2021 (11) TMI 499 - AT - Income Tax

Reopening of assessment u/s 147 - bogus purchases - HELD THAT - As decided in own case 2021 (8) TMI 1246 - ITAT HYDERABAD AO had rightly initiated the impugned re-opening process in all these three cases. Estimation of income on bogus purchases - It depends on facts of each and every case than involving any legal interpretation which could be treated as a valid precedent as per the hon'ble jurisdictional high court's decision in CIT Vs. B.R. Constructions 1992 (6) TMI 13 - ANDHRA PRADESH HIGH COURT . Faced with this situation, we deem it appropriate in larger interest of justice that the impugned bogus purchases in all these three year(s) deserve to be restricted to disallowance @ 8% only in the given facts and circumstances with a rider that the same shall not be taken as a precedent in any other case. Necessary computation shall follow as per law.

Summary

Issues:
Validity of reopening assessment under Section 148 and treatment of purchases as fictitious or bogus.

Analysis:
1. The appeal was filed against the order of the Ld. CIT(A)-6, Hyderabad for the Assessment Year 2010-11 under the Income Tax Act, 1961. The appellant raised substantive grounds challenging the validity of the notice issued under Section 148 and the addition of ?42,18,510 as fictitious purchases from a specific company.

2. The Tribunal noted a delay of 55 days in filing the appeal due to the managing partner's ill health. Citing relevant case law, the delay was condoned, and the case proceeded to adjudication on merits.

3. Regarding the validity of reopening assessment and treatment of purchases, it was observed that similar issues had arisen in preceding assessment years. The Assessing Officer initiated the reopening process based on information from the Investigation Wing, Mumbai, indicating bogus sales entries by a group of companies. The Tribunal held that the reopening was justified and upheld the impugned bogus purchases disallowances/additions.

4. The appellant argued that disallowing the purchases would result in abnormally high profit rates, which was deemed unsubstantiated by the department. The Tribunal, considering the circumstances, concluded that the appellant obtained bogus purchase invoices and decided to restrict the disallowance to 8% of the total amount in the interest of justice.

5. The Tribunal maintained consistency in its decision across all assessment years and directed the Assessing Officer to finalize the computation accordingly. The appeal was partly allowed based on the specified terms, and no other grounds were pressed before the Tribunal.