2017 (6) TMI 595 - AT - Income Tax

Tribunal allows partial addition of GP rate on bogus purchases based on hawala transactions

Rajdeep Engineering Systems Pune Pvt. Ltd., Versus The Dy. Commissioner of Income Tax, Circle-6, Pune

The Tribunal upheld the reopening of assessment under section 147 of the Income-tax Act based on information received regarding hawala transactions. The ... Reopening of assessment u/s 147 - Held that:- We find no merit in the ground of appeal No.1 raised by the assessee, where the original return of income filed by the assessee was processed under section 143(1) of the Act. Thereafter, on the basis of information received, the Assessing Officer had reason to believe that there was escapement of income and accordingly, recorded reasons for reopening the assessment under section 147 of the Act. Following the ratio laid down by the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007 (5) TMI 197 - SUPREME Court) action of Assessing Officer is upheld and the ground of appeal No.1 raised by the assessee is dismissed. Addition by applying GP rate on the alleged bogus purchases - Held that:- Undoubtedly, the assessee has established the trail of goods but since the goods are purchased through hawala dealer, then margins of profit for such goods needs to be added in the hands of assessee. Following the decision in bunch of appeal in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT (2017 (6) TMI 514 - ITAT PUNE ), the Assessing Officer is directed to apply GP rate of 10% on the goods purchased from hawala dealers, over and above the GP rate declared by the assessee. Issues:1. Reopening of assessment under section 147 of the Income-tax Act.2. Addition of GP rate on alleged bogus purchases.Analysis:Issue 1: Reopening of assessment under section 147 of the Income-tax ActThe Appellate Tribunal considered the first issue of reopening the assessment under section 147 of the Income-tax Act. The Assessing Officer had received information regarding hawala transactions made by the assessee, leading to the reopening of the assessment. The assessee contended that the original return of income should be treated as filed in response to the notice under section 148. However, as the Assessing Officer had valid reasons for reopening the assessment based on received information, the Tribunal upheld the action following the precedent set by the Hon'ble Supreme Court. The ground of appeal raised by the assessee against the reopening was dismissed.Issue 2: Addition of GP rate on alleged bogus purchasesThe second issue revolved around the addition of GP rate on alleged bogus purchases made by the assessee. The Assessing Officer had added 20% of total purchases from the alleged parties due to lack of stock register maintenance and inability to produce suppliers during assessment proceedings. The CIT(A) upheld this addition, emphasizing the lack of traceability of the dealer and absence of stock register. However, the Tribunal considered the evidence presented by the assessee, showing the trail of goods and VAT payment. The Tribunal directed the Assessing Officer to apply a GP rate of 10% on goods purchased from hawala dealers, in addition to the declared GP rate by the assessee. The ground of appeal related to this issue was partly allowed.In conclusion, the Tribunal found the facts and issues in all appeals to be similar, and the decision in the main appeal applied to the others. Consequently, all the appeals of the assessee were partly allowed, with the order pronounced on June 2, 2017.