Tribunal upholds assessment reopening, reduces disallowance on non-genuine purchases under Income Tax Act.

The Tribunal partially allowed the appeal, upholding the re-opening of assessment under section 147 of the Income Tax Act, 1961. It directed a reduced disallowance of 8% on the non-genuine purchases of steel, limiting the disallowance made by the Assessing Officer.

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Issues: Validity of re-opening of assessment under section 147 of the Income Tax Act, 1961 and merits of the disallowance made on account of alleged non-genuine purchases.

Validity of Re-opening of Assessment: The appeal challenged the re-opening of assessment under section 147 of the Income Tax Act, 1961. The Assessing Officer re-opened the assessment based on information from the Sales Tax Department indicating non-genuine purchases of steel by the assessee. The assessee argued that the reasons recorded showed a discrepancy in the amount mentioned, but the Tribunal upheld the re-opening citing tangible material to form a belief of income escapement, despite the error in the recorded reasons. The Tribunal deemed the re-opening valid.

Merits of Disallowance on Non-genuine Purchases: The assessee contested the disallowance made on non-genuine purchases of steel. The Assessing Officer disallowed 25% of the purchases as non-genuine, adding back an amount to the income. The Tribunal noted that the assessee had paid VAT on the disputed purchases and had varying profit ratios on steel purchases. Considering industry norms and VAT payments, the Tribunal deemed a disallowance of 8% of the alleged non-genuine purchases fair and reasonable. Thus, the Tribunal directed the Assessing Officer to limit the disallowance to 8% of the non-genuine purchases, partially allowing the grounds raised by the assessee.

Conclusion: The Tribunal partially allowed the appeal, upholding the re-opening of assessment under section 147 of the Income Tax Act, 1961, and directing a reduced disallowance of 8% on the non-genuine purchases of steel.

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