2023 (2) TMI 908 - AT - Income Tax

Tribunal revises tax assessment, limits addition on bogus purchases, upholds reopening under section 147.

Challenger Computers Versus Income Tax Officer Ward–19 (1) (3), Mumbai

The Tribunal partly allowed the appeals for the assessment years 2009-10 and 2010-11, restoring the matter to the Assessing Officer for reconsideration of ... Reopening of assessment - income for bogus purchases - HELD THAT:- AO received information from the DGIT (Inv.), Mumbai, as well as the Sales Tax Department, Government of Maharashtra, indicating that the assessee is a beneficiary of bogus purchase bills. On the basis of such information, which is a new and tangible material, AO had formed the belief that income chargeable to tax has escaped assessment requiring re–opening of assessment under section 147 - Therefore, in view of the above, we uphold the re–opening of assessment under section 147 of the Act in the facts of the present case. Accordingly, ground no.1, raised in assessee’s appeal is dismissed. Estimation of income bogus purchases - As relying on Mohammad Haji Adam case [2019 (2) TMI 1632 - BOMBAY HIGH COURT] we set aside the impugned order passed by the CIT(A) and restore the matter to the file of the Assessing Officer with the direction to restrict the addition as regard the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other genuine purchase. We further direct that if the gross profit rate on bogus purchases is higher than the other genuine purchases and the same has already been offered to tax by the assessee then no further addition be made. Accordingly, grounds raised in assessee’s appeal are allowed for statistical purposes. Issues Involved:Challenging impugned orders under section 250 of the Income Tax Act, 1961 for assessment years 2009-10 and 2010-11, re-opening of assessment under section 147, addition of profit element on alleged non-genuine purchases, jurisdiction invoked under section 147, levy of interest u/s 234B and 234C.Detailed Analysis:Re-opening of Assessment under Section 147:The appeals were filed challenging the orders passed by the Commissioner of Income Tax (Appeals) for the assessment years 2009-10 and 2010-11. The re-assessment proceedings were initiated based on information received indicating the assessee's involvement in bogus purchases. The Assessing Officer added 12.5% of the alleged non-genuine purchases to the total income of the assessee. The Tribunal upheld the re-opening of assessment under section 147 as new material was available, leading to the belief that income had escaped assessment.Addition of Profit Element on Non-Genuine Purchases:The Assessing Officer added the profit element on alleged non-genuine purchases despite not disputing the sales made by the assessee. The Tribunal referred to a similar case where it was held that when sales are not doubted, a hundred percent disallowance for bogus purchases cannot be made. The Tribunal directed the Assessing Officer to restrict the addition by bringing the gross profit rate on bogus purchases at the same rate as that of other genuine purchases.Jurisdiction Invoked under Section 147:The Tribunal found that the Assessing Officer had conducted an independent inquiry and made the impugned addition based on the available material. The re-opening of assessment under section 147 was upheld as the Assessing Officer had formed a belief that income had escaped assessment.Levy of Interest u/s 234B and 234C:The issue of interest levied under sections 234B and 234C was deemed consequential in nature and allowed for statistical purposes.Conclusion:The Tribunal partly allowed the appeals for both assessment years 2009-10 and 2010-11 for statistical purposes. The matter was restored to the file of the Assessing Officer with directions regarding the addition on bogus purchases. The appeals were allowed based on the Tribunal's findings and conclusions from the assessment year 2009-10, which were applied mutatis mutandis to the appeal for the assessment year 2010-11.