2022 (3) TMI 1026 - AT - Income Tax

Reopening of assessment u/s 147 - bogus purchases - case was reopened on the basis of information received from DGIT (Investigation) Mumbai - During the course of search, blank cheque books signed by dummy partners / directors /proprietor of entities was found seized and as informed that assessee is one of the beneficiaries of bogus purchase from three entities managed by Bhanwarlal Jain Group - addition on merit to the extent of 25% of purchases - HELD THAT - Considering the decision of this Tribunal for 2021 (10) TMI 653 - ITAT SURAT wherein we have upheld the validity of reopening and sustained the additions of disputed purchase/ bogus purchase @ 6%. For the year under consideration the ld CIT(A) has already granted substantial relief in sustain the addition of said bogus purchase to the extent of 5% only. Thus, following the order of Tribunal in all the aforesaid years, the grounds of appeal raised by the assessee is dismissed.

Issues Involved:
1. Validity of the assumption of jurisdiction by the Assessing Officer (AO) under Section 147 of the Income Tax Act.
2. Violation of principles of natural justice due to non-provision of cross-examination opportunity.
3. Legitimacy of treating genuine purchases as non-genuine and the estimation of profit on alleged bogus purchases.

Detailed Analysis:

1. Validity of the Assumption of Jurisdiction by the AO:
The assessee contended that the AO's assumption of jurisdiction for initiating reassessment proceedings under Section 147 was invalid as the conditions laid down under the Act were not fulfilled. The AO reopened the case based on information from the DGIT (Investigation) Mumbai, indicating that the assessee was a beneficiary of bogus purchases from entities managed by the Bhanwarlal Jain Group. The Tribunal upheld the validity of the reopening, citing the Hon'ble Jurisdictional High Court’s decisions in similar cases, such as Peass Industrial Engineers (P) Ltd Vs DCIT and Pushpak Bullion (P) Ltd Vs DCIT, where reopening based on information from the investigation wing was deemed justified. The Tribunal concluded that the AO validly assumed jurisdiction for reopening under Section 147.

2. Violation of Principles of Natural Justice:
The assessee argued that the AO erred by not providing an opportunity to cross-examine the third party whose statement was relied upon, thus violating the principles of natural justice. The Tribunal did not provide a detailed discussion on this issue in the summarized judgment, suggesting that the primary focus was on the validity of the reopening and the estimation of profits from alleged bogus purchases.

3. Legitimacy of Treating Genuine Purchases as Non-Genuine:
The AO treated purchases from Rose Gems Pvt. Ltd. as bogus and added 25% of the purchase amount to the assessee's income. The CIT(A) reduced this addition to 5% of the alleged bogus purchases. The Tribunal referenced its decision in the assessee’s own case for A.Y. 2008-09, where similar additions were restricted to 6%. The Tribunal noted that no independent investigation was carried out by the AO, and the sales of the assessee were not disputed. The Tribunal emphasized that tax authorities should only tax the income component of the disputed transaction to prevent revenue leakage. Consequently, the Tribunal sustained the addition of 6% of the disputed purchases, aligning with its prior decisions and the principle of consistency.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the validity of the reopening under Section 147 and sustaining the addition of 6% of the disputed purchases. The decision aligns with previous judgments in similar cases, ensuring consistency and adherence to legal precedents. The Tribunal's order was announced on 10th March 2022, by placing the result on the notice board.

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