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2018 (8) TMI 1181 - AT - Income TaxReopening of an assessment beyond 4 years - issue of bogus purchases - AO estimated the Gross Profit on such alleged bogus purchases at the rate at which the assessee has shown the Gross Profit. - information was unearthed during the course of search in the case of other party - Held that - When there is a specific and concrete information available with the Assessing Officer after completion of assessment there is certainly reason to believe that the income had escaped assessment and therefore we do not see any infirmity in the order of the Assessing Officer in reopening the assessments. We also find that there is no considerable force in the submissions of the Ld. Counsel for the assessee that the basis for making of addition is not adhered to. - Reassessment proceedings sustained - Decided against the assessee. Bogus Purchases - Estimation of income - The Revenue came to know that the Bhanwarlal Jain Group was issuing the accommodation entries to various parties through different entities. - Held that - statements reflecting payments made by the assessee to them copy of acknowledgment of Income Tax Returns filed by them to show that the transaction of sales made to the assessee are genuine. We also find that the Gross Profit margin shown by the assessee is ranging in between 7.02% to 7.62% consistently. Further the disallowance / estimation of profit of purchases by treating them as bogus cannot be made only on the statements recorded from third parties especially when the suppliers have responded to the notice u/s. 133(6) of the Act and filed all the necessary documents to prove the genuineness of the purchases made by the assessee. - All the purchases are genuine - No adition can be made - Decided in favor of assessee.
Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act. 2. Addition towards bogus purchases. Detailed Analysis: Reopening of Assessment under Section 147 of the Income Tax Act: The assessee challenged the reopening of assessments for the Assessment Years (AY) 2007-08 and 2008-09 on the grounds that it was done beyond four years and was based on alleged inflation in expenditure. The assessee contended that the Assessing Officer (AO) did not adhere to the basis for making the addition and failed to mention any failure on the part of the assessee to furnish necessary details. On the other hand, the Revenue argued that the reopening was based on specific information from the DGIT (Investigation), Mumbai, indicating that the assessee had obtained bogus bills from the Bhanwarlal Jain Group. The AO had reason to believe that the income had escaped assessment due to this information. The Tribunal upheld the reopening of assessments, stating that the reopening was based on concrete information unearthed during a search in the Bhanwarlal Jain Group, which indicated that the assessee was a beneficiary of bogus purchase bills. The Tribunal found no infirmity in the AO's action, as the reopening was not based on a change of opinion but on new material that came to light after the original assessment. Addition Towards Bogus Purchases: The AO made additions towards bogus purchases, estimating the Gross Profit (GP) on alleged bogus purchases at the rate shown by the assessee. The assessee argued that it had provided sufficient evidence, including invoices, ledger confirmations, and bank statements, to prove the genuineness of the purchases. The assessee also pointed out that the parties had responded to notices issued under Section 133(6) of the Act, confirming the transactions. The Tribunal observed that the AO ignored the evidence provided by the assessee and the confirmations from the parties. The Ld. CIT(A) concluded that the purchases were made from the gray market without proper billing or documentation and estimated the profit margin embedded in such purchases at 2%, which was deemed fair and reasonable. The Tribunal found that the Ld. CIT(A) had ignored crucial evidence, such as confirmations from the parties, and concluded that the purchases could not be treated as non-genuine when the parties had confirmed the transactions. The Tribunal referred to similar cases where purchases were treated as genuine based on confirmations from the suppliers and concluded that the assessee had discharged its burden of proving the genuineness of the purchases. The Tribunal noted that the AO had failed to make further inquiries and had relied solely on statements from third parties. The Tribunal found that the suppliers had responded to notices and provided necessary documents to prove the genuineness of the transactions. The Tribunal concluded that the disallowance of purchases could not be made solely based on third-party statements and deleted the disallowance made towards bogus purchases for the relevant assessment years. Appeals of M/s. Ariha Diamond Jewellery Pvt. Ltd. and M/s. Sejal Gems Pvt. Ltd.: The Tribunal applied the same reasoning and conclusions to the appeals of M/s. Ariha Diamond Jewellery Pvt. Ltd. and M/s. Sejal Gems Pvt. Ltd., as the facts were identical. The Tribunal rejected the grounds raised by the assessee regarding the reopening of assessments and allowed the appeals on merits, dismissing the Revenue's appeals. Conclusion: The Tribunal partly allowed the appeals of the assessee and dismissed the appeals of the Revenue, concluding that the reopening of assessments was justified based on new material, but the additions towards bogus purchases were not warranted as the assessee had provided sufficient evidence to prove the genuineness of the transactions.
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