2022 (11) TMI 130 - AT - Income Tax

Reopening of assessment u/s 147 - Bogus purchase - HELD THAT - Before Ld. CIT(A) no specific submission was made against such re-opening, no doubt the assessee has challenged the validity of reopening before the Ld. CIT(A). CIT(A) in his categorical finding held that assessee has not made any specific submission on reopening. It was also held that information received from Sales Tax Department is sufficient to lead to the believe that income of ae is escaped assessment. We find that Hon'ble jurisdictional High Court in the case of Peass Industrial Engineers (P.) Ltd. 2016 (8) TMI 277 - GUJARAT HIGH COURT held that where after scrutiny assessment, AO received information from investigation wing that well known entry operator of country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, Assessing Officer was justified in reopening assessment. In view of the aforesaid factual and legal discussion and by following the judgment of Hon'ble jurisdictional High Court in the case of Peass Industrial Engineers (P.) Ltd. (supra), we do not find any infirmity in the reopening. This ground No.1 of assessees appeal is dismissed. Bogus purchases - As neither the books of assessee was rejected nor the sales of assessee is disputed. The Assessing Officer while passing the assessment order treated the recorded nature of business of assessee trading . In trading, the sales are not possible in absence of purchase. In our view if there is allegation of bogus purchases and the AOmade the addition on the basis of third party information without disputing the sales of assessee and without rejecting the books of account of assessee, though the assessee could not fully substantiate the genuineness of such purchase, the entire disallowance of aggregate of purchase is not justified. In such circumstances to avoid the possibility of revenue leakage, only profit element in such purchase may be disallowed. AO has nowhere disputed the sales of assessee. In such circumstances a reasonable and adhock disallowance would be sufficient to avoid the possibility of revenue leakage. Considering the facts and circumstances of the case we are of the view that @ 10% of aggregate of purchase would be sufficient to avoid the possibility of revenue leakage. Disallowance of carry forward loss / unabsorbed business loss - We find that while filing the appeal before Ld. CIT(A) no such ground of appeal was raised. Therefore, thereby the assessee has raised new and additional Ground of appeal. No application for admission of additional grounds of appeal is filed before Tribunal. The addition based on factual appreciation of fact, in our view, once the assessee has not raised such ground of appeal before ld CIT(A)/ FAA, the assessee is now precluded to raise such ground of appeal before Tribunal. Thus ground of assessees appeal is dismissed.

Summary

Issues Involved:
1. Validity of reopening the case under Section 147 of the Income Tax Act.
2. Addition on account of bogus purchases.
3. Disallowance of carry forward loss/unabsorbed business loss.
4. Charging of interest under Sections 234B and 234C.
5. Initiation of penalty under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Validity of Reopening the Case:
The case was reopened based on information from the Sales Tax Department, Mumbai, indicating that the assessee had availed accommodation entries of bogus purchases from hawala operators. The Tribunal upheld the reopening, citing the jurisdictional High Court's decision in Peass Industrial Engineers (P.) Ltd., which supported reopening assessments based on credible information from investigation wings about bogus entries provided by entry operators. The Tribunal found no infirmity in the reopening process, dismissing the assessee's challenge on this ground.

2. Addition on Account of Bogus Purchases:
The Assessing Officer (AO) disallowed the entire amount of purchases from identified bogus suppliers, totaling Rs. 1,49,81,520/-. The AO's decision was based on the failure of the assessee to produce stock registers, inward registers, and proof of consumption of the purchased materials. Notices sent under Section 133(6) to the suppliers were returned unserved. The Tribunal, however, noted that the AO did not dispute the sales or reject the books of accounts. Given that sales were accepted, it was deemed unreasonable to disallow the entire purchase amount. Instead, the Tribunal decided to disallow only 10% of the aggregate purchases to account for potential revenue leakage, thus partly allowing the assessee's appeal on this issue.

3. Disallowance of Carry Forward Loss/Unabsorbed Business Loss:
The assessee did not raise this issue before the Commissioner of Income Tax (Appeals) [CIT(A)]. Consequently, the Tribunal held that the assessee was precluded from raising this ground at the Tribunal level without an application for admission of additional grounds. The Tribunal dismissed the appeal on this ground, emphasizing the procedural lapse by the assessee.

4. Charging of Interest under Sections 234B and 234C:
This issue was not specifically addressed in the Tribunal's detailed analysis, implying that it was considered general in nature and did not require separate adjudication.

5. Initiation of Penalty under Section 271(1)(c):
Similarly, the Tribunal did not provide a detailed analysis for this ground, treating it as general and not necessitating specific adjudication.

Separate Judgments Delivered:
For the assessment years 2010-11 and 2011-12, the Tribunal followed the same reasoning as in the lead case (assessment year 2009-10). The appeals for these years were partly allowed, with the Tribunal restricting the addition of bogus purchases to 10% and deleting the addition of commission payments. The principle of consistency was applied across the different assessment years.

Conclusion:
The Tribunal's judgment resulted in the partial allowance of the assessee's appeals. The validity of reopening the case was upheld, the addition on account of bogus purchases was restricted to 10%, and the disallowance of carry forward loss was dismissed due to procedural lapses. General grounds related to interest and penalties were not specifically adjudicated.