Reopening on tangible third-party information and bogus purchase estimation upheld where genuineness of purchases was not proved.

Reopening under sections 147 and 148 was upheld because the return had been processed only under section 143(1), no earlier opinion existed, and tangible information from the Investigation Wing linked the assessee to bogus purchase bills. The assessee also failed to prove the genuineness of purchases from alleged hawala concerns, as it did not produce the suppliers or establish movement of goods, and the burden of proof remained undischarged. Rejection of books was sustained, and the Commissioner (Appeals)' estimate of 9% addition on the impugned purchases was found reasonable and left undisturbed.

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Issues: (i) Whether reopening of the assessment under sections 147 and 148 of the Income-tax Act, 1961 was valid on the basis of information received from the Investigation Wing after the return had been processed under section 143(1); (ii) whether the purchases from the alleged hawala concerns were genuine and, if not, whether the addition restricted by the Commissioner (Appeals) to 9% of such purchases called for interference.

Issue (i): Whether reopening of the assessment under sections 147 and 148 of the Income-tax Act, 1961 was valid on the basis of information received from the Investigation Wing after the return had been processed under section 143(1).

Analysis: The return had originally been processed only under section 143(1), so no opinion had been formed earlier and the doctrine of change of opinion did not apply. The reopening was within four years and was supported by tangible material received from the Investigation Wing arising from search proceedings in the case of the accommodation entry provider. That material specifically linked the assessee to bogus purchase bills, which was sufficient at the stage of forming reasons to believe.

Conclusion: The reopening was held to be valid and lawful, against the assessee.

Issue (ii): Whether the purchases from the alleged hawala concerns were genuine and, if not, whether the addition restricted by the Commissioner (Appeals) to 9% of such purchases called for interference.

Analysis: The assessee failed to produce the suppliers or establish the movement of goods. The notices issued to the alleged suppliers elicited only partial replies, and the surrounding material showed that the concerns were benami entities used for issuing accommodation bills. In such circumstances, the burden under section 106 of the Indian Evidence Act, 1872 remained undischarged. The rejection of books under section 145(3) was upheld, and the Commissioner (Appeals) adopted a reasonable estimate by applying 9% to the impugned purchases based on the assessee's own historical profit margins.

Conclusion: The addition as restricted by the Commissioner (Appeals) was sustained, against the assessee.

Final Conclusion: The appeal failed in its entirety, and the assessment as modified in first appeal was left undisturbed.

Ratio Decidendi: Where reopening is based on tangible third-party information revealing escapement of income after processing under section 143(1), and the assessee fails to discharge the burden of proving the genuineness of alleged purchases, the reopening and reasonable estimation of profit on bogus purchases are sustainable.

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