2017 (11) TMI 1058 - AT - Income Tax

Validity of reopening of assessment - eligible reasons to believe - Held that:- AO issued notice u/s 148 of the I.T. Act after receiving information from the Sales Tax Department that some of the parties from whom the assessee had made purchases were bogus and they are engaged in the business of providing bills without actual delivery of goods and thus there was escapement of income from assessment. This information received from the Investigation wing construed ‘tangible material’ for the purpose of reopening the assessment. Hence reopening of the assessment by the AO and upheld by Ld. CIT(A) is valid. Hence this ground raised by the assessee is dismissed.

Confirmation of disallowance @ 12.5% of the bogus purchases - Held that:- Facts and circumstances of the case clearly prove that assessee has booked bogus purchases. The assessee has made purchase from grey market. Making purchases from the grey market gives the assessee selling on account of non-payment of tax and others at the expense of the exchequer. In such circumstances, following the precedent from Hon’ble Gujarat High Court decision in the case of Simit P. Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) we are of the considered opinion that 12.5% disallowance in this case would serve the interest of justice. - Decided against assessee.