2022 (12) TMI 1208 - AT - Income Tax

Re-opening assessment u/s 147 by issuing notice u/s 148 - disallowance on account of bogus purchase - HELD THAT - A three Judges bench of Hon'ble Gujarat High Court in the case of A.L.A. Firm 1991 (2) TMI 1 - SUPREME COURT after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to re-assess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied. As observed earlier not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. Therefore, we dismiss ground no.1 and 3 raised by the assessee. Estimation of income on bogus purchases - We notice that the issue is squarely covered by the decision of the Coordinate Bench of Surat in the case of Pankaj K. Choudhary 2021 (10) TMI 653 - ITAT SURAT and there is no change in facts and law, therefore respectfully following the binding precedent, we direct the Assessing Officer to sustain the addition at the rate of 6% of bogus purchases.

Summary

Issues Involved:
1. Dismissal of Revenue's appeal due to low tax effect.
2. Validity of reopening assessment under section 147 of the Income Tax Act, 1961.
3. Addition on account of bogus purchases.

Detailed Analysis:

1. Dismissal of Revenue's Appeal Due to Low Tax Effect:
The Revenue's appeal in ITA No. 121/SRT/2019 for AY 2008-09 was dismissed due to the tax effect being below the monetary limit prescribed by CBDT Circular No. 17/2019 dated 08.08.2019. The Circular specifies that appeals before the Appellate Tribunal should have a tax effect of Rs. 50,00,000/- or more. The tax effect in this case was less than Rs. 50,00,000/-, and thus, the appeal was dismissed. It was noted that the Circulars issued by CBDT are binding on the Revenue, as confirmed by the Apex Court in Commissioner of Customs vs. Indian Oil Corporation Ltd. (267 ITR 272).

2. Validity of Reopening Assessment Under Section 147:
The assessee challenged the reopening of the assessment under section 147, arguing that it was done after four years without any failure on their part to disclose fully and truly all necessary facts. The AO had received information from the DIT (Inv.), Mumbai, indicating that the assessee was a beneficiary of bogus purchase bills. The AO recorded reasons for reopening the assessment, which included information from a search and seizure action revealing that the group concerns were paper companies with no real business activities, providing accommodation entries. The Tribunal held that the AO had credible new information and had applied his mind, thus satisfying the conditions for reopening under section 147. The reopening was justified and legal, dismissing the assessee's ground.

3. Addition on Account of Bogus Purchases:
The AO made an addition of Rs. 85,45,283/- for bogus purchases, which was reduced by the CIT(A) to 5% of the bogus purchases, amounting to Rs. 4,27,264/-. The assessee appealed for the deletion of this addition. The Tribunal referred to the case of Pankaj K. Chaudhary, where a similar issue was adjudicated, and the addition was sustained at 6% of the bogus purchases. The Tribunal noted that the AO had not conducted an independent investigation and relied solely on the report of the Investigation Wing. It was observed that the books of accounts were not rejected, and no sales were disputed. Following the precedent, the Tribunal directed the AO to sustain the addition at the rate of 6% of the bogus purchases, thereby partly allowing the assessee's appeal.

Conclusion:
The Revenue's appeal was dismissed due to low tax effect, the reopening of assessment under section 147 was upheld as valid, and the addition on account of bogus purchases was sustained at 6%, following the precedent set in similar cases. The Tribunal's decision was pronounced on 20/09/2022.