Tribunal Upholds Reopening of Assessment on Credible Information

The Tribunal upheld the reopening of assessment based on credible information from the Investigation Wing. It directed the AO to sustain the addition at the rate of 6% of bogus purchases, following precedent. The assessee's appeals were dismissed, and the Revenue's appeals were partly allowed.

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Issues Involved:
1. Legitimacy of the bogus purchase claims.
2. Validity of the reopening of assessment based on third-party information.
3. Appropriate percentage of disallowance on bogus purchases.

Detailed Analysis:

1. Legitimacy of the Bogus Purchase Claims:
The primary issue involved in these appeals is the legitimacy of the purchases claimed by the assessee from entities associated with Shri Rajendra Jain Group. The Assessing Officer (AO) noted that the assessee was engaged in transactions with entities that were found to be providing accommodation entries in the form of bogus purchases. The AO concluded that the purchases shown by the assessee were not genuine and added the amounts to the total income of the assessee for the respective assessment years (AYs).

During the search and seizure action, it was revealed that Shri Rajendra Jain Group was involved in issuing non-genuine purchase bills and providing unsecured loan accommodation entries. The AO held that the purchases from M/s Dharam Impex, M/s Kangan Jewels Pvt. Ltd., and M/s Maniprabha Impex Pvt. Ltd., totaling Rs.87,92,67,245/- for AY 2013-14, Rs.7,70,75,906/- for AY 2014-15, and Rs.7,43,20,222/- for AY 2015-16, were bogus and added these amounts to the assessee's income.

2. Validity of the Reopening of Assessment:
The assessee challenged the validity of the reopening of the assessment, arguing that it was based on third-party information without any preliminary investigation. The AO reopened the case based on information from the Investigation Wing, Mumbai, which indicated that the assessee was a beneficiary of accommodation entries provided by Shri Rajendra Jain Group. The Tribunal, following the jurisdictional High Court's decisions in similar cases, upheld the AO's action, stating that the AO had valid reasons to believe that the income had escaped assessment.

3. Appropriate Percentage of Disallowance on Bogus Purchases:
The CIT(A) restricted the disallowance to 5% of the impugned purchases, observing that the facts of the case were similar to other cases where such disallowances were restricted to a certain percentage. The Tribunal, however, referred to the judgment in the case of Pankaj K. Chaudhary, where the addition was sustained at 6% of bogus purchases. The Tribunal directed the AO to sustain the addition at the rate of 6% of bogus purchases, dismissing the assessee's appeals and partly allowing the Revenue's appeals.

Conclusion:
In conclusion, the Tribunal upheld the reopening of the assessment based on credible information from the Investigation Wing. It directed the AO to sustain the addition at the rate of 6% of bogus purchases, following the precedent set in similar cases. The appeals filed by the assessees were dismissed, and the appeals filed by the Revenue were partly allowed. The order was pronounced on 21/10/2022.

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