2019 (9) TMI 184 - AT - Income Tax

Tribunal rules on tax notice challenge and income addition, citing precedents

The Tribunal ruled in favor of the revenue against the assessee regarding the challenge to the notice issued under section 148 of the Act, citing ... Reopening of assessment u/s 147 - information received from the Sales Tax Authorities in connection with bogus seller/hawala dealer - HELD THAT:- Assessee submitted his explanation by virtue of letter dated 04.03.2015 but the same was not found justifiable by the AO. AO invoked the power u/s 147/148 of the Act on the basis of information received from the Sales Tax Authorities in connection with bogus seller/hawala dealer. As decided the matter of controversy in the case of Shoreline Hotel P. Ltd. Vs. CIT [2018 (9) TMI 1248 - BOMBAY HIGH COURT] in which it is specifically held that the AO has justifiably invoked the power on the basis of information received from the Sales Tax Department. Case CIT invoked the power u/s 263 of the Act but the principle is the same and accordingly, we are of the view that the law settled in the case of Shoreline Hotel P. Ltd. Vs. CIT is quite applicable to the fact of the present case, therefore, we upheld the finding of the CIT(A) on these issues. Accordingly, we are of the view that the AO has rightly invoked the power u/s 147/148 of the Act on the basis of the information received from the Sales Tax Department. Accordingly, we decide these issues in favour of the revenue against the assessee. Addition i.e. 12.5% of the bogus purchase - HELD THAT:- In the settled law in SIMIT P SHETH [2013 (10) TMI 1028 - GUJARAT HIGH COURT] the profit embedded to the transaction was taken into consideration and in these cases, the profit embedded to the transaction was to the extent of 12.5%. In the instant case, the profit is very low. Taking into account, all the facts and circumstances, we are of the view that the end of justice would met if the addition be restricted to the extent of 6% of the bogus purchase. Accordingly, we set aside the finding of the CIT(A) on this issue and restrict the addition to the extent of 6% of the bogus purchase. Issues Involved:1. Challenge to notice u/s 148 of the Act2. Confirmation of addition to the extent of 5,85,520/-3. Challenge to levy of interest u/s 234BIssue Nos. 1 & 2:The assessee contested the notice u/s 148, arguing it was wrongly reopened without satisfying the conditions. The AO invoked the provision based on information from Sales Tax Authorities regarding Hawala Operators. The assessee's explanation was deemed insufficient. The Tribunal upheld the AO's decision, citing the precedent of Shoreline Hotel P. Ltd. Vs. CIT (2018) where a similar provision was justified. Therefore, the Tribunal ruled in favor of the revenue against the assessee.Issue Nos. 3 & 4:The assessee challenged the addition of 5,85,520/- (12.5% of bogus purchase) based on low profits. The CIT(A) considered the lack of served notices and absence of parties' production. Despite meager profits, the CIT(A) relied on precedents to uphold the addition. The Tribunal, considering the circumstances, reduced the addition to 6% of the bogus purchase, aligning with the principle of justice. Consequently, these issues were decided in favor of the assessee against the revenue.Issue No. 5:The assessee contested the levy of interest u/s 234B. However, detailed arguments or findings related to this specific issue were not provided in the judgment. Hence, no specific analysis or decision on this issue is available in the provided text.In conclusion, the Tribunal partly allowed the assessee's appeal while dismissing the revenue's appeal. The Tribunal upheld the notice u/s 148 based on information from Sales Tax Authorities, reduced the addition to 6% of bogus purchases, and did not provide specific details on the challenge to interest levy u/s 234B. The judgment highlighted the importance of justifiable actions based on legal provisions and precedents in tax assessment cases.