2019 (10) TMI 725 - AT - Income Tax

Reopening of assessment u/s 148 - distinction between the acceptance of a return u/s 143(1) and an assessment which is framed u/s 143(3) - HELD THAT - As decided in AVIRAT STAR HOMES VENTURE PRIVATE LIMITED 2018 (12) TMI 1397 - BOMBAY HIGH COURT information supplied by the Investigation Wing to the Assessing Officer formed a prima facie basis to enable the Assessing Officer to form a belief of income chargeable to tax having escaped assessment. The Assessing Officer perused the information supplied by the Investigation Wing and having formed the belief that income chargeable to tax had escaped assessment, could not be stated to have acted mechanically. Further, the mere fact that the assessee had asked for certain information from the Assessing Officer, which at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the notice. The notice was valid AO has rightly issued notice u/s 148 for reopening the return of income processed u/s 143(1) of the Act. Therefore, the 1st ground of appeal is dismissed. Bogus purchases - CIT(A) confirming the order of the AO in disallowing the purchases made from two parties @ 12.5% of alleged bogus purchases - HELD THAT - We direct the AO to restrict the additions limited to the extent of bringing the G.P. rate on disputed purchases at the same rate of other genuine purchases.

Summary

Issues:
1. Reopening of assessment beyond the four-year period.
2. Disallowance of purchases made from two parties.

Issue 1: Reopening of assessment beyond the four-year period
The case involved appeals against the order of the Commissioner of Income Tax (Appeals) and arose from an assessment completed under the Income Tax Act, 1961. The primary issue was the reopening of the assessment by the Assessing Officer (AO) based on information received from the Sales Tax Department regarding alleged bogus purchase bills. The first ground raised in the appeal was against the reopening done by the AO via notice under section 148. The appellant argued that the notice was beyond the four-year period and lacked tangible material, while the Revenue contended that the reopening was justified based on information received. The Tribunal cited relevant legal precedents to support the decision that the AO rightly issued the notice for reopening, dismissing the first ground of appeal.

Issue 2: Disallowance of purchases made from two parties
The second ground raised in the appeal related to the disallowance of purchases made from two parties totaling a specific amount, which the AO considered as alleged bogus purchases. The AO's decision was based on the inability to serve notices to the parties, lack of documentary evidence provided by the appellant, and failure to produce the parties for verification. The appellant argued that the purchases were genuine, supported by documentation, and challenged the disallowance. The Tribunal considered the nature of the appellant's business, similar cases, and legal precedents to determine a reasonable profit estimation. Citing a relevant case, the Tribunal directed the AO to restrict the additions to bring the gross profit rate on disputed purchases in line with genuine purchases. Consequently, the appeals were partly allowed, with the Tribunal providing detailed reasoning for its decision based on the facts and circumstances of the case.

This comprehensive analysis covers the key issues addressed in the legal judgment, highlighting the arguments presented by the parties, the Tribunal's considerations, and the final decision rendered.