2021 (12) TMI 924 - AT - Income Tax

Tribunal allows appeals, directs 4% profit estimate for non-genuine purchases. Emphasizes reasonable estimation & compliance with Rule 45.

Kamlesh T. Basnsali Versus Income Tax Officer -10 (2) (2), Mumbai

Kamlesh T. Basnsali Versus Income Tax Officer -10 (2) (2), Mumbai - TMI Issues:- Validity of notice u/s 148 and re-opening of assessment- Disallowance of alleged bogus purchases- Compliance with principles of natural justice- Appeal filed in contravention of Rule 45 of I.T. RulesIssue 1: Validity of notice u/s 148 and re-opening of assessment:The appeals were filed against orders of the Learned Commissioner of Income Tax (Appeals) confirming the action of the assessing officer in issuing notice u/s 148 of the Act and re-opening the assessment u/s. 147 of the Act for the A.Y. 2009-10. The Assessing Officer reopened the assessment based on information received about accommodation entries provided by various dealers, including the assessee. The assessee contended that the purchases made were genuine and supported this with purchase invoices, bank statements, and other documents. However, the Assessing Officer treated the purchases as non-genuine, leading to a disallowance. The Tribunal held that the Assessing Officer should estimate the profit element from the non-genuine purchases reasonably, considering the nature of the business, and directed a re-computation of income at 4%.Issue 2: Disallowance of alleged bogus purchases:The Assessing Officer disallowed certain purchases made by the assessee from specific dealers, totaling to a significant amount, as non-genuine. This disallowance was based on the failure of the assessee to produce the parties and the unverifiability of the books of accounts. The Assessing Officer estimated the profit element from such purchases at 12.5%, which was sustained by the Ld.CIT(A). However, the Tribunal, after considering various decisions and the nature of the assessee's business, reduced the estimated profit element to 4%, stating that the entire purchases cannot be treated as non-genuine when sales have been accepted as genuine.Issue 3: Compliance with principles of natural justice:The assessee raised concerns about the assessing officer's order not complying with principles of natural justice. The Tribunal considered the submissions made before the Ld.CIT(A) and ultimately directed the Assessing Officer to estimate the profit element from the non-genuine purchases at 4% for the A.Y. 2009-10, emphasizing the need for a reasonable estimation in the absence of conclusive proof regarding the purchases made.Issue 4: Appeal filed in contravention of Rule 45 of I.T. Rules:In another appeal, the Ld.CIT(A) dismissed the appeal in limine, considering it non-est, as it was manually filed instead of electronically as required by Rule 45 of I.T. Rules. However, following precedents where such procedural defects were considered curable, the Tribunal restored the appeal to the file of the Ld.CIT(A) for disposal on merits. The assessee was directed to e-file the appeal within a specified period, with the assurance of adequate opportunity to be heard.In conclusion, the Tribunal partly allowed both appeals, addressing issues related to the validity of notice u/s 148, disallowance of alleged bogus purchases, compliance with principles of natural justice, and the procedural aspect of filing the appeal in accordance with Rule 45 of I.T. Rules. The judgments provided clarity on the estimation of profit elements from non-genuine purchases and emphasized the importance of fair assessment procedures and compliance with legal requirements.