2020 (8) TMI 115 - AT - Income Tax

Validity of reopening u/s.148 - Addition of bogus purchases - HELD THAT - On the basis of information received from the Investigation Wing which was based on information forwarded by Maharashtra VAT Department that the assessee has availed Hawala entry of bogus bill purchases in the financial year 2010-11.Based on this information, reopening has been done u/s.148. From the perusal of the record, it is seen that, nowhere AO has disputed that the source of purchase is outside the books of account. In fact the purchase of same amount and invoice has been recorded in the books of account and duly disclosed and the amount has been paid through banking channels. The corresponding sales have also not been disputed including the directed expenses and the gross profit. This could be a case where assessee has made purchases in cash and has taken an accommodation bill for same quantity for which cheque amount has been issued. In such a case also, the source of purchase are from the books, therefore, the entire purchases cannot be treated as income of the assessee especially when books of account have not been rejected and sales and GP stands accepted in the trading account. It could be at best, a case of suppression of GP on the purchase. Profit element of such amount should be added as income. Accordingly, Assessing Officer is directed to apply the GP declared by the assessee on purchase of ₹ 1,93,066/- and balance amount should be deleted. Validity of reopening u/s.148 - No merits in the contention of the ld. counsel for the reason that, firstly, there was a categorical information wherein the assessee s name was appearing along with details of the parties from whom the assessee has made purchases which were found to be Hawala operator providing accommodation bogus bills. The Assessing Officer after receiving the information has independently applied his mind and recorded his reason to believe as to why such a purchase is not genuine. Thus, do not find any infirmity in the jurisdiction accorded u/s.147 and the same is dismissed. Appeal of the assessee is partly allowed.

Summary

Issues:
Validity of reopening u/s.148, Addition of &8377; 1,93,066/- on account of bogus purchases, Levy of interest u/s.234B and 234C.

Validity of Reopening u/s.148:
The appeal was filed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-XXXI for the Assessment Year 2011-12. The case was reopened u/s.148 based on information from the Investigation Wing regarding non-genuine/bogus bills. The assessee challenged the reopening, arguing that the original return filed should be considered as a response to the notice u/s.148. The Assessing Officer confronted the information with the assessee, who denied transactions with the mentioned party. The Tribunal held that the reopening was valid as the Assessing Officer had applied his mind independently based on the information received, dismissing the contention against the jurisdiction accorded u/s.147.

Addition of &8377; 1,93,066/- on Account of Bogus Purchases:
The Assessing Officer treated the purchase of &8377; 1,93,066/- as bogus based on information from the Investigation Wing. The assessee contended that the purchase was made from a different party and was duly recorded in the books of account. The Tribunal observed that the purchases were recorded in the books, paid through banking channels, and the sales and gross profit were accepted. It was held that at most, it could be a case of suppression of gross profit on the purchase amount. The Tribunal directed the Assessing Officer to add the profit element of the amount as income and delete the balance.

Levy of Interest u/s.234B and 234C:
The judgment did not provide detailed analysis or discussion on the levy of interest u/s.234B and 234C. Therefore, no specific information or decision related to this issue was included in the summary.

In conclusion, the Tribunal partly allowed the appeal, directing the addition of the profit element of the disputed purchase amount as income. The reopening u/s.148 was upheld as valid, dismissing the challenge against the jurisdiction accorded. The judgment focused on the specifics of the bogus purchase issue, emphasizing the importance of considering the source of purchases and the recording in books of account while determining the treatment of such transactions.