2023 (6) TMI 1215 - AT - Income Tax

Estimation of income - Bogus purchases - communication received from the DDIT(Inv) with regard to the information received from sales-tax department, as per which, the assessee is involved in taking bogus entries towards purchases - CIT(A) given partial relief only to the extent of 50% of the amount reflected in the stock register - HELD THAT - We notice that there are certain discrepancies in the figures considered by the CIT(A) for the purpose of disallowance and the figures as per assessee's stock register. CIT(A) did not call for any remand report from the AO with regard to the additional evidences submitted by the assessee and there is per se violation of Rule 46A of the Income-tax Rules, 1962. The issue should go back to the AO for fresh verification of the evidences submitted by the assessee. Accordingly we remit the issue for a fresh verification to the AO with a direction to consider the reconciliation statement of the stock register prepared by the assessee and also to keep in mind the decision of Mohammed Haji Adam Co 2019 (2) TMI 1632 - BOMBAY HIGH COURT as held that profit embedded in the sale of bogus purchases can only be added since the AO in the instant case as noted has not disturbed the sales figures shown by the assessee and decide accordingly. Needless to say that the assessee be given an opportunity of being heard. Appeal is allowed for statistical purpose.

Summary

Issues:
The judgment involves issues related to the validity of reopening, treatment of non-genuine purchases, consideration of evidence, and procedural fairness.

Validity of Reopening:
The appeal challenged the reopening of the assessment, arguing that the Assessing Officer should have formed an independent belief of income escapement rather than relying solely on information from the Sales Tax Authorities and Investigation Wing.

Treatment of Non-Genuine Purchases:
The CIT(A) confirmed the addition of non-genuine purchases based on discrepancies between the purchase amounts in the stock register and the assessment order. The appellant contended that certain purchases were not considered, which would eliminate the discrepancy.

Consideration of Evidence:
The appellant provided invoices, bank statements, and stock registers to prove the genuineness of purchases. The CIT(A) upheld the addition without considering the appellant's submissions, leading to a dual addition scenario.

Procedural Fairness:
The judgment highlighted procedural lapses, including the failure to call for a remand report from the Assessing Officer and discrepancies in figures considered for disallowance. The case was remitted back to the Assessing Officer for fresh verification, emphasizing adherence to procedural rules and the need to consider the profit embedded in the sale of alleged bogus purchases.

The judgment addressed the issues of reopening validity, treatment of non-genuine purchases, consideration of evidence, and procedural fairness. The appellant's arguments regarding the independent belief for reopening, inclusion of all purchases, and submission of supporting documents were discussed. The CIT(A) decision to uphold additions without considering all evidence and the procedural lapses in not seeking a remand report were noted. The judgment emphasized the need for proper verification, adherence to procedural rules, and consideration of profit aspects in dealing with alleged non-genuine purchases.