Tribunal upholds assessment reopening for A.Y. 2013-14, directs taxing profit on bogus purchases.

The Tribunal upheld the validity of reopening the assessment for A.Y. 2013-14, dismissing the challenge raised by the assessee. Regarding the addition made on account of bogus purchases, the Tribunal directed to tax only the profit element embedded in the disputed purchases, following a prescribed threshold. The appeals of the assessee were partly allowed, with the decision pronounced on 19/07/2021.

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Issues:
1. Validity of reopening of assessment.
2. Addition made on account of bogus purchases.

Validity of reopening of assessment:
The appeals in ITA No. 7150/Mum/2019 & 7149/Mum/2019 for A.Yrs. 2013-14 & 2014-15 were filed against the order by the Ld. Commissioner of Income Tax (Appeals)-41, Mumbai. The first ground raised by the assessee challenged the reopening of assessment. The Ld. AO sought to reopen the assessment for A.Y. 2013-14 based on information indicating the assessee's involvement in bogus transactions. The Ld. AO observed the assessee was a beneficiary of bogus purchases and had not disclosed true income. The Ld. CIT(A) upheld the validity of reopening based on tangible material and legal precedents. The Tribunal dismissed the ground challenging the reopening, citing the formation of a belief that income had escaped assessment.

Addition made on account of bogus purchases:
The second ground raised by the assessee challenged the addition on account of bogus purchases. The Ld. AO noted significant purchases from certain parties, which the assessee failed to prove as genuine during assessment proceedings. Despite providing some documentation, the parties did not respond to summons, and their statements indicated the purchases were bogus. The Ld. AO estimated a profit percentage on the disputed purchases and made an addition to the assessment. The Tribunal, considering the sales made by the assessee within the disputed purchases, directed to tax only the profit element embedded in the value of such purchases, following a benign/presumptive taxation threshold set by the Government of India. The Tribunal partly allowed the ground related to the addition on account of bogus purchases for both years.

In conclusion, the Tribunal upheld the validity of reopening the assessment for A.Y. 2013-14, dismissing the challenge raised by the assessee. Regarding the addition made on account of bogus purchases, the Tribunal directed to tax only the profit element embedded in the disputed purchases, following a prescribed threshold. The appeals of the assessee were partly allowed, with the decision pronounced on 19/07/2021.

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