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2025 (4) TMI 1171 - AT - Income TaxEstimation of income - bogus purchases - CIT(A) confirmed the addition of GP at 8% and upheld the assessment order - HELD THAT - The issue stands well settled by the decision of the Coordinate Bench of ITAT Mumbai in the assessee s own case 2018 (12) TMI 2017 - ITAT MUMBAI . The assessee had accepted the addition of GP at 8% on the alleged bogus purchases. We find no reason to deviate from the ruling of the Coordinate Bench and accordingly we restrict the addition to 8% GP on the alleged bogus purchases. It is noted that in the original assessment order u/s 143(3) an addition (8% GP) was made on the alleged bogus purchase which was already confirmed. Therefore the entire addition made in the reassessment order under Sections 143(3)/147 is unsustainable and is accordingly deleted. However concerning the alleged bogus purchases we direct that the addition be restricted to 8% of the GP which works out to Rs. 5, 49, 452/-.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in the appeal are: (a) Whether the addition of Rs. 1,80,93,680/- on account of alleged bogus purchases from M/s Mohit Enterprises and M/s Mayur Exports, confirmed by the CIT(A) NFAC, is justified without proper consideration of the fact that goods were exported and sales could not have been effected without corresponding purchases. (b) Whether the reassessment order under Sections 147/143(3) of the Income Tax Act, 1961, which added the entire amount of alleged bogus purchases from M/s Mayur Exports, amounts to impermissible change of opinion, given that the original assessment under Section 143(3) had already made a partial disallowance by applying an 8% gross profit addition on the said purchases. (c) Whether the reassessment addition of the entire purchase amount from M/s Mayur Exports is sustainable in law, considering the prior adjudication and acceptance of an 8% gross profit addition by the ITAT Mumbai Bench. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a) and (b): Legitimacy of additions on alleged bogus purchases and applicability of reassessment provisions Relevant legal framework and precedents: The assessment proceedings were originally completed under Section 143(3) of the Income Tax Act, 1961, with additions made on the basis of alleged bogus purchases. The reassessment proceedings were initiated under Section 147 read with Section 143(3), which permits reopening of assessments if there is reason to believe that income has escaped assessment. However, it is well settled that reassessment cannot be based on a mere change of opinion. The principle against change of opinion has been repeatedly affirmed by judicial precedents, which hold that reassessment is permissible only if new information or material is discovered which was not considered earlier. Court's interpretation and reasoning: The Tribunal noted that in the original assessment order dated 27/03/2015, the AO had made an addition of Rs. 8,96,442/- by applying an 8% gross profit rate on the alleged bogus purchases of Rs. 1,12,05,525/- from M/s Mayur Exports. This addition was confirmed by the CIT(A) and further upheld by the ITAT Mumbai Bench in ITA No. 2582/Mum/2018. The assessee had accepted this addition and did not challenge the ITAT order before any higher forum. Subsequently, the AO issued a notice under Section 148 and passed a reassessment order adding the entire amount of Rs. 1,12,05,525/- as bogus purchases, thereby deviating from the original assessment where only 8% gross profit addition was made. The Tribunal held that this amounted to a complete change of opinion, which is impermissible in reassessment proceedings. Key evidence and findings: The Tribunal relied on the prior assessment records, the original assessment order, the CIT(A) order, and the ITAT Mumbai Bench ruling in the assessee's own case. The assessee's acceptance of the 8% gross profit addition and failure to challenge the ITAT order before a higher forum were significant factors. Application of law to facts: The Tribunal applied the settled legal principle that reassessment cannot be based on a mere change of opinion. Since the issue of bogus purchases from M/s Mayur Exports had been adjudicated with an 8% gross profit addition, the AO was not justified in reopening the entire amount as bogus purchases in reassessment. The reassessment addition of Rs. 1,12,05,525/- was therefore unsustainable. Treatment of competing arguments: The assessee argued that the reassessment addition was a change of opinion and there was no new information warranting reopening. The revenue contended that the reassessment was justified. The Tribunal sided with the assessee, emphasizing the binding nature of the earlier ITAT ruling and the principle against change of opinion. Conclusions: The addition of the entire amount of Rs. 1,12,05,525/- in reassessment was deleted. The addition was restricted to the 8% gross profit addition of Rs. 8,96,442/- as accepted in the original assessment and upheld by the ITAT. Issue (c): Addition relating to purchases from M/s Mohit Enterprises Relevant legal framework and precedents: The reassessment order also included an addition of Rs. 68,68,157/- for alleged bogus purchases from M/s Mohit Enterprises. The principle of applying gross profit rate to determine addition on bogus purchases was relevant here. Court's interpretation and reasoning: The Tribunal observed that while the addition relating to M/s Mayur Exports was restricted to 8% gross profit, the addition relating to M/s Mohit Enterprises was confirmed but limited to 8% of the alleged bogus purchases, amounting to Rs. 5,49,452/-. Key evidence and findings: The reassessment order and submissions of both parties were considered. Both the learned Departmental Representative and the learned Authorized Representative accepted the Tribunal's view restricting addition to 8% gross profit on the purchases from M/s Mohit Enterprises. Application of law to facts: The Tribunal applied the same principle of gross profit addition to the purchases from M/s Mohit Enterprises, consistent with the treatment of purchases from M/s Mayur Exports in the original assessment. Treatment of competing arguments: No significant dispute was noted regarding this issue in the appeal, as both parties accepted the Tribunal's approach. Conclusions: The addition relating to purchases from M/s Mohit Enterprises was confirmed but restricted to 8% gross profit, amounting to Rs. 5,49,452/-. 3. SIGNIFICANT HOLDINGS The Tribunal succinctly stated the core legal principle governing the reassessment proceedings: "The issue stands well settled by the decision of the Coordinate Bench of ITAT, Mumbai, in the assessee's own case ... We find no reason to deviate from the ruling of the Coordinate Bench, and accordingly, we restrict the addition to 8% GP on the alleged bogus purchases." It was held that the reassessment addition of the entire amount of alleged bogus purchases from M/s Mayur Exports was "unsustainable and is accordingly deleted." The Tribunal established the principle that reassessment proceedings cannot be used to effect a "complete change of opinion" in the absence of new information or material. Regarding the purchases from M/s Mohit Enterprises, the Tribunal confirmed the addition but limited it to 8% gross profit, consistent with the treatment of similar purchases. Final determinations on each issue were:
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