2021 (7) TMI 292 - AT - Income Tax

Reopening of assessment u/s 147 - HELD THAT - No doubt, in assessment year 2009-10, assessments in case of both the assessee were initially completed under section 143(3) - as observed, after receiving the notices issued u/s 148 the assessee had raised objection against reopening of assessment. It is evident, the assessing officer has dealt with the objections of the assessee in separate orders. Thus, the assessing officer has acted in conformity with the legal principles before proceeding to re-assess the income of the assessee. As noticed from the material on record that the assessing officer has only made routine enquiry in course of original assessment proceedings. He has not made specific enquiry in respect of the purchases. It is also a fact on record, after completion of original assessments for assessment year 2009-10, AO received information from the Investigation Wing of the department indicating that certain purchases claimed to have been made by the assessee are non genuine as the concerned selling dealers have indulged in providing accommodation bills - AO had tangible material available with him to form a belief that income chargeable to tax has escaped assessment - contention of the assessee that the assessing officer has reopened the assessment on a mere change of opinion without proper application of mind is contrary to facts on record; hence, unacceptable. Insofar as assessment year 2010-11 it is an admitted factual position that the returns of income filed by both the assessees were only processed under section 143(1) - there was no occasion for examining the purchases made by the assessees - unable to accept assessee s contention that the assessments were not reopened validly - there is no need for deliberating on them at length - grounds raised by the assessees challenging the validity of reopening of assessment under section 147 of the Act do not have merit. Estimation of income on bogus purchases - Considering the nature of business of both the assessee s and keeping in view the decision of coordinate bench in case of M/s Sterling Steel Industries 2020 (4) TMI 889 - ITAT MUMBAI disallowance @2% on the alleged non genuine purchases would be fair and reasonable.

Summary

Issues:
- Validity of reopening of assessment under section 147 of the Income Tax Act, 1961
- Merits of the disallowance made due to alleged non genuine purchases

Validity of Reopening of Assessment:
In this case, the Appellate Tribunal considered the challenge raised by the assessees regarding the validity of the reopening of assessments under section 147 of the Act. It was noted that the assessing officer had received specific information from the Investigation Wing indicating non-genuine purchases by the assessees. The Tribunal found that the assessing officer had tangible material available to form a belief that income chargeable to tax had escaped assessment. The Tribunal held that the contention of the assessees that the assessments were reopened on a mere change of opinion without proper application of mind was contrary to the facts on record and therefore dismissed the grounds challenging the validity of the reopening of assessments.

Merits of the Disallowance:
Regarding the merits of the disallowance made due to alleged non genuine purchases, the Tribunal observed that the doubt was only regarding the source of purchases and not the purchases themselves. The assessing officer had restricted the disallowance to the profit element embedded in the purchases, which was further reduced by the learned Commissioner (Appeals). The Tribunal considered the nature of the business of the assessees and referred to a decision of a coordinate bench in a similar case, where a disallowance of 2% on alleged non genuine purchases was deemed fair and reasonable. Consequently, the Tribunal directed the assessing officer to compute the disallowance at 2% on the alleged non genuine purchases for all the assessment years under dispute, partially allowing grounds 3 and 4 raised by the assessees.

In conclusion, the Appellate Tribunal partially allowed the appeals, dismissing the challenges to the validity of the reopening of assessments and directing a 2% disallowance on alleged non genuine purchases for the assessment years in question.