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2022 (11) TMI 817 - AT - Income TaxReopening of assessment u/s 147 - bogus purchases - HELD THAT - Even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied. As observed earlier not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. Therefore, we dismiss the ground No.1 raised by the assessee. Addition at the rate of 6% of bogus purchases - Since the issue is squarely covered by the decision of the Co-ordinate Bench in the case of Pankaj K. Chaudhary 2021 (10) TMI 653 - ITAT SURAT and there is no change in facts and law and Revenue is unable to produce any material to controvert the aforesaid findings of the Co-ordinate Bench (supra). We find no reason to interfere in the above said order of Co-ordinate Bench, therefore we dismiss the appeals of the assessees and we allow the appeals of the Revenue partly.
Issues Involved:
1. Justification of the CIT(A) in partly allowing the appeal of the assessee and estimating disallowance at 5% of unverifiable and bogus purchases. 2. Validity of reopening the assessment under section 147 of the Income Tax Act, 1961. 3. Reliance on the case of M/s Mayank Diamonds Pvt. Ltd. by the CIT(A). 4. Overall legitimacy and quantum of additions made by the Assessing Officer (AO). Detailed Analysis: 1. Justification of the CIT(A) in Partly Allowing the Appeal of the Assessee and Estimating Disallowance at 5%: The CIT(A) restricted the addition to 5% of the bogus purchases, amounting to Rs. 13,19,35,109/-, based on the gross profit rate of 5% as the average rate of the industry. The CIT(A) observed that the transactions through banking channels were a make-believe arrangement to provide bogus accommodation entries. The CIT(A) relied on the decision of the Hon'ble Jurisdictional Gujarat High Court in the case of Mayank Diamond Pvt. Ltd. v ITO, which upheld a similar addition at 5% of bogus purchases. The Tribunal, however, noted that in similar cases, the Co-ordinate Bench of Surat has sustained the addition at the rate of 6% of bogus purchases, thus modifying the CIT(A)'s decision. 2. Validity of Reopening the Assessment under Section 147: The Tribunal upheld the reopening of assessment under section 147, noting that the AO had credible new information from the Investigation Wing, Mumbai, which indicated that the assessee had availed accommodation entries from bogus entities managed by Bhanwarlal Jain and his family. The Tribunal referenced the Hon'ble Supreme Court's decision in Phul Chand Bajrang Lal and the Hon'ble Gujarat High Court's decision in Dishman Pharmaceuticals and Chemicals Ltd., which supported the AO's jurisdiction to reassess based on new, specific, and reliable information. The Tribunal dismissed the assessee's ground challenging the reopening of the assessment. 3. Reliance on the Case of M/s Mayank Diamonds Pvt. Ltd.: The CIT(A) relied on the case of M/s Mayank Diamonds Pvt. Ltd. to justify the 5% addition of bogus purchases. The Tribunal, however, noted that the facts of the present case were more aligned with other similar cases where a 6% addition was upheld. The Tribunal found that the CIT(A)'s reliance on Mayank Diamonds Pvt. Ltd. was not entirely appropriate given the specific circumstances and evidence in the present case. 4. Overall Legitimacy and Quantum of Additions Made by the AO: The AO made an addition of Rs. 13,19,35,109/- based on the information from the Investigation Wing, which indicated that the purchases were bogus. The CIT(A) reduced this to 5%, but the Tribunal found that a 6% addition was more appropriate based on similar cases and the evidence presented. The Tribunal noted that the AO did not conduct an independent investigation and relied solely on the investigation report. The Tribunal emphasized that the tax authorities should only tax the income component of the disputed transaction to prevent revenue leakage, hence modifying the addition to 6%. Conclusion: The Tribunal upheld the reopening of the assessment under section 147, modified the CIT(A)'s decision by increasing the addition from 5% to 6% of the bogus purchases, and dismissed the appeals of the assessee while partly allowing the appeals of the Revenue. The Tribunal's decision was based on a thorough examination of the facts, legal precedents, and the specific circumstances of the case.
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