2024 (11) TMI 1025 - AT - Income Tax

Validity of reopening of assessment - Addition of alleged bogus purchases - reasons to believe - HELD THAT - In assessment order there is no allegation that the assessee has taken any bogus accommodation entries from the bogus concerns of Deepak Sharma named in the reasons for reopening the assessment. It is a well settled law that if no addition is made on the basis of reasons recorded for reopening, no other addition can be made. The reasons for reopening should coincide with the addition made in the reassessment proceedings. Further, third party statement recorded subsequent to the reasons recorded, cannot form basis of Assessing Officer s reasons to believe to reopen the assessment. In the instant case, there is no coherence in the reasons recorded for reopening and the addition made in the assessment order. There is utter nonapplication of mind by the Assessing Officer while recording reasons for reopening. In facts of the case, we have no hesitation in holding that reopening of assessment lacks Assessing Officer s, reasons to believe for reopening of assessment. Reassessment proceedings are held invalid, hence, quashed. The assessee succeeds on ground no.1 of appeal.

Summary

Issues:
Validity of reopening of assessment, Addition of alleged bogus purchases from M/s. G.S Industries, Principles of natural justice in assessment order.

Validity of Reopening of Assessment:
The appeal challenged the order of the Commissioner of Income Tax (Appeals) regarding the reopening of assessment for the assessment year 2018-19. The Assessing Officer (AO) issued a notice under section 148A(b) of the Income Tax Act, 1961, along with reasons for reopening, alleging bogus purchases from certain concerns. The AO proceeded with reassessment despite the assessee's objections. The AO made additions based on a statement by Shri Deepak Sharma, recorded after the reasons for reopening were conveyed. The Tribunal found that the reasons for reopening did not mention M/s. G.S Industries, the basis of the subsequent addition. The Tribunal held that there was a lack of coherence between the reasons for reopening and the additions made, rendering the reopening invalid. The Tribunal quashed the reassessment proceedings on this ground.

Addition of Alleged Bogus Purchases from M/s. G.S Industries:
Regarding the addition of Rs. 1,35,40,359 on account of alleged bogus purchases from M/s. G.S Industries, the assessee provided invoices and bank statements to support the transactions. The Assessing Officer accepted the sales and books of accounts but made the addition without examining the documents furnished. The CIT(A) raised doubts about the transactions, citing lack of details on transportation and address of G.S Industries. However, the invoices provided by the assessee contained necessary details, contradicting the CIT(A)'s observations. The Tribunal found that the assessee had discharged its burden of proving the genuineness of the transactions. Despite the challenges raised, the Tribunal upheld the assessee's position on the validity of the purchases.

Principles of Natural Justice in Assessment Order:
The assessee contended that the assessment order was passed without following the principles of natural justice. The AO made additions based on a statement by Shri Deepak Sharma, which the assessee argued was inadmissible as it was not signed by the recording officer under oath. Moreover, the reasons for reopening alleged accommodation entries from different concerns than those for which additions were made. The Tribunal emphasized that if no addition is made based on the reasons for reopening, no further addition can be justified. The lack of coherence between the reasons recorded and the additions made indicated a failure on the part of the AO to apply proper reasoning. Consequently, the Tribunal held the reassessment proceedings invalid on this ground as well.

In conclusion, the Tribunal allowed the appeal, quashed the reassessment proceedings, and held in favor of the assessee on the jurisdictional issue, rendering the discussion on the merits of the addition of alleged bogus purchases from M/s. G.S Industries academic and unnecessary.