2019 (7) TMI 1595 - AT - Income Tax

Tribunal upholds decision to reopen assessment under Income-tax Act citing bogus purchases.

The Tribunal upheld the CIT(A)'s decision to reopen the assessment under Section 147 of the Income-tax Act, 1961, based on information from the Sales Tax ... Bogus purchases - Addition @12.5% towards embedded profits in these bogus purchases - HELD THAT:- Factual matrix in the impugned assessment year AY 2010-11 is similar to that prevailing in AY 2009-10 and we did not find any reason to deviate from detailed and well reasoned order passed by tribunal for the immediately preceding year viz. AY 2009-10 in assesses own case[2017 (12) TMI 858 - ITAT MUMBAI] thus Respectfully following the aforesaid decision of the tribunal we are upholding additions to the income of the assessee to the tune of 12.5% of Bogus Purchases towards embedded profits in these bogus purchases which was suppressed by the assessee which additions shall be in addition to the income declared by assessee .We are guided by the decision of Hon’ble Supreme Court in the case of Radhasoami Satsang v. CIT [1991 (11) TMI 2 - SUPREME COURT] so as to maintain consistency and judicial discipline by following preceding year decision of tribunal - Decided against revenue Issues Involved:1. Validity of reopening the assessment under Section 147 of the Income-tax Act, 1961.2. Addition of 12.5% of the alleged bogus purchases as suppressed profit.Detailed Analysis:1. Validity of Reopening the Assessment under Section 147:The primary issue was whether the reopening of the assessment based on information received from the Sales Tax Department, indicating that the purchases were bogus, constituted sufficient reason to believe that income had escaped assessment. The CIT(A) upheld the reopening, citing the Supreme Court's decision in Rajesh Jhaveri Stockbrokers Pvt Ltd vs. ACIT, which states that at the initiation stage, it is sufficient to have a reason to believe rather than conclusive proof of income escapement. The Tribunal dismissed the legal challenge to the reopening of the assessment, noting that the assessee's counsel did not press this issue. The Tribunal referenced its own decision in the assessee’s case for the previous assessment year (2009-10), where it upheld the reopening based on similar grounds.2. Addition of 12.5% of the Alleged Bogus Purchases as Suppressed Profit:The assessee challenged the addition of 12.5% of the alleged bogus purchases, arguing that the purchases were made through account payee cheques and that the identity of the suppliers was confirmed by bankers. The CIT(A) sustained the addition, reasoning that the profit derived from such transactions should be assessed to tax. The CIT(A) relied on the decision in Bholenath Poly Fab Pvt. Ltd., where it was held that only the profit element embedded in such purchases should be taxed. The Tribunal upheld this decision, noting that the assessee failed to produce the parties or provide sufficient evidence to substantiate the genuineness of the purchases. The Tribunal also referenced its decision for the previous assessment year, where it upheld a similar addition of 12.5% of the bogus purchases.Tribunal's Conclusion:The Tribunal dismissed the assessee's appeal, upholding the CIT(A)’s decision to reopen the assessment and to add 12.5% of the alleged bogus purchases as suppressed profit. The Tribunal emphasized the consistency with its earlier decision in the assessee's case for the previous assessment year and noted that the assessee could not rebut the statements of the hawala dealers or produce adequate evidence to prove the genuineness of the purchases.Order Pronouncement:The appeal of the assessee was dismissed, and the order was pronounced in the open court on 03.07.2019.