2018 (3) TMI 1032 - AT - Income Tax

Tribunal partially allows appeals, orders reassessment due to non-genuine purchases.

The Tribunal allowed the appeals in part, restoring the matter to the Assessing Officer for fresh consideration. The Tribunal upheld the addition of 12.5% ... Reopening of assessment u/s.147 - addition of 12.5% made in respect of bogus purchases found during the course of survey - Held that:- There is no allegation by the assessee before AO that copy of impounded documents were not supplied to the assessee so as to enable it to furnish the required details. Even before the CIT(A), there is no such request made by the assessee, therefore, contention of ld. AR to restore the matter back to the file of the AO is not acceptable at all. So far as giving of credit of the GP rate already declared by the assessee is concerned [2017 (4) TMI 402 - ITAT MUMBAI] we restore the matter back to the file of the AO for deciding afresh in terms of the observation made by the Tribunal - Decided partly in favour of assessee for statistical purposes. Issues Involved:1. Addition of 12.5% in respect of bogus purchases found during the survey.2. Reopening of assessment under Section 147 of the Income Tax Act.Detailed Analysis:1. Addition of 12.5% in respect of bogus purchases:The assessee, engaged in trading ferrous and non-ferrous metals, was found to be a beneficiary of accommodation entries from MVAT dealers issuing bogus sale/purchase bills. During the reassessment proceedings, the Assessing Officer (AO) issued notices under Section 133(6) to verify the genuineness of the purchases, which were returned unserved. The assessee failed to provide adequate supporting evidence like delivery challans, lorry receipts, and transportation details. Consequently, the AO concluded that the purchases were non-genuine and added 12.5% of the total non-genuine purchases to the assessee's income, following precedents from the Gujarat High Court in CIT Vs Simit P Sheth and M/s Bholenath Poly Fab P Ltd.The CIT(A) confirmed the AO's action, noting that the appellant failed to produce any evidence to prove the genuineness of the purchases or the receipt of goods. The CIT(A) emphasized that the onus was on the appellant to prove the purchases with infallible evidence, which was not met. The CIT(A) also highlighted that the appellant could not reconcile the purchases with the items sold, and the notices issued under Section 133(6) were returned unserved. The CIT(A) upheld the AO's estimation of the profit element at 12.5%, relying on the decisions of the Gujarat High Court in Bholanath Poly Fab Pvt. Ltd. and Sanjay Oilcake Industries.2. Reopening of assessment under Section 147:The reopening of the assessment was based on information received from the DGIT(Inv.), Mumbai, indicating that the assessee was a beneficiary of bogus purchase bills. The AO had sufficient reason to believe that there was escapement of income, justifying the reopening. The Tribunal found the reasons recorded by the AO for reopening the assessment to be sound, as the AO had identified bogus bills from non-genuine suppliers during the survey.Conclusion:The Tribunal considered the rival contentions and the orders of the lower authorities. It found that the reasons for reopening the assessment were justified and that the AO had correctly added 12.5% of the bogus purchases to the assessee's income. The Tribunal also noted that the assessee did not request copies of the impounded documents during the proceedings before the AO or the CIT(A). The Tribunal referred to a similar case, Ratnagiri Stainless Pvt. Ltd., where a GP ratio of 12.5% on alleged bogus purchases was adopted, and credit for the declared GP ratio was granted after verification by the AO. Consequently, the Tribunal restored the matter to the AO for fresh consideration in line with the observations made in the Ratnagiri Stainless Pvt. Ltd. case.Order:All the appeals of both the assessees were allowed in part for statistical purposes, with the matter restored to the AO for fresh consideration. The order was pronounced in the open court on 14/03/2018.