Tribunal directs exclusion of unsecured loan as bogus purchases, upholds assessment reopening based on third-party info

The Tribunal partly allowed the Revenue's appeal by directing the Assessing Officer to exclude the unsecured loan amount from M/s Krishna Diamond Pvt. Ltd. as bogus purchases and sustain the addition at a rate of 6% on the remaining identified bogus purchases. The Tribunal upheld the validity of the assessment reopening based on credible third-party information. The final decision was issued on 30/01/2023.

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Issues Involved:
1. Restriction of addition on account of bogus purchases.
2. Validity of reopening assessment based on third-party information.
3. Treatment of unsecured loan as bogus purchase.

Issue-wise Detailed Analysis:

1. Restriction of Addition on Account of Bogus Purchases:
The Revenue contended that the entire purchase from alleged concerns was bogus, substantiated by the statement on oath given by the entry provider. The Assessing Officer (AO) added Rs. 3,28,72,462/- as bogus purchases. The Commissioner of Income Tax (Appeals) [CIT(A)] restricted the disallowance to 5% of the total purchases, citing similar cases where disallowances were restricted to a lower percentage. The Tribunal noted that the issue is covered by the judgment of the Co-ordinate Bench in the case of ITO vs. Pankaj K. Chaudhary, which held that disallowance should be reasonable and not the entire amount. The Tribunal directed the AO to sustain the addition at the rate of 6% on the remaining bogus purchases after excluding the unsecured loan.

2. Validity of Reopening Assessment Based on Third-party Information:
The AO reopened the assessment based on information from the DIT(Inv), Mumbai, indicating that the assessee was a beneficiary of bogus purchase bills. The Tribunal upheld the reopening, citing the Hon'ble Jurisdictional High Court's rulings in Peass Industrial Engineers (P) Ltd Vs DCIT and Pushpak Bullion (P) Ltd Vs DCIT, which validated reopening based on credible information from investigation wings about accommodation entries provided by entry operators. The Tribunal found that the AO had valid reasons to believe that income had escaped assessment, justifying the reopening.

3. Treatment of Unsecured Loan as Bogus Purchase:
The AO included an unsecured loan of Rs. 43,06,094/- from M/s Krishna Diamond Pvt. Ltd. as part of bogus purchases. The assessee argued that this amount was an opening balance from the previous year and not a purchase. The Tribunal accepted this argument, noting that the unsecured loan was carried forward from the previous year and should not be treated as a bogus purchase. Therefore, the Tribunal directed the AO to exclude this amount from the bogus purchases.

Conclusion:
The Tribunal partly allowed the Revenue's appeal, directing the AO to exclude the unsecured loan of Rs. 43,06,094/- from M/s Krishna Diamond Pvt. Ltd. and sustain the addition at the rate of 6% on the remaining bogus purchases totaling Rs. 2,85,66,368/-. The Tribunal upheld the validity of the reopening of the assessment based on the information received from the investigation wing. The final order was pronounced on 30/01/2023.

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