Assessee's appeal dismissed, CIT(A) order upheld. Reopening under Section 147 valid. Addition of 12.5% bogus purchases confirmed.

The appeal filed by the assessee was dismissed, and the order of the CIT(A) was upheld, confirming the validity of the reopening under Section 147 and the addition of 12.5% of the bogus purchases to the appellant's income. The Tribunal found no infirmity in the AO's actions and concluded that the reassessment and the additions were justified based on the credible information and evidence of bogus transactions.

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Issues Involved:
1. Legality of the reassessment order under Section 147 of the Income Tax Act.
2. Addition of Rs. 22,70,666/- being 12.5% of purchase from various alleged parties estimated by the Assessing Officer.
3. Rejection of the appellant's books of account without providing an opportunity of being heard or issuing a show cause notice.
4. Overall merit and legality of the order passed by the Assessing Officer.

Detailed Analysis:

1. Legality of the Reassessment Order Under Section 147 of the Income Tax Act:
The appellant contested the issuance of notice under Section 148 for reopening the assessment, claiming it was illegal and unjustified. The CIT(A) upheld the validity of the reopening, observing that the AO received credible information from the DGIT(Inv.), Mumbai and the Sales Tax Department indicating that the appellant had made purchases from alleged hawala dealers. The CIT(A) noted that the AO had "reason to believe" based on authenticated information, which justified the issuance of the notice under Section 148. The Tribunal agreed with this, citing the Supreme Court's decision in CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd, which established that at the stage of issue of notice, the AO only needs to have a "reason to believe" that income has escaped assessment.

2. Addition of Rs. 22,70,666/- Being 12.5% of Purchase from Various Alleged Parties:
The AO made an addition of 12.5% of the total bogus purchases amounting to Rs. 1,81,65,330/-, resulting in Rs. 22,70,666/- being added to the total income of the appellant. The CIT(A) upheld this addition, referencing the Gujarat High Court's decision in CIT vs. Simit P. Sheth, which held that not the entire purchase price but only the profit element embedded in such purchases should be added to the income. The Tribunal also upheld this, noting that credible and cogent information was received that the appellant obtained bogus purchase bills. The Tribunal found that the appellant failed to produce any confirmation from the parties or provide any evidence of actual movement of goods.

3. Rejection of Books of Account Without Opportunity of Being Heard:
The appellant argued that the AO erred in rejecting the books of account without providing an opportunity of being heard or issuing a show cause notice. The AO had rejected the books under Section 145(3) of the IT Act, stating that the purchases were non-verifiable and the appellant failed to prove the genuineness of the purchases. The Tribunal found that the AO's rejection was justified based on the overwhelming evidence of bogus purchases and the appellant's failure to produce the alleged suppliers for examination.

4. Overall Merit and Legality of the Order:
The appellant claimed that the order passed by the AO was devoid of merit, arbitrary, uncalled for, and bad in law. The Tribunal, after considering the facts and circumstances, upheld the order of the CIT(A). The Tribunal noted that credible information and tangible material justified the reopening and the addition made by the AO. The Tribunal also referenced the Gujarat High Court's decision in N.K. Industries v. DCIT, which held that 100% of the bogus purchases should be disallowed, although it did not alter the 12.5% disallowance upheld by the CIT(A) since the appeal was not by the Revenue.

Conclusion:
The appeal filed by the assessee was dismissed, and the order of the CIT(A) was upheld, confirming the validity of the reopening under Section 147 and the addition of 12.5% of the bogus purchases to the appellant's income. The Tribunal found no infirmity in the AO's actions and concluded that the reassessment and the additions were justified based on the credible information and evidence of bogus transactions.

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