Tribunal Reduces Addition on Bogus Purchases to 5%, Upholds Reopening of Assessment Due to New Information.

The Tribunal dismissed the revenue's appeals and partly allowed the assessee's cross-objections. The CIT(A) had sustained an addition of 17.5% on bogus purchases, which the Tribunal reduced to 5%, citing potential savings from gray market purchases. The reopening of assessment under Sec. 147 was upheld, as new information justified it.

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Issues:
1. Deletion of addition of Rs.1,61,38,686/- by CIT(A)
2. Reopening of assessment u/s 147 r.w.s.148
3. Confirmation of addition at the rate of 17.5%

Analysis:

Issue 1: Deletion of addition by CIT(A)
The appeals by the revenue were directed against the common order passed by CIT(A) pertaining to the assessment years 2009-10 and 2011-12. The AO added Rs.1,61,38,686/- to the income of the assessee on account of bogus purchases. The CIT(A) partly allowed the appeal by sustaining the addition to the extent of 17.5% of the total purchases. The AO concluded that the purchases made by the assessee were mostly bogus or made in cash. The CIT(A) upheld the reopening of assessment u/s 147 and considered various contentions and submissions before partially sustaining the addition.

Issue 2: Reopening of assessment
The assessee challenged the reopening of assessment u/s 147 r.w.s.148. The Tribunal found that the reopening was based on information from the Sales Tax Department indicating hawala entries for purchases. The Tribunal deemed this information as not available to the AO during the original assessment, justifying the reopening. The cross-objection raised against the reopening was dismissed based on this analysis.

Issue 3: Confirmation of addition at 17.5%
The Tribunal noted that the addition should cover potential savings from purchasing goods from the gray market without paying VAT and other taxes. Citing consistent views from other benches, the Tribunal decided to sustain the addition at 5% of the total bogus purchases. The Tribunal emphasized the failure of the assessee to prove the genuineness of purchases, leading to the decision to apply a reasonable percentage to account for potential savings.

In another appeal, the Tribunal applied the same reasoning as in the previous case, deciding in favor of the assessee and partly allowing the cross-objection while dismissing the appeal of the revenue. The appeals of the revenue were ultimately dismissed, and the cross-objections of the assessee were partly allowed.

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