2019 (2) TMI 2035 - AT - Income Tax

Validity of re-opening of assessment under section 147 - AO received specific information from the DGIT (Inv.) Mumbai that purchases claimed to have been made from three parties are not genuine - HELD THAT - AO had tangible material before him to form the belief that income chargeable to tax has escaped assessment. It is also seen from record that challenging the re opening of assessment assessee had raised objections before the Assessing Officer. However before completion of the assessment the Assessing Officer has disposed off the objections of the assessee through a separate well reasoned order. As regards the contention of the assessee that there being no failure on the part of the assessee to disclose fully and truly all material facts relating to the assessment the re opening of assessment after four years is invalid we must observe non furnishing of accurate / correct details relating to purchases made tantamount to failure on the part of the assessee to disclose fully and correctly all material facts relating to his assessment. That being the case the re opening of assessment cannot be held to be invalid The contention of the assessee that in spite of having information before him the Assessing Officer did not make any addition on account of bogus purchase in the assessment completed under section 153C of the Act is irrelevant considering the fact that the intent and purpose of section 153C of the Act is different from section 148 of the Act. In view of the aforesaid I hold that the Assessing Officer has validly re opened the assessment under section 147 of the Act. Accordingly ground no.1 is dismissed. Estimation of Income - Bogus purchases - As respectfully following the decision of the Co ordinate Bench in assessee s own case we direct the Assessing Officer to restrict the addition to 2% of the non genuine purchases. This ground is partly allowed.

Summary

Issues:
1. Validity of re-opening of assessment under section 147 of the Income Tax Act, 1961.
2. Challenge to the addition sustained on account of bogus purchase.

Issue 1: Validity of re-opening of assessment under section 147 of the Income Tax Act, 1961:

The appeal was filed by the assessee challenging the re-opening of assessment under section 147 of the Income Tax Act, 1961 for the assessment year 2009-10. The Assessing Officer re-opened the assessment based on information received regarding non-genuine purchases made by the assessee. The assessee contended that there was no failure on their part to disclose all material facts during the original assessment. The Tribunal held that non-furnishing of accurate details regarding purchases amounts to a failure to disclose fully and correctly all material facts. The Tribunal found that the Assessing Officer had tangible material to believe that income had escaped assessment. The Tribunal dismissed the appeal, holding that the re-opening of assessment was valid.

Issue 2: Challenge to the addition sustained on account of bogus purchase:

The assessee challenged the addition sustained by the Commissioner (Appeals) on account of non-genuine purchases. The Assessing Officer had treated the purchases as non-genuine and made an addition based on a gross profit rate of 3.13%. The Commissioner (Appeals) enhanced the gross profit rate to 5%, resulting in a higher addition. The assessee argued for restricting the addition to 2% based on previous Tribunal decisions. The Tribunal observed that the assessee failed to provide conclusive evidence of the genuineness of the purchases. Relying on previous Tribunal decisions in the assessee's own case, the Tribunal directed the Assessing Officer to restrict the addition to 2% of the non-genuine purchases. Consequently, this ground of the appeal was partly allowed.

In conclusion, the Tribunal upheld the validity of the re-opening of assessment under section 147 of the Income Tax Act, 1961 and partially allowed the appeal regarding the addition sustained on account of non-genuine purchases. The Tribunal directed the Assessing Officer to restrict the addition to 2% of the non-genuine purchases based on previous Tribunal decisions in the assessee's own case.