2021 (12) TMI 136 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 69C - Bogus purchases - HELD THAT - As relying on 2015 (12) TMI 1538 - ITAT DELHI Assumption of jurisdiction is bad in law and the additions made u/s.69C of the Act has no legs to stand. The appeal filed by the assessee is accordingly allowed.

Issues Involved:
1. Jurisdiction under Section 147 of the Income Tax Act.
2. Addition under Section 69C of the Income Tax Act for alleged bogus purchases.
3. Verification of recorded payments and purchases.
4. Absence of defects in audited accounts.
5. Right to amend grounds of appeal.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 147 of the Income Tax Act:
The assessee contested the jurisdiction assumed by the Assessing Officer (AO) under Section 147, which was upheld by the CIT(A). The AO issued a notice under Section 148 based on information from the Chief Commissioner of Income Tax, Delhi-I, regarding accommodation entries provided by certain individuals. The Tribunal referenced similar cases where reassessment orders were quashed due to identical reasons and facts, concluding that the assumption of jurisdiction was invalid.

2. Addition under Section 69C of the Income Tax Act for Alleged Bogus Purchases:
The CIT(A) sustained an addition of ?9,25,232 out of a total of ?37,00,928 made by the AO under Section 69C, deeming the purchases as bogus. The AO's conclusion was based on the details of accommodation entries provided. The Tribunal, referencing previous decisions, found that similar additions were deleted in other cases. The Tribunal held that since the purchases were not proven to be bogus, the addition could not be sustained.

3. Verification of Recorded Payments and Purchases:
The assessee argued that the payments for purchases were fully recorded in the books of accounts and verifiable from the bank account, purchase bills, and stock registers. The Tribunal noted that the assessee had provided detailed purchase and sale records, bank statements, and affidavits to substantiate the genuineness of the transactions. However, the AO did not accept these explanations and made the addition.

4. Absence of Defects in Audited Accounts:
The assessee contended that the AO found no discrepancies in the audited accounts, including trading accounts, stock tallies, and sales declarations. The Tribunal observed that the AO had not identified any defects in the assessee's books of accounts and that the addition was based solely on suspicion and unverified statements. The Tribunal emphasized that tax should be levied on real income, and without proving the purchases as bogus, the addition was unjustified.

5. Right to Amend Grounds of Appeal:
The assessee reserved the right to add, delete, or amend any grounds of appeal. This procedural aspect was acknowledged but did not affect the substantive findings of the Tribunal.

Conclusion:
The Tribunal allowed the appeal, quashing the reassessment proceedings and deleting the addition under Section 69C. The Tribunal's decision was based on the lack of valid jurisdiction under Section 147 and the absence of concrete evidence proving the purchases as bogus. The Tribunal followed precedents set in similar cases, reinforcing the principle that tax should be levied on real income and not on unverified suspicions.

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