issue in the provided summary. However, it can be inferred that the penalty and interest charges were likely upheld based on the overall findings and decisions regarding the validity of reopening assessment, treatment of purchases, and addition to income.

This comprehensive analysis of the legal judgment from the Appellate Tribunal ITAT Mumbai covers the various issues involved, detailing the tribunal's findings and decisions on each aspect of the appeal.