TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 726
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....w and liable to be quashed. a) The ld. A.O erred in reopening the assessment u/s 147 solely on the basis of information received from DGIT (Inv.) Mumbai without any application of mind and as such, the reopening is bad in law and liable to be quashed. b) The ld. A.O erred in reopening the assessment u/s 147 based on suspicion and surmises without any tangible material showing escapement of income and as such, the reopening is bad in law and liable to be quashed. 2. That on the facts and circumstances of the case and in law, the ld. CIT(A) erred in confirming the action of AO in disallowing a sum of Rs. 4,97,40,017/- on account of alleged bogus purchase. 3. Your appellant craves leave to add to, amend or alter or delete any of the above grounds of appeal." 2. Briefly stated, the assessee had filed his return of income for A.Y. 2010-11 on 30.09.2011, declaring a total income of Rs. 11,50,184/-. The return of income filed by the assessee was initially processed as such u/s 143(1) of the Act. Subsequently, on the basis of information received by the A.O from the office of the DGIT(Inv.), Mumbai, that the assessee during the year under consideration as a beneficiary had obtaine....
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....chases by treating the same as bogus purchases. However, the CIT(A) not finding any infirmity in the view taken by the A.O therein upheld the same and dismissed the appeal of the assessee. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short "A.R‟) for the assessee at the very outset submitted that both the lower authorities had most arbitrarily made/sustained the addition of the entire value of the alleged bogus purchases in question. Although, it was not the claim of the ld. A.R that the assessee company had made genuine purchases from the aforementioned supplier parties, however, she confined her contention qua the arbitrary manner in which the addition of the entire value of the impugned purchases was made by the A.O, which thereafter had been sustained by the first appellate authority. It was submitted by the ld. A.R that the addition in respect of the aforesaid unverifiable purchases could only have been made only up to the extent of the profit which the assessee would had made by procuring the goods/material in question not from the aforementioned parties, but at a discoun....
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....t discernible from the records that the assessee had utterly failed to evidence the genuineness of the impugned purchase transactions on the basis of any supporting material. At the same time, we cannot also shut our eyes to the fact that the A.O himself had admitted that in the given facts and the circumstances of the case the assessee had probably made the impugned purchases from the grey market. Backed by the aforesaid observation of the A.O, we are of the considered view that though he had rejected the books of accounts of the assessee by invoking the provisions of Sec. 145(3) of the Act, however, there was no justification on his part in adding the entire value of the impugned purchases as an unexplained business expenditure in the hands of the assessee. Accordingly, now when the A.O himself was of the view that the assessee had probably purchased the goods in question from the open/grey market, then, the addition qua such impugned purchases was liable to be restricted only to the extent of the profit which the assessee would have made by procuring the goods at a discounted value from the open/grey market. Insofar the nature of the addition made by the A.O is concerned, we fin....
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.... assessee is able to demonstrate before the A.O that the impugned bogus/unverified purchases in question formed part of its sales and/or closing stock for the year under consideration, then, the A.O shall restrict the addition in the hands of the assessee to the extent of 12.5% of the aggregate value of the impugned purchases aggregating to Rs. 7,11,82,340/- 8. Resultantly, the appeal of the assessee is partly allowed for statistical purposes in terms of our aforesaid observations. ITA No. 1099/Mum/2020 A.Y. 2011-12 9. We shall now take up the appeal of the assessee for A.Y. 2011-12. The assessee has assailed the impugned order on the following grounds before us: "1. That on the facts and circumstances of the case and in law, the reopening proceedings initiated by the ld. AO u/ 147 is bad in law and liable to be quashed. a) The ld. A.O erred in reopening the assessment u/s 147 solely on the basis of information received from DGIT (Inv.) Mumbai without any application of mind and as such, the reopening is bad in law and liable to be quashed. b) The ld. A.O erred in reopening the assessment u/s 147 based on suspicion and surmises without any tangible material showing escape....