Tribunal allows appeal, deletes addition for bogus purchases. Validity of reopening under Section 147 left open.

The Tribunal allowed the assessee's appeal, deleting the addition of Rs. 12,56,068/- on account of bogus purchases. The issue of the validity of reopening under Section 147 was kept open as it became academic. The order was pronounced on 28th January 2019.

---

---

Issues Involved:
1. Validity of reopening under Section 147.
2. Addition of Rs. 12,56,068/- on account of bogus purchases.

Issue-wise Detailed Analysis:

1. Validity of Reopening under Section 147:
The assessee challenged the reopening of the assessment under Section 147, arguing that the 'reasons recorded' were not in accordance with the law. The Assessing Officer (AO) had reopened the case based on information received from CIT Central Circle II, New Delhi, which included a list of individuals involved in bogus purchases provided by certain entities. The AO issued a notice under Section 148 for reopening the case. The CIT (A) dismissed the assessee’s objection, holding that there was a clear connection between the material available and the escapement of income, and that the AO had a prima facie 'reason to believe' based on such material. The Tribunal, however, did not make a conclusive determination on this issue as it became academic after the merits of the addition were addressed.

2. Addition of Rs. 12,56,068/- on Account of Bogus Purchases:
The AO made an addition of Rs. 12,56,068/- under Section 69C, treating purchases from three entities as bogus based on statements from individuals involved in providing accommodation entries. The assessee argued that the purchases were genuine, supported by DVAT registration and TIN numbers, and that payments were made by cheque. The CIT (A) upheld the AO’s addition, stating that the onus was on the assessee to prove the genuineness of the purchases after being confronted with incriminating material.

The Tribunal considered the rival submissions and the relevant findings. It noted that the assessee maintained a quantitative stock register, purchase and sale bills, and regular books of account. The AO accepted the figures of opening stock, purchases, sales, closing stock, and gross profit, including the quantitative tally in the trading account. The Tribunal found that the purchases were made through account payee cheques and were recorded in the books of account, and there was no discrepancy in the quantitative tally of stock.

The Tribunal emphasized that if the quantitative details of stock, purchases, and sales are accepted, it is difficult to hold that some purchases recorded in the books are unexplained. It noted that the purchases were supported by bills mentioning delivery details and that the source of the purchases was from the books of account. The Tribunal concluded that no addition could be made under Section 69C for unexplained purchases when the quantitative tally and gross profit were accepted. Therefore, the addition made by the AO was deleted, and the assessee’s appeal was allowed.

Conclusion:
The Tribunal allowed the assessee’s appeal on merits, deleting the addition of Rs. 12,56,068/- on account of bogus purchases. Consequently, the issue of the validity of reopening under Section 147 was kept open as it became academic. The order was pronounced in the open court on 28th January 2019.

---