Appellate Tribunal Validates Assessment Reopening & Disallowance on Non-Genuine Purchases

The Appellate Tribunal upheld the validity of the reopening of assessments under section 147 of the Income Tax Act due to tangible material indicating non-genuine purchases. The Tribunal dismissed the challenge that the assessments were reopened on a mere change of opinion. Regarding the disallowance made on alleged non-genuine purchases, the Tribunal directed a 2% disallowance on the profit element embedded in the purchases for the assessment years, following a similar precedent. The Tribunal partially allowed the appeals, affirming the validity of the reopening and ordering the specified disallowance.

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Issues:
- Validity of reopening of assessment under section 147 of the Income Tax Act, 1961
- Merits of the disallowance made due to alleged non genuine purchases

Validity of Reopening of Assessment:
In this case, the Appellate Tribunal considered the challenge raised by the assessees regarding the validity of the reopening of assessments under section 147 of the Act. It was noted that the assessing officer had received specific information from the Investigation Wing indicating non-genuine purchases by the assessees. The Tribunal found that the assessing officer had tangible material available to form a belief that income chargeable to tax had escaped assessment. The Tribunal held that the contention of the assessees that the assessments were reopened on a mere change of opinion without proper application of mind was contrary to the facts on record and therefore dismissed the grounds challenging the validity of the reopening of assessments.

Merits of the Disallowance:
Regarding the merits of the disallowance made due to alleged non genuine purchases, the Tribunal observed that the doubt was only regarding the source of purchases and not the purchases themselves. The assessing officer had restricted the disallowance to the profit element embedded in the purchases, which was further reduced by the learned Commissioner (Appeals). The Tribunal considered the nature of the business of the assessees and referred to a decision of a coordinate bench in a similar case, where a disallowance of 2% on alleged non genuine purchases was deemed fair and reasonable. Consequently, the Tribunal directed the assessing officer to compute the disallowance at 2% on the alleged non genuine purchases for all the assessment years under dispute, partially allowing grounds 3 and 4 raised by the assessees.

In conclusion, the Appellate Tribunal partially allowed the appeals, dismissing the challenges to the validity of the reopening of assessments and directing a 2% disallowance on alleged non genuine purchases for the assessment years in question.

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