2022 (12) TMI 1224 - AT - Income Tax

Reopening of assessment u/s 147 - reason to believe - HELD THAT - AO bears no nexus with the material available on record and is merely based on suspicion, does not find favor with me. As per the settled position of law, the A.O for taking recourse to proceedings u/s 147 is required to arrive at a bonafide belief on the basis of material available on record that the income of the assessee chargeable to tax had escaped assessment. No obligation is cast upon the A.O at the stage of taking recourse to proceedings u/s 147 to conclusively prove that the income of the assessee chargeable to tax had escaped assessment. As is discernible from the aforesaid reasons to believe , A.O had clearly arrived at a bonafide belief on the basis of the material available with him that the income of the assessee chargeable to tax had escaped assessment. Accordingly, finding no substance in the claim of the ld. A.R that the belief of the AO that the income of the assessee chargeable to tax had escaped assessment has no nexus with the material available on record, and is merely based on a pretence, does not find favor with me, as there was sufficient material available with the A.O for taking recourse to proceedings u/s.147 - Thus, the additional ground of appeal No.1 raised by the assessee is dismissed in terms of the aforesaid observations. Claim of the Ld. AR that there is no independent application of mind by the A.O, and the proceedings u/s.147 of the Act have been initiated by him on the basis of a borrowed satisfaction - We are unable to subscribe to the same. On a careful perusal of the reasons to believe , find that the A.O after referring to the material as was available before him had clearly applied his mind, and had on the basis of a bonafide belief so arrived at by him taken recourse to proceedings u/s.147 of the Act. Quality of the reasons to believe , as per the settled position of law, cannot be allowed as a basis for the assessee to assail the validity of jurisdiction assumed by the A.O u/s.147 of the Act. Thus, the additional ground of appeal No.2 raised by the assessee is dismissed in terms of the aforesaid observations. Claim of the assessee that as the reasons to believe was followed by issuance of notice u/s.148 of the Act on the same date, i.e., on 31.03.2017 after obtaining approval of the appropriate authority u/s.151 - On a perusal of the sanction granted by the appropriate authority u/s.151 of the Act, I find that the latter had approved the reasons to believe recorded by the A.O with an observation that the case was fit for reopening, and thus, had granted sanction for issuing notice u/s.148 of the Act. I, thus, not finding any merit in the aforesaid claim of the ld. A.R reject the same. Thus, the additional ground of appeal No.3 raised by the assessee is dismissed in terms of the aforesaid observations.

Summary

Issues:
1. Addition of alleged bogus purchases of "rice bran" from M/s. Syndicate Corporation.
2. Validity of jurisdiction assumed by the Assessing Officer (A.O) for initiating proceedings under Sec. 147 of the Income-tax Act, 1961.

Analysis:
1. The appeal was filed against the order passed by the Commissioner of Income-Tax (Appeals) concerning the addition of Rs.1,40,260 on the alleged bogus purchases of "rice bran" from M/s. Syndicate Corporation. The Assessing Officer had not rejected the books of account under section 145(3) but disallowed 25% of the purchases. The appellant contended that the disallowance was arbitrary and lacked corroborative evidence. The Tribunal admitted additional grounds challenging the validity of jurisdiction assumed by the A.O. The Tribunal considered the Supreme Court's judgment in National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC) and admitted the additional grounds. The appellant's claim that the purchases were genuine was dismissed as they failed to provide irrefutable evidence. The A.O's decision to disallow the purchases was upheld.

2. The A.O initiated proceedings under Sec. 147 based on information about alleged bogus purchase bills from M/s. Syndicate Corporation. The appellant challenged the jurisdiction of the A.O, claiming the reasons to believe were based on suspicion. The Tribunal held that the A.O had a bonafide belief supported by available material. The claim that the A.O lacked independent application of mind was dismissed as the A.O applied his mind to the available material. The contention that the approval for reopening was granted mechanically was rejected as the appropriate authority approved the reasons to believe and granted sanction for issuing notice under Sec. 148. The Tribunal upheld the initiation of proceedings under Sec. 147 and dismissed the appeal.

This detailed analysis covers the issues of alleged bogus purchases and the validity of jurisdiction assumed by the A.O, providing a comprehensive understanding of the judgment.