2023 (6) TMI 565 - AT - Income Tax

Reopening of assessment u/s 147 - reasons to believe - independent application of mind or borrowed satisfaction - bogus purchase on account of inflation of purchase price - contention of the assessee that the Ld. AO issued notice purely on borrowed satisfaction of DCIT, Central Circle-4, Surat without application of independent mind - HELD THAT - Assessee had filed objections for initiation of proceedings by issue of notice u/s148 and AO met the objections by passing a speaking order in accordance with GKN Drive Sharft (India) 2002 (11) TMI 7 - SUPREME COURT case - Assessee contention that AO issued notice purely on borrowed satisfaction of DCIT, Central Circle-4, Surat without application of independent mind has also been found to be without merit by the Ld. CIT(A). Reopening of assessment has taken place after following due procedure as per law. We decline to interfere. Estimation of income - Bogus purchases - Finding of AO/CIT(A) is that the assessee did purchase goods without bills from some other suppliers otherwise sales could not be effected and that he has been benefitted by providing margin of grey market - AO/CIT(A) instead of treating the entire impugned purchases as bogus and adding the same to the income of the assessee restricted the addition to 25% of such purchases following the decision in Vijay Protein Ltd 2015 (1) TMI 828 - GUJARAT HIGH COURT and Sanjay Oil Cake Industries 2008 (3) TMI 323 - GUJARAT HIGH COURT The above findings remain uncontroverted before us. No infirmity in the order of the Ld. CIT(A) and sustain the same. Assessee appeal dismissed.

Summary

Issues involved:
The issues involved in this case are:
1. Validity of reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Addition of Rs. 85,52,431 as income on account of alleged bogus purchases.

Reopening of Assessment:
The Ld. CIT(A) upheld the initiation of reassessment proceedings under section 147, stating that the Assessing Officer had proper reasons to believe that income had escaped assessment due to discrepancies between the purchases reflected in the return and the information received. The AO followed due procedure and issued the notice after necessary approval, hence the reassessment was justified.

Addition of Alleged Bogus Purchases:
The Ld. AO added Rs. 85,52,431 to the income of the assessee, representing 25% of the alleged bogus purchase amount of Rs. 3,42,09,724. The assessee contended that the purchases were genuine and provided evidence including invoices, payment details, ledger accounts, and confirmations from parties. The Ld. CIT(A) found the genuineness of the purchase party doubtful but accepted that the purchases as a whole were genuine. The AO's decision to restrict the addition to 25% of the purchases was based on precedents and the benefit received by the assessee from the grey market. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the findings were uncontroverted and sustained the addition.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the validity of the reassessment proceedings and the addition of Rs. 85,52,431 to the income. The order was pronounced on 18th May, 2023.