2017 (12) TMI 1477 - AT - Income Tax

Bogus purchases - estimation of income - Held that - Since in the case of M/s. Modern Road Maker Pvt. Ltd. the Tribunal has given the reasons 2017 (12) TMI 1394 - ITAT MUMBAI , respectfully following the same, direct the Assessing Officer to estimate the profit @5%. Since in all the appeals filed by the assessee the issue involved is common, we therefore following the decision for A.Y. 2006-07 direct the Assessing Officer to estimate the profit @5%.

Summary

Issues Involved:
1. Estimation of profit on alleged bogus purchases.
2. Validity of proceedings initiated under Section 147 by issuing notice under Section 148.
3. Legality of order made under Section 143(3) read with Section 147.
4. Charging of interest under Sections 234A, 234B, 234C, and 234D.

Issue-wise Detailed Analysis:

1. Estimation of Profit on Alleged Bogus Purchases:
The assessee challenged the CIT(A)'s decision to estimate profit at 17.5% on alleged bogus purchases of ?21,07,723/-. The CIT(A) held that the motive behind obtaining bogus bills was to inflate purchase prices to suppress true profits. The CIT(A) directed the Assessing Officer (AO) to estimate the net profit at 17.5% on such purchases, considering various judicial precedents. The Tribunal observed that the AO had reopened the assessment based on information from the DGIT(Inv), which was considered tangible information. The Tribunal noted that the assessee would have made purchases from the grey market, saving on taxes and obtaining materials at lower rates. The Tribunal referred to a previous decision where profit was estimated at 5% and directed the AO to estimate profit at 5% in this case as well.

2. Validity of Proceedings Initiated Under Section 147 by Issuing Notice Under Section 148:
The assessee contended that the proceedings initiated under Section 147 by issuing notice under Section 148 were bad in law and based on mere suspicion without tangible material. The CIT(A) dismissed this ground, stating that the AO had reason to believe there was escapement of assessment based on information from the DGIT(Inv). The Tribunal upheld this view, noting that the information received from the DGIT(Inv) was tangible and that the AO had applied his mind before reopening the case.

3. Legality of Order Made Under Section 143(3) Read with Section 147:
The assessee argued that the order made under Section 143(3) read with Section 147 was illegal, ultra vires, and made without reasonable opportunity of hearing. The Tribunal dismissed this ground, agreeing with the CIT(A) that the AO had valid reasons for reopening the assessment and that the proceedings were conducted in accordance with the law.

4. Charging of Interest Under Sections 234A, 234B, 234C, and 234D:
The assessee contested the AO's decision to charge interest under Sections 234A, 234B, 234C, and 234D. The Tribunal did not provide a detailed discussion on this issue, indicating that it was not a primary point of contention in the appeals.

Conclusion:
The Tribunal partly allowed the appeals filed by the assessee and the Revenue. It directed the AO to estimate the profit at 5% on the alleged bogus purchases, following the reasoning in a previous decision. The Tribunal upheld the validity of the proceedings initiated under Section 147 and the legality of the order made under Section 143(3) read with Section 147. The issue of charging interest under various sections was not extensively discussed. The judgment emphasized the need for tangible information and proper application of mind by the AO in reopening assessments and estimating profits on alleged bogus purchases.