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2019 (9) TMI 1509 - ITAT MUMBAIReopening of assessment u/s 147 - Estimation of income on bogus purchases - HELD THAT:- In the original return of income was processed u/s 143(1) and the only requirement under law to initiate reassessment proceedings was that learned AO had reasons to believe that certain income escaped assessment in the hands of the assessee. AO was clinched with tangible material in the shape of information from investigation wing / Sales Tax Department which, prima facie, suggested possible escapement of income in the hands of the assessee. Nothing more was required at this stage. Therefore, the reassessment proceedings were perfectly valid. Nothing on record support the legal grounds raised by assessee before us. Therefore, these grounds stand dismissed. Estimation of additions of bogus purchases - There could be no sale without actual purchase of material keeping in view the assessee’s nature of business. The assessee was in possession of primary purchase documents and the payments to the supplier was through banking channels. The sales turnover reflected by the assessee was not disputed / disturbed by Ld.AO. However, at the same time, the assessee miserably failed to substantiate the purchases during assessment proceedings. Notices issued u/s 133(6) remained unresponded to in all the cases. Under such circumstances, the additions which could be sustained, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. first appellate authority has rightly done. Assessee was dealing in a low-margin item like iron & steel which attracts lower rate of tax, the estimation made by Ld. CIT(A) would be slightly on the higher side. We modify the same to 5% of suspicious purchases which comes to ₹ 4,64,973/-. The Ld. AO is directed to recompute the income in terms of our order. The grounds, on merits, stands partly allowed.
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