Assessment orders overturned due to invalid reassessment reason, lack of distinction between bogus and URD purchases

Jitendra Roopraj Mehta Versus The Income Tax Officer, Ward-5 (1), Pune

Jitendra Roopraj Mehta Versus The Income Tax Officer, Ward-5 (1), Pune - TMI Issues:
- Addition of GP ratio on unregistered dealer purchases
- Distinction between bogus purchases and URD purchases
- Jurisdiction of the Assessing Officer in making additions

Analysis:
1. Addition of GP ratio on unregistered dealer purchases:
- The appeals filed by the assessee were based on common issues for different assessment years. The AO made additions based on the GP involved in purchases from unregistered dealers. The assessee contended that the GP ratio was already declared and adding more would lead to double taxation. The CIT(A) upheld the AO's order, citing various court decisions supporting GP additions. However, the ITAT found that the reassessment was initiated based on alleged bogus purchases, not URD purchases. As per the Hon'ble Bombay High Court, if the initial reason for reassessment is found invalid, no further additions can be made. The ITAT set aside the assessment orders for all three years, allowing the assessee's appeals.

2. Distinction between bogus purchases and URD purchases:
- The AO treated the purchases as URD purchases instead of bogus purchases, leading to GP ratio additions. The assessee argued that the AO's actions were beyond jurisdiction as no additions were made for alleged bogus purchases. The ITAT agreed, emphasizing the importance of the initial reason for reassessment. Since the AO did not differentiate between bogus and URD purchases, the ITAT found the reassessment proceedings unjustified and set aside the orders.

3. Jurisdiction of the Assessing Officer in making additions:
- The AO's decision to add GP ratio on URD purchases was challenged by the assessee, highlighting the lack of distinction between bogus and URD purchases. The ITAT, following the decision of the Hon'ble Bombay High Court, ruled that if the initial reason for reassessment was not valid, no further additions could be made. As the reassessment was based on alleged bogus purchases and not URD purchases, the ITAT found the AO's actions unjustified and set aside the assessment orders for all three years, allowing the assessee's appeals.