2023 (1) TMI 659 - AT - Income Tax

Reopening of assessment u/s 147 - bogus purchases - HELD THAT - Initiation of reassessment proceedings as well as issuance of notice u/s 148 of the Act was not valid and the same was void ab initio and thus, liable to be quashed along with assessment order passed in pursuance thereto. Also following the decision of the Tribunal in the case of Unique Metal Industries 2015 (10) TMI 2753 - ITAT NEW DELHI whereby the addition of 20% of the purchases sustained by the Id. CIT(A) has been deleted in the identical facts and circumstances of the case, are not inclined to sustain the similar addition in the instant case. Consequently, the grounds of the assessee on merits are also found covered in favour of assessee by the aforesaid decision. Appeal of assessee allowed.

Issues Involved:
1. Validity of order passed by learned CIT(A)
2. Reopening of assessment under Section 147 of the Act
3. Compliance with statutory conditions and procedures
4. Nexus between reasons recorded and belief formed by assessing officer
5. Adequate opportunity provided to assessee under section 142(3) of the Act
6. Validity of reopening assessment proceedings and reassessment order
7. Obtaining approval of prescribed authority for reassessment proceedings
8. Addition of Rs.1,49,056/- treating purchases as unexplained expenditure
9. Tallying of quantity purchased and sold
10. Addition on account of bogus purchases
11. Opportunity for cross-examination
12. Addition based on surmises and conjectures

Analysis:
1. The appeal challenged the order of the learned Commissioner of Income-tax (Appeals) regarding the assessment year 2007-08. The assessee raised various grounds questioning the legality and factual basis of the order.

2. The assessee contended that the reopening of the assessment under Section 147 of the Act was not in compliance with statutory conditions and procedures. The argument was that there was no live nexus between the reasons recorded and the belief formed by the assessing officer.

3. It was further argued that the assessing officer did not provide adequate opportunity to the assessee to rebut the material collected at the back of the assessee, violating the statutory provision of section 142(3) of the Act.

4. The validity of the reopening of assessment proceedings and the reassessment order was challenged, claiming that they were made without assuming valid jurisdiction. The contention was that the reassessment proceedings were initiated without obtaining approval from the prescribed authority under the Act.

5. Regarding the addition of Rs.1,49,056/- on purchases treated as unexplained expenditure, the assessee argued that the addition was arbitrary, lacked basis, and disregarded the detailed explanation and evidence provided.

6. The issue of tallying quantity purchased and sold was raised to dispute the allegation that the assessee did not make purchases. The assessee argued that since the quantities matched, the allegation was unsustainable.

7. The addition on account of bogus purchases was challenged with evidence showing the genuineness of purchases and sales made in the regular course of business.

8. The assessee also raised concerns about not being provided an opportunity for cross-examination and contended that the addition was based on surmises and conjectures rather than concrete evidence.

9. The Tribunal, in a similar case, held in favor of the assessee, citing identical issues and grounds raised. The Tribunal directed the assessing officer to delete the impugned addition based on the precedents and reasoning provided.

10. Ultimately, the Tribunal allowed the appeal of the assessee, following the binding precedents and the decision in the similar case, directing the deletion of the impugned addition.

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